Buyer Agency Crosses the Threshold

Long spurned, buyer agency has only recently won over the industry's heart. Is it true love? Or simply a marriage of convenience? We asked a panel of REALTORS®.

August 1, 1997

When the NATIONAL ASSOCIATION OF REALTORS® purchased the Real Estate Buyer's Agent Council, an organization of buyer's representatives, industry observers saw it as a symbol of mainstream acceptance of buyer agency--a once controversial practice.

Walt Albro, associate editor of Today's REALTOR®, recently talked with four REALTORS®, each of whom has observed the development of buyer agency over the years, and asked them about the acceptance of buyer agency and the implications of this change for the industry's future.

Look Who's Talking

WILLIAM M. FRENCH, president, William French Buyer's Real Estate Services, Chesterfield, Mo., a relocation company that represents only buyers. Telephone: 314/469-2220.

CURTIS V. HALL, ABR®, associate broker, RE/MAX-Anasazi Realty, Tempe, Ariz.; practices single agency. Telephone: 800/487-3222.

VALERIE HUFFMAN, director of educational and career development for the Washington, D.C., area offices of Weichert, REALTORS®, which has its headquarters in Morris Plains, N.J. Telephone: 301/718-4183.

BARRY M. MILLER, CEO of Only Buyers-America Real Estate, a Denver-based franchise of brokers and appraisers who work exclusively with buyers. Telephone: 888/552-8937.

What's happening with buyer representation in your market today compared with five years ago?

Miller: As recently as four years ago, all the industry leaders at the state and national level were saying that subagency would never die. So here we are in 1997, and subagency is dead. That's a major shift, and the marketplace did it—not legislation, not the federal government.

Buyer agency today is probably accepted and recognized by more than three-fourths of practitioners across the country.

Hall: A shift took place in 1993 when national MLS policy changed and an offer of subagency became optional on a listing. Today you can't find subagency anymore in the Phoenix area. Many people have changed their cap from that of a subagent to that of a buyer's agent.

Of course, some of these buyer's representatives don't have the slightest idea of what they're doing. But little by little, they're coming into the fold and saying, "Well, maybe I'd better get some education on this."

Huffman: I taught my first course on buyer representation in 1990. I had 65 people in the room, and if they'd had any food in their hands, they would have thrown it at me!

The resistance was tremendous. They did not want to deal with agency disclosure. They thought the consumers didn't want to have to deal with it and would not understand it.

Since then, agency laws in Maryland, the District of Columbia, and Virginia have changed. In Virginia, because the laws have been made user-friendly, 90 percent of our transactions are done by buyer's agents.

The future of buyer representation depends a lot on the way the laws are written and what the salesperson has to do to perform as a buyer's representative. In general, as education progresses and as more salespeople learn how to negotiate on behalf of their party, we're going to see buyer agency take over completely.

Do buyer's representatives act any differently today than they did five years ago?

Huffman: When buyer agency first started in our market, we had a lot of people without any education in buyer representation who viewed the job as adversarial. They took the position, "I'm going to go out and slam the seller or work in the best interest only of the buyer."

Now people are starting to understand that acting in an adversarial way is not the most effective way to represent a buyer.

French: In the early days, we saw some buyer's agents whose only goal was to bring down the price. But sometimes, it's in the buyer's best interest for the buyer's agent to act differently.

I'll give you an example. We've had transactions involving highly desirable listings that attracted a lot of offers. In a situation like that, our buyers say to us, "We want that house!" We advise them to pay more than the asking price.

That's a legitimate thing for a buyer's representative to do. Being a buyer's agent doesn't mean you automatically have to rush in like Genghis Khan and hammer the seller into submission.

Miller: To put that in context, though, for every buyer's agent who has gone in like Genghis Khan, there have been 99 traditional seller's agents who were hostile to the buyer's agent.

I agree that in the last five to 10 years, the attitude of the buyer's agent has changed. It's no longer, "I'm an advocate only of the buyer." It has evolved into, "Yes, I'm an advocate of the buyer, but my best friend, professionally speaking, is the seller's advocate, and we know how to negotiate so that the seller sells and the buyer buys. And I've learned to keep my own motives out of it. My job is to reflect the needs of the buyer."

Do today's buyer's representatives have a better grasp of what they're doing?

French: I don't think the average agent out there understands yet how high the level of service will have to be under buyer agency. Buyer agency creates a new level of expectation on the part of consumers, extending to every aspect of the transaction process.

Hall: I know of a small association of REALTORS® with 155 members that recently has had a total of 12 complaints involving buyer agency filed against its members. Three of the complaints have gone to arbitration, and the brokers have had to pay a total of $16,000 in compensation to consumers.

Every one of the 12 complaints involved the general public's coming back to the broker and saying, "My buyer's representative should have done this."

The common denominator in the complaints is the old-time, veteran salesperson who, because subagency has gone by the wayside, has recently put on a buyer agency cap but doesn't yet understand all the duties that go along with it.

I fear that we're going to see big-time increases in complaints against inadequately trained buyer's agents.

French: When I explain buyer agency to people, I ask them to imagine a circle within a circle. The inner circle represents the competent delivery of real estate services.

If you're going to prevail in this buyer agency market, you're going to have to expand into the outer circle, which involves doing the unexpected.

Finding a workshop program for a handicapped child is not part of buyer agency, but if you're going to survive as a buyer's agent in the relocation business, you'd better know how to do things like that.

Huffman: Salespeople today are challenged to figure out the correct interpretation of their responsibility as buyer's representatives. Everyone has a different interpretation of what those duties are.

Are buyer's representatives adequately trained? Is there a problem with people who worked as subagents and don't feel comfortable as buyer's representatives?

Huffman: It depends on the level of education the company provides. In our company, agency education is pretty much a part of everything we do.

We just came out with a buyer's counseling book that's exactly like a listing presentation book. We're using it to help get our salespeople comfortable with buyer representation.

I've found that the more tools I can put in the hands of salespeople in terms of scripts, dialogues, and handouts to use in buyer interviews, the more comfortable the salespeople become with the concept.

Are salespeople uniformly comfortable with buyer agency? No, I don't think so, but the comfort level has grown by leaps and bounds over the last five years.

What's the biggest problem among salespeople with respect to buyer representation?

Huffman: With us in the Washington area, it's lack of uniformity of the law from jurisdiction to jurisdiction. Virginia, Maryland, and the District of Columbia each have different agency disclosures, which is confusing.

The District of Columbia came out with a new agency law in March, but the real estate commission didn't provide forms to use, leaving it up to the companies to develop their own. There are a dozen different interpretations as to what salespeople are supposed to do. The situation is frustrating.

Miller: From the consumer's perspective, buyer agency isn't working well in most parts of the country, including Colorado, where the market is dominated by nonagency transaction brokers.

All they're doing in Colorado is subagency under another name. States like California--where something like 96 percent of the transactions involve buyer agency--are doing subagency under yet another name, buyer agency.

The service-to-the-consumer aspect of buyer agency is not going to fulfill its promise until we get back to the original idea of specialization--exclusive buyer agency, in which the salesperson represents only buyers and never sellers.

The consumers are demanding those higher services. But the buyer agency forms being generated by the states are way behind in speaking consumer language. They're still written to satisfy the bulk of salespeople--those who want to keep the status quo.

Where do you see buyer representation headed?

Hall: Buyer agency is going to grow into another facet of a full-service brokerage operation. We're going to see much more enhanced service delivery and packaging and more negotiable fee structures and menu of services.

We're going to see much more salesperson accountability. We'll see a considerable thinning out of the herd, as more and more consumers are going to take their practitioner to task and say, "You should have done these things for me."

As buyer's representatives improve their professionalism and their negotiation skills, they're going to create a niche market for seller-only companies.

Miller: Today's buyer agency is too much like yesterday's subagency. Is it evolving? Yes. It's changing, and it's changing faster than ever because of NAR's purchase of REBAC. I believe that was a landmark event.

I see buyer agency leading salespeople to higher levels of services for the consumer.

I see it headed toward more specialization, toward exclusive buyer agency and seller agency companies. We'll see major changes like this taking place in the next two to six years.

Huffman: The future will differ in each market. The major brokerages in the Washington metropolitan marketplace are very heavily into full service, and they have a lot of ancillary services such as title companies and lenders, which makes it more advantageous for them to be able to offer both buyer agency and seller agency.

The dominant brokers in the market are going to determine the direction that buyer agency goes in that particular area.

I agree with Barry that in some marketplaces the concept of exclusive buyer agency will catch on, but I don't think it's going to be in the industry mainstream, at least not in the Washington metropolitan area.

French: I don't think the market is going toward exclusive buyer representation. Money talks, and money is on the side of the big brokers. Many of the big brokers would prefer to keep dual agency or designated agency.

Despite that, however, I still believe there are many opportunities in the market for specialization. Specialization to me means aiming for a much higher level of service than has been commonly available in the marketplace.

If there's any lesson in buyer agency for the real estate industry, it's that you'd better start right now going for that higher level of service, because you don't want to be playing catch-up later.

Walt Albro is a former senior editor for REALTOR® Magazine.

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