Buyer Representation ~ Research & Disclosure

By
Real Estate Agent with Westcott Group Real Estate Company

In the most recent post in this buyer representation series, Buyer Representation ~ Finding the Right Home for the Right Price, it was discussed that buyers that have their own representation are entitled to counsel from their buyer agent.  Part of the counsel was offering advice, and the other part was providing a comparative market analysis (CMA) to buyers to help them to determine their offer price. 

 

This counseling is based upon the educated opinion and factual data compiled by the buyer's agent.  Both of these tools are very helpful, although the counseling does not end there.  Buyer clients are also entitled to the disclosure of any facts that can give them leverage during negotiations with a seller.

 

If you have not yet read the article in the series addressing the client vs. customer relationship, I would suggest doing so to fully understand the fiduciary duties that are owed to each.  In short, a buyer agent has a fiduciary duty to a buyer client, but buyer customers are working with an agent that has a fiduciary duty to the seller.  The difference between the two is that buyer clients will be armed with information to help them in negotiations, while buyer customers run the risk of divulging information that will be disclosed to the seller and used against them in negotiations.

 

So what kind of information can buyer clients expect to receive?

 

Home Seller's Motivation - Home sellers, and even listing agents for that matter, often times divulge information about the home seller's motivation that cannot be shared with customers, but must be shared with clients.  As a buyer, would you like to know why the seller is selling the home?  Do you think that certain information could be useful in trying to negotiate a home purchase for the lowest price possible?  Do you know what kind of information is typically the most helpful to buyers?  The following is a list of factors that buyers can use to their advantage in negotiations if they are aware that they exist.

 

Divorce - It's no secret that many relationships today end in divorce.  Often times when this happens, couples are forced to sell their home so that they can divide the assets.  This is especially true when neither party can afford to buy out the other to keep the home.  Since the parties getting divorced are trying to move on with their lives, they can be very motivated to sell.

 

 

Estate Sale - When a home is being sold to divide the estate between heirs, there is motivation for a quick transaction.  Aside from the emotional issues and the need for closure, the heirs also must maintain the home until it is sold, and dividing this task is not always easy.  This is especially true when the heirs live out of town.  Another reason that the heirs are motivated to sell is because they must continue to pay real estate taxes and the mortgage if there is one.  

 

Financial Distress - Foreclosures and short sales are on the rise, and this is likely to continue for the foreseeable future, especially since so many adjustable rate mortgages are about to reset to higher interest rates in the next few years.  Sellers that have equity, but can no longer afford to keep their homes are going to be forced to sell.  Often times, they will wait too long, and put themselves at a disadvantage in the negotiations, especially if they run the risk of having to do a short sale.

 

Dead Deals - When a deal dies it can put the sellers into a desperate situation, particularly in markets where home prices are declining.  This situation is not that uncommon in today's market. Having knowledge of any deals that died, including the timeline and pricing information, can be very helpful for the next buyer to have.

 

 

Relocation - While most of the information that can give buyer clients leverage is negative, this situation could be a positive for the sellers, yet still put them at a disadvantage in negotiations.  Many times, people that are relocating are on a tight timeline to get a deal done.  When dealing with a relocation company, the sellers are usually given the opportunity to sell their home for the highest possible price by a specified deadline.  Once the deadline is reached, the sellers will have the choice to sell privately, or sell to the relocation company for a pre-determined price.  When the clock is ticking, sellers are generally more motivated, and buyers can use this information to their advantage.

 

 

Seller Bought a New Home - In today's market, this situation is not as common as it was during the peak of the seller's market, but it does happen.  Whether it is because the home seller had the financial security to own two homes at once, or they were just very confident that their home would sell quickly, the fact of the matter is that home sellers in this situation have very little leverage when it comes to negotiating.  Aside from the holding costs, there is also the issue of maintaining two homes, and the security risk of having a vacant home.  Knowing this information gives a buyer client a distinct advantage in the negotiations.

 

 

Listing Status - Buyers that are new to the market may think that a home is a new listing, but it is very possible that the home has been on the market for some time, at various prices, and with different brokers.  Knowing this information can give the buyer leverage in negotiations.  Other information that will be shared with buyer clients is the length of time that the home has currently been on the market and the history of price reductions.  Listing agents also mistakenly put confidential information in the remarks that only other agents can see.  This information will be shared with buyer clients, but must not be shared with buyer customers.

 

 

Bottom Line Price - In their zeal to get the home sold, home sellers will sometimes divulge their bottom line price to agents during showings.  It is a mistake to divulge this information, because it can be used against them by a buyer's agent.  Listing agents also make this mistake, especially if a home has been on the market for a while, and they are starting to feel pressured to get the home sold.  Again, it's a mistake, but one that could work to the buyer client's advantage.

 

 

SUMMARY:

As you can see, buyer clients can use information to their advantage.  It should also be noted that buyer customers often divulge confidential information that can be used against them, due to a false sense of security, and the relationship that they've built with the agent that they are working with.  The most common mistake that buyer customers make is telling the agent that they're working with how high they are willing to go on the offer price.

 

 

This series has provided a lot of reasons why buyer representation is advantageous for homebuyers.  However, it is still not the norm on Long Island, and many homebuyers will have concerns about signing a buyer broker agreement.  When this series continues, the common concerns that Long Island homebuyers have about buyer representation will be addressed.

 

About The Author

Adam Waldman is a Long Island Residential Real Estate Professional that can assist you with the purchase and/or sale of real estate on Long Island, from bank owned homes to new construction to waterfront property, and everything in between. Adam is a Relocation Specialist that has created a network of real estate professionals throughout the country in an effort to assist relocating Long Islanders in their transition to new areas. These professionals are experts in the field of relocation and can serve many purposes beyond a simple home search. In addition to being a Relocation Specialist, Adam also holds the designations of Certified Buyer Representative (CBR), Senior Residential Specialist (SRES) and e-PRO.

Please visit www.TheLIReloGuy.com for your relocation needs and www.AdamWaldman.com for your local needs.

Adam Waldman - RE/MAX Best - 631-357-2036 - adam@AdamWaldman.com

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Rainmaker
909,945
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Hi Adam - I am a big fan of buyers representation eventhough the majority of my business is working with sellers. Buyers deserve a good buyers agent in their corner. I will mention that any listing broker that divulges most of this kind of information is a poor agent. If a seller realized this information was being passed along I don't think they would be pleased!

Jun 17, 2008 07:01 AM #1
Ambassador
1,260,693
Debe Maxwell
www.AtHomesCharlotte.com | Savvy + Company Real Estate - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Adam:  Disclosure, disclosure, disclosure!  I had an instructor in my brokers class who put the fear of God in all of us regarding the who, what, where and whys of disclosure so, I spend a great deal of time doing research before my clients make Offers! 

One thing that never ceases to amaze me is that I'll have experienced agents ask me how long one of my listings has been on the market.  I'll say that if they've checked in the archives, they'd see that the last sale was in, say 2000, and that we've been on the market, say 4 days.  Their response:  "I just wondered if you were the first agent to list this home this time?!"  When you're going in for your second showing, don't you go prepared with this information (and your comps) so that you can give the Buyer an educated range for what you would Offer?  If they've been on the market for 18 months, through 3 agents and reduced the price accordingly, they're probably READY to sell!  How is their agent going to adequately assist them in the negotiating process without having done their homework?! 

Another one of my pet peeves, can you tell?!!!  Great post by the way!!

Debe in Charlotte

Jun 17, 2008 07:13 AM #2
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2,371,707
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

I find that seller motivation is misleading to buyers.  So the sellers are getting a divorce.  That doesn't make them any more negotiable.  The house may already have been discounted for need to sell. 

Buyers are not sufficiently equipped to determine value to use such informtion. 

However, it does help the agent in recommending offering prices based on comparables.  Buyers don't understand comperables. 

A buyer who tries to analyze every thing about a transaction is usually more interested in negotiating than getting a good home.  If they can't get the "deal", they often don't buy anything.  These buyers are not realistic and often just shopping for "deals".

NEXT!

Jun 17, 2008 07:34 AM #3
Rainer
274,098
Adam Waldman
Westcott Group Real Estate Company - Hauppauge, NY
Realtor - Long Island

BILL:  I think that many sellers would be dissatisfied with some of the things that their agents are doing if they actually realized that they were going on.  Too often, agents are more concerned with getting offers to come in than they are with protecting the best interests of the seller.  Because most agents around here do not practice buyer representation, they are supposed to keep the information to themselves, but I know that this is not always the case either.  Thanks for commenting, Bill.

Jun 17, 2008 07:39 AM #4
Rainer
274,098
Adam Waldman
Westcott Group Real Estate Company - Hauppauge, NY
Realtor - Long Island

DEBE:  I understand that each MLS handles days on market in its own way.  Our MLS has the listing and expiration date posted right on the listing.  I can also view the history of the listing, so I know what date each price reduction was made, and by how much.  There is actually a lot of useful information that can be shared with buyers if they are clients.  Since most buyers are customers here, they do not get to take advantage of the research that buyer clients do.  Thanks for commenting, Debe.

Jun 17, 2008 07:41 AM #5
Rainer
274,098
Adam Waldman
Westcott Group Real Estate Company - Hauppauge, NY
Realtor - Long Island

LENN:  I can't speak for your area, but you've made a sweeping generalization about seller's motivation that is not accurate for Long Island.  Even if you think that a divorce is already factored into the price (which I don't believe is true in most cases that I've seen), I don't see how you think that all of the other information that I've mentioned wouldn't be helpful to a buyer.

While providing comparables and a full market analysis is helpful to buyers, it is still a lagging indicator, whereas a seller's motivation is something that is a current indicator.  Will all people going through a divorce or an estate sale or a relocation be very flexible in their price?  Of course not.  However, the purpose of this series is to show the advantages of buyer representation. 

If you were buying a home, would you rather have all of the information available to you when making a purchase or would you be satisfied knowing only the information that the listing agent has put into the listing?

Some buyers will be looking for deals no matter what information they are given.  However, I don't think that you've given buyers enough credit in their ability to absorb information and use it properly, especially with the help of an agent.

I think that we'll just have to agree to disagree on the value of seller motivation to buyers.

Jun 17, 2008 07:50 AM #6
Rainer
134,620
Michael Shankman
Realty One Group - Las Vegas, NV
Selling Las Vegas 702-498-3383

great post.thanks for stating this clearly...where do you find the time to blog??

Jun 17, 2008 08:29 AM #7
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Jason Crouch
Austin Texas Homes, LLC - Austin, TX
Broker - Austin Texas Real Estate (512-796-7653)

Adam - This is a wonderfully composed presentation on the value of buyer agency for the consumer.  I hope it brings you tons of business.  Talk to you soon -

Jun 17, 2008 09:04 AM #8
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2,371,707
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

"buyers enough credit in their ability to absorb information and use it properly"

Or, perhaps you've given them too much. 

One of the first things I usually hear from many buyers is "Why are they selling". 

IMO, buyers are limited in how to factor in the seller's motivation.  It has to be used in context with all available information.  As soon as a buyer hears about the seller's reason for selling, they tend to focus on that and neglict more important pricing factors thinking that they have a "gotcha" piece of intelligence. 

Interesting post. 

Jun 17, 2008 09:34 AM #9
Rainer
150,001
R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham
Bank of England (NMLS#418481) - Raleigh, NC
Bob Mitchell (NMLS#1046286)

You nailed it again!  Thanks for the post!

Bob Mitchell

ValueList Real Estate Services, Inc.

Jun 17, 2008 11:40 AM #10
Ambassador
1,885,139
Nestor & Katerina Gasset
International Properties and Investments LLC - Wellington, FL
Realtors, Wellington Florida Homes For Sale

Adam- Here in Florida we have transaction broker status which does not carry fiduciary with it and if you are a transaction agent for both the buyer and the seller you are under law required to disclose defects to the home and only disclosures regarding the property, not the sellers or the buyers. You may not say anything to the detriment of the other party. Buyers and sellers thus, are not clients, but customers.

Jun 18, 2008 01:41 AM #11
Rainmaker
525,719
Jeremy Blanton
210 Consulting~ Social Media Advisors - Myrtle Beach, SC

Adam, I always encourage getting buyer representation & becoming my client.  Once the person meets us in person and spend a little time getting to know us and see our knowledge of our market, they have no problem becoming a client.  BTW- Jason Crouch & I discussed you in regards to my most recent post.  Hope you enjoy it!  It came from the heart :)

Jun 19, 2008 04:36 PM #12
Ambassador
475,435
Kate Elim
Dockside Realty - Spotsylvania, VA
Realtor 540-226-1964, Selling Homes & Land at LA

Hi Adam...Do you find many listing agents divulge information that is not in the best interest of their seller?

I realize that sellers may inadvertently give away too much information but most of the listing agents I deal with do not. 

Also, if you are working as the buyer's representative and the buyer is forthcoming with their top figure we are not to use that against them.  Do you find that happening often?

If so, these agents (listing or selling) are not adhering to the COE as you know.  That's a shame.

Kathleen

Jun 21, 2008 07:16 PM #13
Rainmaker
605,794
Sharon Simms
Coastal Properties Group International - Saint Petersburg, FL
St. Pete FL - CRS CIPS CLHMS RSPS

Adam - excellent post on the value of buyer representation. In Florida, with a transaction agent, the buyer SHOULD'T have to worry about "run the risk of divulging information that will be disclosed to the seller and used against them in negotiations". That being said, agency aside, disclosure on either side depends on the ethics of the agent.

Jun 22, 2008 11:19 AM #14
Rainmaker
192,159
Mary Sheridan
Keller Willliams - NE TN,Johnson City,Kingsport,Jonesboro - Johnson City, TN
Creative Marketing, Buyer Agency 423-943-7655

This is a good list of things we should be trying to find out for our clients, granting that they're not all always relevant.   Did you mention the amount of their most recent re-finance?  Sometimes this means that there's no way they'll be able to take what the comps would suggest unless we get into short sale red tape.   Maybe you already covered that - I need to re-read.   It goes without saying that some listing agents say way too much.  I called one last week with a question about a property, mentioning casually that it was above my buyer's preferred price range, but it sounded good enough to show anyway.  He volunteered immediately that $... was a more realistici price - $30,000 below what it was listed for.   It's now on the list.   Maybe he was doing what was good for the seller after all, but that seemed to me to be going too far.  

Jan 06, 2012 12:43 PM #15
Rainer
8,446
Peggy Johnson
Coldwell Banker Danforth - Lynnwood, WA

Hi Adam - I just attended a class where the instructor said - there is no "fiduciary" responsibility on the part of the agent/broker.  Interesting, huh?  This was in the State of Washington.  That's obviously changed recently. I had noticed you wrote about fiduciary responsibilty, so I thought I would pass this along.

You know, it doesn't matter to me because I abide by the laws and my clients always come first anyway, so I never have a problem with that, because my clients know I have their best interest at heart throughout the time we are in contract and hopefully after!

Feb 11, 2012 12:46 PM #16
Rainmaker
74,885
Shannon Thomas
MSWoods Real Estate, LLC - Avon, IN
Real Estate Broker, E-Pro, ABR, SFR

Great article.  When I am out with a buyer, I consider the history report one of the most important items I have to prove my value to the client.  

Thanks again,

Aug 15, 2013 11:15 AM #17
Rainmaker
488,956
Sarah Oswald
Eastvale Team Realty & Property Mgmt - Corona, CA
Broker, Realtor, CDPE, CIAS, SFR , Investor

Great title: Buyer's representation...research and disclose.

As we represent a buyer, it is our duty to research and disclose as much as possible so that our client can make a reasonable educated decision. 

May 25, 2014 11:46 PM #18
Rainmaker
50,021
Mark Don McInnes, Associate Broker
Keller Williams Realty Sandpoint Idaho 83864 - - Sandpoint, ID
Keller Williams Realty - North Idaho 208 255-6227

Interesting post.  Thank you.  Plenty to think about here.

Jun 11, 2014 11:42 PM #19
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Adam Waldman

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