Are Your Interests Represented?

This entry is part 1 of 4 in the series Property Finding Services.

1. Are Your Interests Represented?
2. Is it Necessary to Have a Buyer Agent?
3. Property Finding FAQ: What do You Do that I Can’t?
4. Property Finding Step by Step

One of the most common misconceptions shared by a large number of Home Buyers and Tenants is that when working with a Real Estate Agent, he or she will “automatically” represent you.

Unless this is specifically discussed in a written contract, in all probability:

The Real Estate Agent, listing the Home Owner’s property, will be legally bound to represent the Home Owner and not the Buyer or Tenant.

The traditional relationship has been that a Real Estate Agent’s primary legal loyalty was to the Owner of the property. This relationship is in effect whether the Real Estate Agent is the listing agent, or working with a Home Buyer or Tenant. This situation causes many Buyers and Tenants to be confused: Buyers and Tenants assume that the Real Estate Agent who has been driving them around showing them houses for the last 3 weeks is representing them. In reality, the Real Estate Agent has been representing the Owners of the houses they viewed, and is bound to reveal to those Home Owners any information he or she knows about the Buyers or Tenants.

Buyer Agency changes that. The Home Buyer now has a choice in representation: the Listing Real Estate Agent can continue to represent the Home Owner in the transaction, and a different Real Estate Professional, a buyer’s representative or Buyer Agent can represent the Buyer or the Tenant. The Buyer (or Tenant) is now able to compete on a level playing field.

Types of Representations, and who the Real Estate Agent represents

OWNER REPRESENTATION (Listing Agency): The “default” situation. Unless specified to the contrary, all Real Estate Agents involved in a real estate transaction represent, and owe their loyalty to the Home Owner. If you contact a Real Estate Agent who has a property listed, that Listing Agent will receive a commission from - and always represent the interests of - the Home Owner.

BUYER REPRESENTATION (Buyer Agency: When a Realtor, Real Estate Agent or Broker represents the Buyer, that Buyer Agent owes loyalty to the Home Buyer.

DUAL REPRESENTATION: This occurs when a Buyer Agent of a Buyer or Tenant is selling or leasing property of which he or she is already the Listing Agent. In this case the Agent’s fees are paid by the Owner of the property according to the listing agreement, and the Buyer or Tenant will not pay the Buyer Agency fee. This situation must be disclosed to both the Home Buyer and the Home Owner before the property is shown to the Buyer or Tenant. Privileged information (e.g. the price that a Home Buyer will pay or a Home Owner will sell at) cannot be disclosed to the other party without the permission of that party.

Who will I Represent in a Transaction

If you ask me to show you a house that is listed by Budapest Property Finder, I represent the Home Owner. You will find all of our own listings by putting your mouse over FOR SALE LISTINGS, RENTAL LISTINGS, and RENT TO OWN LISTINGS on the menu bar above. I also keep a collection of picture galleries of other properties on the market, mainly to give you an idea of what properties in the different districts or towns look like and how much they normally cost. You can view them grouped by locations under the menu bar title WHAT ELSE IS ON THE MARKET.

If you enlist my Property Finding (Buyer Agency) services, I will search the market on your behalf, and show you properties listed by other real estate companies or by owners I have no agency relationship with. In this case I am representing you, the Home Buyer or Tenant. Representation disclosure should take place at the first meeting when we begin to work together.

If you are ready to move on and hire me to list your house, I represent you, the Home Owner in that situation.

What if after I sold or leased your house successfully, you hired me to represent you in your next purchase process, and then you decided to buy a house I happened to list? In this case, I would have a conflict of interests when you decided to buy one of my listings, because I represented you as a Buyer, and I represented the Owner in the sale of his or her house that you wished to buy.

Are you still with me? In this situation, I would be limited in what I can do for you as a Home Buyer, and I would also be limited as to what I can do for the Owner. That is the origin of the term ‘limited representation’. Conflict of interests are allowed in real estate as long as all parties are informed of the conflict and agree to proceed.

Not Understanding Representation Can Cost You Big Money

Let’s imagine that you decide to purchase a house from a listing Real Estate Agent who represents the Home Owner. You do not realize this, or do not pay attention, and believe the Real Estate Agent is also representing you as the Home Buyer. You tell to the Owner’s Real Estate Agent, “I will offer $300,000 for this home. The most I will give is $315,000.” That Owner’s Real Estate Agent is bound to disclose that you will give $315,000. On the other hand, if you made that statement to your Buyer Agent, your Buyer Agent would be bound not to disclose your top price and not to damage your negotiating power in any way. Instead, your Buyer Agent will do most or all of the negotiating for you. As you can see, who the Real Estate Agent represents makes a huge difference!

If you leave the representation question “as-is”, your Real Estate Agent will automatically represent the Owner in the transaction. To sum it up, if you want full representation, consider using the services of a Buyers Agent.

Next: Is it Necessary to Have a Buyer Agent? »

Topics: property purchase in Hungary, buyer representation, buyer agency, real estate agent, listing agent, buyer agent