Real Estate Teams….Bad Idea for Buyers ?

Real Estate Teams have grown in popularity among some Real Estate brokerages and size. It used to be a Team was two maybe three people; today some Teams can have 30 or more members! Many of these Teams may be “Top Producers”, meaning they close a lot of deals – great for real estate companies!

The book The Millionaire Real Estate Agent, by Keller Williams founder Gary Keller and co-authors Dave Jenks and Jay Papasan has been instrumental in promoting the Real Estate Team concept. A “Team” typically divides it’s members; some work with Sellers, some with Buyers. The Team usually works out of a larger real estate office/company (Brokerage). The key is coordinating all the different members of the Team to maximize the number of closed deals so that the Team makes enough money to support all it’s members. Closing the deal, making the sale is the driving force in this form of Sales Organization.

The foundation of the Team is based on the typical Real Estate model of “Dual Agency”. Dual agency is where the same real estate Brokerage represents both Buyers and Sellers. Part of the Team focuses on getting listings contracts – contracts to sell property for a property owner. These contracts create an obligation for the Brokerage as well as the Team to market, promote, display the Seller’s property in the most favorable light and sell for the highest price possible. Another part of the Team works with Buyers.

From a Buyer’s perspective how does this Team concept benefit the Buyer? The Buyer’s main objective is to find the best property for the lowest price. A Team member will want to show and sell one of the Team’s property listings – first. Buyers often complain that Team/Brokerage properties get “talked up” while other properties get “talked down” or are just not shown at all. Why? Because by selling a property the Team has listed the Team could double it’s commission.

Can you imagine your Buyer Agent Team member “fighting” fellow Team mates to get the Buyer the best deal?

While many professions do have team concepts: surgeons, contractors, sports, etc.; these team members typically do not serve clients that have opposing objectives.

Florida Waterfront Home Prices

Waterfront Home Prices

The above chart shows the Median Home Prices of Waterfront Homes in the Greater Tampa Bay area buy quarter in 2008 and in 2009. Price have adjusted from a high of $507k in the 1 st. qtr. of 2008, down to $366k in the 4th qtr. and then rebounding in the 1st qtr of 2009 to $449k. There was a big dip in the 2nd qtr. of 2009 coinciding with the Global Economic picture followed by a steady increase back to the $449k level.

The target properties are residential singld family homes with 3 bedrooms and 2 bathrooms that have direct Gulf Access. In 2008 there were a total of 300 of these properties Sold. In 2009 there were a total of 344 of these homes sold. This equates to a 14.6% increase in waterfront home sales.

Currently, an interesting trend has developed with DOM or Days On Market or the average number of days it takes for the subject property to Close. In 2008 the average DOM was 90 days. In 2009 the average DOM was 91 days however during the last quarter of 2009 the DOM dropped to 66 days. This is a significant change reflecting buyer demand.

WatertrontInFlorida.com

Does a Seller Orientated Industry Look out for the Buyer….YES!

In 1983, a Federal Trade Commission study revealed that over 72% of all home buyers mistakenly believed that they were represented by the agent who was showing them homes. The fact was that most agents showing homes were representing sellers. And by legal requirements of agency representation, agents must negotiate in the best interest of their clients (the sellers) by not withholding any information from them (possibly meaning they would reveal such important information as buyer’s motivation, financial qualification etc.) and presenting their property in most favorable way. When consumers became aware of this, they demanded their own representation, and as a result, laws requiring disclosing representation were passed all over the country… An exclusive buyer agent does not have a conflict of interest since he or she only represents the buyer in a transaction. Exclusive buyer’s agent will negotiate in buyer’s best interest, and will not have to disclose buyer’s confidential information to the seller.

Florida is known as a “Transaction Brokerage” state.  Due to the FTC and the widespread practice of  “Dual Agency”, where the sellers agent would represent both the Seller and the Buyer, Conflict of Interest was a legal problem that more and more brokerages were having to deal with.  A Transaction broker walks a tightrope between the Buyer and the Seller.  He can’t provide Full Disclosure or Fiduciary Representation to either the Buyer or Seller.  In fact he doesn’t represent either one.  He is a “Facilitator” only.  Why would an agent choose to operate in this fashion…. ?  He is able to collect the commission from the seller (which he was originally entitled to as the Listing Agent) as well as the commission a Buyers agent would get to represent the Best Interest of the Buyer.

Some will argue that today, Florida Law protects the Buyer’s interest from a Seller orientated Real Estate industry. However, in 2008, the state dropped the standing requirement that an Agent identify whom he/she was working for or represented at the very first meeting with a new client.  This law was originally written to protect buyers from agents not disclosing they were really working for the seller.

Last month the department of Housing and Urban Development (HUD.gov) added the following statement to their “Home Buyers Handbook”,  “It is your responsibility to search for an agent who will represent your interests in the real estate transaction. If you want someone to represent only your interests, consider hiring an “exclusive buyer’s agent”, who will be working for you.”

Bottom Line….

If a Real Estate Brokerage signs contracts with Sellers to Sell their property, they owe these Sellers their best efforts in getting the Sellers asking Price and Terms.  This alone creates a “Conflict of Interest” with the Home Buyer and prevents them from working in the “Best Interest” of the Home Buyer.  On the other hand, an Exclusive Buyer Agent or Exclusive Buyer Brokerage would be unable to ethically represent Sellers for the same reason.

Florida Association of Exclusive Buyer Agents. org

HUD.gov and Real Estate Representation

Here’s what HUD says,  “It is your responsibility to search for an agent who will represent your interests in the real estate transaction. If you want someone to represent only your interests, consider hiring an “exclusive buyer’s agent”, who will be working for you.”

Because 98% of all Real Estate Brokerages are Seller orientated, that is they sign a contract with the Seller, they can not provide Buyers Fiduciary Representation.  Fiduciary Representation means Full Disclosure, Complete Confidentiality, seeing ALL properties meeting your requirements and putting the Buyers Best Interest First.

An Exclusive Buyer Agent can be found at brokerages that do NOT contract with Sellers.  These Exclusively Buyers Brokerages never list properties for sale and work directly for the Buyer, usually on a Flat-Fee basis with the Buyer Agent commission going directly to the Buyer at closing.

A directory of Exclusive Buyer Agents in the US can be found at ExclusiveBuyerAgent.US or ExclusivelyBuyersRealty.com

The Buyer and The Code of Ethics

If you work with a Realtor® you may hear the term “Realtor® Code of Ethics”. This code was established by the National Association of Realtors® (NAR) so that its members would have guidelines when working with their clients, the public and other Realtors®. It is an excellent code, with the main precept being that “Realtors® remain obligated to treat all parties honestly”. After this opening affirmative statement there are a number of areas that the NAR code addresses; disclosure of representation, duties to the client, the public and duties towards other Realtors®. The National Association of Exclusive Buyer Agents® (NAEBA) also has a Code of Ethics which also spells out how an Exclusive Buyer Agent is to serve their clients. There is an important difference that buyers should understand.

In the NAR Code of Ethics “Realtors® may represent the seller and buyer in the same transaction only after full disclosure to and with informed consent of both parties”. In The NAEBA Code of Ethics: “An Exclusive Buyer’s Agent shall remain loyal to their principal client throughout any real estate purchase and will not reduce the level of that loyalty through “informed consent”.” With an Exclusive Buyer Agent your agent will not “change hats” during the purchase process. According to the NAR Code “when entering into buyer agreements, Realtors® must advise potential clients of any potential for the buyer representative to act as a disclosed “dual agent”. So if your Realtor® discloses to you that he/she may act as a dual agent at some time during the process of your purchase you have the right to not work with that Realtor® if you do not want to work with a potential “dual” agent. However, most buyers are not aware of this, so they may not know that their “agent” is not really working for them when they show them a home that is listed by the Realtor’s® brokerage. With an Exclusive Buyer Agent, there is never a question; Exclusive Buyer Agents cannot work as dual agents, ever.

Florida – The “Transaction Broker” State

Understanding “Transaction Brokerages”..

A Transaction Broker, in some state referred to as a Dual Agency, provide limited representation to clients.  Their primary function is to FACILITATE a transaction between a Seller, usually their client and a Buyer. Florida is by statute a “Transaction Brokerage” State.  Prior to 2008,  an Agent was required to advise his prospective client who he represented.  Today,  that is not required.  His representation roll has been reduced to that of a mediator.

a Transaction Broker can not provide these Critical Buyer services:

1… Be an advocate for you.
2… Negotiate the best price for you.
3… Negotiate the best terms for you.
4… Suggest an appropriate offering price.
5… Research on your behalf and bring to your attention, defects and/or problems.
6… Provide information about the seller motivation and position.
7… What the Seller paid for the property and his mortgage.
8… Research previous attempts to Sell the property.
9… Provide Fiduciary Representation.

Transaction (Agents) Brokers can and usually do switch from Transaction Broker to “Buyer’s Agent” to “Seller’s Agent”, back to Transaction (Agent) Broker.

The Question is: Who do these Agents really work for?

Answer…The Brokerage. All agents have employment contracts with the Brokerage they work for.

Ok, The Question to follow would be…

Who does the Brokerage work for?

Answer…If the Brokerage Lists properties for Sale, they have Legal Contracts with Property Owners to Market, Advertise, and Sell the owners property at the Price and Terms the Seller wants.

The Agents working for the Brokerage secure these Listings however, the Brokerage owns these Listing Contracts, Not the Agent.

All the Agents working for the Brokerage are obligated under these Listing Contracts and their Contractual Relationship with the Brokerage to Sell these Listings.

Now, the Obvious Question is…

How can the Brokerage’s Agents provide Buyers “Fiduciary Representation” ?

Answer… They Can’t. There is an inherent “Conflict of Interest” that prevents brokerages Contracting with Sellers from providing Buyers, “Fiduciary Representation“.  It’s questionable that they can provide it to their Listing Clients.

The Solution…

Has been to choose up sides.  Either you work with Sellers or work exclusively with Buyers!  To this end, enter the Buyers Brokerage and Exclusive Buyer Agents.  Because they do not take Listings or ever work with Sellers, they can provide Buyers Fiduciary Representation from Start to Finish.  Finding an Exclusive Buyers Agent to work with may be more of a challenge then a traditional Listing Agent however.  Searches on Exclusively Buyers Realty or FAEBA.org (newly formed Florida Association of Exclusive Buyers Agents) can get you to the right Exclusive Buyers Agent.     “a Clear Choice for Today’s Sophisticated Buyer”

You Either Have it or You Don’t…

When you hire an attorney to represent you,  you expect that he will place your Best Intrest first in all matters.  If he finds himselt in a “Conflict of Interest” situation he will excuse himself from service so you can find other representation.  With this fiduciary representation comes privlidges of trust, confiduality, full disclosure and obligation.

For the past 40 years or so, corporations have hired Real Estate Professionals to make them great deals and protect the companies best interest.  Today, many companys have their own Real Estate division.  The agents working their do not have the Conflicts of Interest we see in todays Seller orientated Real Estate industry.  They enjoy a fiduciary relationship with their employer.

Some,  in today’s real estate industry believe that fiduciary representation is  not the same relationship as that of  an attorney and his client.  It’s  more like “casual dating” then “marrage”.  They believe they can work for a large brokerage with thousands of contracts to represent  Sellers,   yet represent a Buyer that walkes in the front door without “Conflicting Interests”.  Really… Having worked in Listing Brokerages, that Buyer walking in the front door is just someones “Pay Check” not their Sister. 

To get the kind of fiduciary representation Buyers deserve, a brokerage needs to decide which side their on.  If on the buyers side they will only represent Buyers to eliminate the Buyer- Seller conflict of interest.  Next,  they will eliminate their compensation being based on how much the Buyer pays for the property.  Why?  If your Buyer Agent saves you $50k on a property it will cost him $1,500.00 in commission. No incentive there!

Fortunately for Buyers there is a solution.  It’s called an Exclusive Buyer Agency.  These agents work for Brokerages that specialze in working exclusively with buyers.  There is no Buyer – Seller conflict.  At Exclusively Buyers Realty in Tampa,Florida the exclusive buyer agents work on a Flat-Fee. The Buyer gets the commission and Bonus.  They are members of FAEBA.ORG where Exclusive Buyers Agents in Florida can be found.

Baby its cold outside

It’s a weekend in mid-December here in Florida, at our real estate office the phone calls and emails are up; baby, its cold outside. This is the time of year that despite all the bad press Florida looks like a pretty good place to be, especially when it is 80 degrees here and minus 10 everywhere, and don’t forget the wind chill, brrrrr! Yes Florida has had a pretty rough time of it, lots of foreclosures, short sales, but one of the dubious honors of being one of the first areas where the bubble burst, we are one of the few metropolitan areas that are on the way to a recovery. Foreclosure numbers look better for Tampa Bay, not rosy mind you, but better. Area filings dropped 9 percent on a yearly basis and 1 percent from the previous month, according to RealtyTrac, the California based company that tracks mortgage activity. It also appears that this drop is not just a fluke; October’s yearly decline of nearly 18 percent was the largest drop in filings in the Tampa Bay area since RealtyTrac began tracking annual changes in Jan. 2008. Could it be that Tampa Bay is coming out of its own real estate deep freeze, on the way to sunnier days? Time of course will tell.

Getting Fiduciary Representation

Dec 12, 2009 – Tampa Bay Florida
Ninety Eight (98%) percent of all real estate brokerages are geared
toward listing properties to market and SELL. These companies work for the Seller. The Listing/Selling Agent has a legal contract with the property owner to get the price and terms the seller wants. Exclusively Buyers Realty was born from the desire to provide Buyers the same representation that Sellers receive. How?

Most Buyers are unaware that they do not get fiduciary representation from “Buyers Agents”.  Why?  Traditional buyer agents can represent both Buyers and Sellers at the same time. This is sometimes referred to as a “Dual Agent” or a “Transaction Broker“.  This is similar to two competing teams using the same coach to win a championship game.  Some States have made this type of  agent representation illegal because of the obvious Conflicts of Interest created.  Ad to this  that the Seller pays a commission based on what the buyer is willing to pay and behold, the Buyer looks  like “Red Meat”.

Exclusively Buyers Realty offers today’s savvy Buyer the opportunity to get “Fiduciary Representation” with their own Exclusive Buyer Agent  representing their interest Every Step of the Way, in one of the most important purchases they may ever make!

Fiduciary Representation in Real Estate

Dec 11, 2009 – Tampa Bay Florida
Exclusively Buyers Realty, a Buyers Brokerage located in the Tampa Bay, is a real estate company that never takes property listings to sell, a unique business model in the world of real estate. It is owned and operated by Aileen Kane who has over 10 years of experience in the real estate industry.

Traditionally, real estate brokerages are geared toward listing properties to sell, these companies work for the seller.   Exclusively Buyers Realty was born from the desire to provide the buyer the same representation that sellers receive, a fiduciary relationship with “exclusive buyer agents”.

Most buyers are unaware that they do not get  fiduciary representation from their “buyers” agent since traditional agents can and do represent both sides in a real estate transaction. This is similar to two teams using the same coach to win a game.  Exclusively Buyers Realty wants to offer the buyer a real choice, the ability to have their own agent represent them in one of the most important purchases they will ever make!
http://www.ExclusivelyBuyersRealty.com