Two common reasons why some feel working with a Realtor is not necessary:
A) I just donâ€™t need a Realtor.
If I havenâ€™t provided enough incentive above to consider teaming with a Realtor on what might be the largest financial purchase of your life, perhaps some information regarding Agency, or shall I say lack of Agency, might tweak your interest.
There are two ways to create agency: 1) through a formal agency document, and 2) through one's actions. When you go to a Builder they will ask you to sign one of two documents. One has you agree that the Builderâ€™s Agent will be acting in Dual-Agency, representing both Builder and Buyer, or that the Builderâ€™s Agent does not represent you.
Case #1 - Builder asks you to sign a Dual-Agency:
An Agent has certain Fiduciary duties to a client (A fiduciary duty is the highest standard of care possible). These can be boiled down to Loyalty, Obedience, Diligence, Disclosure, Accountability, and Confidentiality. One person cannot provide full Disclosure and maintain full Confidentiality at the same time. To avoid this conflict of duties, a Dual-Agent may not place either client into a beneficial position over the other.
For example, a Dual-Agent can provide the price of a home but canâ€™t provide advice as to the appropriateness of the price. Another example might be where a Dual-Agent performs a Comprehensive Market Analysis. The findings can be shared, but not interpreted to either client. If we can agree that determining price is important, when does a Builder Dual-Agency make sense? Why negotiate without the knowledge and experience your own Agent can bring to the table?
Case #2 - Builder asks you to sign a single-agency form/disclosure that Builderâ€™s Agent only works for the Builder:
Think you have dodged the Dual-Agency bullet? Not so fast. Because formalities are not required to create an agency relationship, one can be implied from the conduct of the parties toward each other, regardless of each party's intent, or label used to describe their relationship. Regardless of the document signed by a Buyer to disclose that the Builder's Agent only represents the Builder, if the Builder's Agent/Representative/etc. subsequently acts in an Agency capacity with the Buyer a Dual-Agency is established through action. An undisclosed Dual-Agency is a felony. Do Builderâ€™s Agents do this? Sure. Knowingly? Yes and No. More importantly, from a financial position, you own financial interests are not being represented! Why would one consider doing thisâ€¦?
B) Iâ€™ll save the commission!
Bottom line: The Builderâ€™s Agent doesnâ€™t work for your best interests â€“ their priority is the Builder! In the case of a Dual-Agency, if they were looking to make sure you were in the best position this action would be a breach of Fiduciary Duty to the Builder, and in a sole Builder Agency, they are openly working for the benefit of the Builder. If in both cases they wonâ€™t be working in your best interests, how will you save the commission that the Builder would normally pay YOUR Buyerâ€™s Agent who IS looking out for your best interests? Just having your Buyerâ€™s Agent complete a Comprehensive Market Analysis alone could save you well more than the commission. Especially in these times where housing value are declining, it's prudent to have a knowledgeable Realtor negotiate on your behalf.
If you decide to, team with a Realtor before contacting the Builder if at all possible if you want the Builder to pay for your Agentâ€™s services. Many Builders will not cover your Agentâ€™s fee unless the Realtor registers you first. Understandably, some Builders are getting more lenient on this requirement, and you could always refuse to sign a contract unless they do agree to compensate your Realtor, but its best to be conservative.
Best Regards, Steve