Anyone who has bought a house has likely spent an afternoon with a real estate agent, being driven from one property to the next. Anyone who has sold a home has probably been visited by an agent with potential bidders in tow.
But buyers might have unwittingly revealed their innermost bargaining secrets -- not realizing the agent worked for the seller. Sellers, on the other hand, might have assumed an agent represented buyers inspecting their home -- never knowing they could be held responsible for the agent's actions.
Over the years, confusion over who works for whom in a real estate deal has prompted a spate of lawsuits, laws and regulations that have begun to reshape the way agents do business. A new breed -- the buyer's agent -- has emerged.
More and more buyers are turning to these specialized agents for help finding and purchasing a home. In the Baltimore area, buyer agency has soared in popularity since Jan. 1, when agents in Maryland were first required to explain to buyers the various forms of agency representation.
Clients can choose the traditional route. Sellers pay agents a commission for marketing and showing a home and negotiating a deal on the seller's behalf. If an agent from another real estate company finds a buyer, that agent, known as the co-operating or sub-agent, splits the commission.
Consumer groups and some in the real estate industry have criticized that arrangement as fraught with conflict. For one thing, many consumers fail to realize that co-operating agents work with buyers but are paid by and represent the interests of sellers.
Now, under the state's new disclosure law, buyers are being told they can opt for their own agent, and many are making that choice.
Use of the service has mushroomed at Coldwell Banker Grempler Realty Inc. since the law took effect, said President D. R. Grempler. More than 250 buyers looking for homes through the Towson-based company have chosen a buyer's agent so far this year. That's more than in any month in the three years since the company began offering the option, Mr. Grempler said.
"The sales people need to be comfortable with it, and the agents are getting more comfortable with it," he said.
Georgianna Tyler, who represents buyers for her Georgianna Tyler & Co. and sells properties for W. H. C. Wilson and Co., said about 75 percent of agents she sees working with buyers now work as buyer's agents, compared with about 25 percent last year.
An estimated 3,000 agents and brokers nationwide work exclusively for buyers. Countless others -- typically those who work for large companies -- represent buyers in some sales, sellers in others. Most large real estate companies have now trained their agents to represent buyers, to handle either end of the business. Regulators, consumer advocates and the National Association of Realtors support the concept.
"Buyer brokerage, in whatever business environment, is growing very rapidly," said Leo Berard, a buyer's broker in Cape Cod, Mass., and president of the newly formed National Association of Exclusive Buyer Agents. "It's becoming the norm. In a few years, in just about all transactions in the country, there will be a buyer broker involved."
Moving from New York
Revell and Carrie Horsey had never heard of a buyer's agent when they began planning a move from New York City to Baltimore in January 1993. They needed to find a house fast and knew nothing about Baltimore. Mr. Horsey called a real estate agency in Baltimore, spoke to an agent and arranged to see homes.
The Horseys traveled to Baltimore twice but felt they were getting nowhere. Despite their repeated requests to see houses outside highly urbanized areas, the agent insisted on showing homes in Charles Village.
"We wasted a lot of time looking at stuff which didn't make any sense for us," said Mr. Horsey, a research analyst at Alex. Brown. "We'd ask advice on valuation, what's the right price, and would be told, 'People are snapping up real estate, so bid what they're asking.' It was pretty clear they were more interested in doing a deal, writing a ticket vs. making sure we were well taken care of."
TC With time running out, the Horseys called a buyer's agent. By this time, they had only three or four days to find a house. They spent a day driving through neighborhoods with the agent.
"He asked us a lot of questions," Mr. Horsey said. "He grilled us for an hour, where we live now and what's good and bad about it. With all the information we gave him, he went into the database and put together a short list. In one day we picked the house. Then he advised us how to bid for it."
The agent who helped the Horseys find a stone Colonial in Cedarcroft has worked exclusively with buyers since starting his own agency, Buyers 1st Realty in Annapolis.
As a former agent with Long & Foster Real Estate Inc., Bill Lamb says he used to show properties to buyers, spending hours driving them from house to house. He would explain that he represented the seller and had an obligation to share any information regarding the buyer's motivation and strategy.
"Over three or four days, people trust you," Mr. Lamb said. "I would say, 'I represent the seller.' But people still say things they have no business saying because they believed I had their best interest at heart."
Buyer's agents try to match a buyer with a home that fits his needs and price range, even if it means talking him out of a home, agents say. They attempt to negotiate contracts on the best possible terms at the lowest possible price. For some buyer's brokers, that means using sales contracts that vary significantly from the standard ones.
For instance, at Buyers 1st Realty, sales contracts say buyers can make an offer on more than one house and can get out of the contract if they discover something that, in their view, constitutes a defect -- for instance a high tension line, plastic pipes or aluminum wiring. Some companies have escape clauses in which buyers can get out of the contract until the day of settlement with no recourse from the seller.
Buyers might be asked to pay a retainer fee to enter a contract with a buyer's agent. But buyers usually end up paying no commission.
Sellers pay a commission to their listing agent, who typically splits the fee with an agent who finds a buyer, whether he is a buyer's agent or co-operating agent.
Buyers can go through a large agency and request a buyer's agent, or they can find a company that works exclusively with buyers. Buyer's agents at large companies usually can also represent sellers. Small, buyer's agent companies do not list property and have buyers exclusively as clients.
Brokers who represent buyers exclusively say they can better protect a buyer's interest because no one at their company represents sellers.
At agencies that represent both buyers and sellers, chances are dual agency will arise. That occurs when a buyer represented by a buyer's agent becomes interested in a property listed by that agent's broker. (A broker is a real estate agent's boss, often the ++ owner of the real estate company.)
Maryland's disclosure law sanctions dual agency and creates rules for the practice, including requiring the buyers and sellers involved to sign consent forms.
Exclusive buyer's brokers view such situations as inherent conflicts of interest and say neither buyer nor seller can be adequately represented because both agents owe their allegiance to the same broker.
"Dual agency is impossible," said Jeffrey L. Underwood, a broker whose company in Columbia, Home Buyers Agent, represents buyers. "It becomes non-agency. Neither party gets full representation or fidelity. Agents do talk and have sales meetings where information may be disclosed."
The new buyer's agents group formed, in part, to speak out against dual agency, but brokers who act as dual agents dispute Mr. Underwood's view.
They say only a small percentage buyers with their own broker end up purchasing a home listed by the company, since each company lists just a small percentage of all homes on the market. Still, some companies encourage their buyers and sellers to sign dual agency consent forms up front -- in case dual agency arises.
When it does, "With everyone understanding what the situation is, I don't see it as a problem," Mr. Grempler said.
"We're not allowed as a dual agent to pass [confidential information] on. It's very clear, and agents understand that."