2011 Jan 31st

But I Thought You Were My Agent?

A Frequently Asked Question by Hoboken Condo Buyers

When I work with buyers and make an offer for them I always do it in contract form. It is more formal and I believe gives your offer more weight.  Part of the standard form contract package we use in New Jersey which is provided to us by the New Jersey Board of Realtors includes what is called an “Opinion 26” letter.

Here is what that looks like:  Opinion 26

This letter is legally required and is supposed to tell the buyer who the agent represents, who the title company represents, and that neither the agent nor the title company will provide legal advice to the buyer.  If so desired, the buyer can hire real estate counsel.  The letter explains to the buyer why it’s a good idea to do so.

Here in the world of Hoboken real estate, when an agent works with a buyer we are not really an “agent” in the legal sense of the word.  We don’t normally sign a Buyers Agency Agreement.   I don’t really know why we don’t but I’ve heard brokers claim it increases their potential liability.  I guess they’re not familiar with the legal concept of “implied agency”. Nonetheless, here is what that agreement looks like:

Buyers Agency Agreement

Without a Buyers Agency Agreement, there is no contractual agency relationship created between the agent and the buyer. That’s why we are not really “agents” but more like sales people working with customer. The buyer is free to stop working with his or her not-really-an-agent at any time. Whether not using an agency agreement is a good idea or not is the subject of another post.  In fact, I could probably write a book about our relationship with buyers and the complications that can ensue.

In any event, every time I check the box on the Opinion 26 form that says “I represent neither the seller nor the buyer” I get a call from my buyer saying – but I thought you were my agent!

We are all also required to provide all our customers with a “Consumer Information Statement”.  It looks like this:

Consumer Info Statement

As a lawyer, I can honestly say it is not the best examples of legal writing I have ever seen.  I believe its purpose is to explain to consumers the various relationships and how we can be on both sides of a deal – otherwise known as disclosed dual agency.  In most states dual agency is illegal.  It is recognized that there is an inherent conflict in serving two masters.  Not in New Jersey.

When working as a “Transaction Broker” we are bound to treat our customers fairly and honestly.  I think that is always a good idea in any business.  Any member of the NAR and NJAR is bound by the Code of Ethics and, if he or she fails to live by it, a consumer can file a complaint.  Once an offer is made and accepted, every buyer I have ever worked with has retained counsel.  So even if I am not their formal agent or lawyer, they do have someone representing them and advising them on the legal implications of the transaction.

I thought it might be useful to try to expain all of this and let you all see and read these documents at a time other then when you are about to make an offer on a property and have a ton of other questions on your mind.  Do you think this is a good system?  Does it make sense to you?  I’m curious to hear the consumers’ take on this scheme.  Thanks for reading.  Off to the gym before the snow starts!

Posted by Lori Turoff | Currently 12 Comments »

2009 Aug 25th

What Would You Do?

Hypothetical Hoboken Condo Buyer Scenario QuestionMark

I thought it might be fun (and educational) to discuss a possible response from you, the Hoboken condo-buying public, to a pretty common situation that might arise when you’re home hunting in Hoboken. While I sometimes get ideas for blog posts from real life situations, this is a hypothetical that I made up for the sake of this post and bears no relation to any particular “deal” in reality.

Let’s say you’re looking to buy a condo in Hoboken. You’ve found a real estate agent whom you really like and whose expertise you think highly. Your agent has been taking you to see a bunch of properties. In fact, you’ve now spent a few months looking at Hoboken condos on a pretty regular basis. Your agent has been responsive, diligent, informative, and generally helpful to your search process. Overall, you have seen some really nice properties and you’ve been very happy with your agent’s work on your behalf.

Most people refer to a realtor as their ‘agent’. Now, in some parts of the country, a buyer will sign an agreement with an ‘agent’ that creates a true agency relationship. That agreement also obligates the buyer to compensate the agent for his or her services no matter where the buyer finds the property they ultimately buy. In addition, the agreement makes the buyer’s agent an actual legal agent of the buyer. In Hoboken, that is rarely the case.

Most buyers work with someone called an “agent” but that person is just there to help find you a new home and facilitate the deal from finding the property through closing. We call that realtor a “transaction broker” to differentiate them from a true agency role. If you ever sign a New Jersey standard form sales contract, you will see that term. There is no overt or express contractual relationship or legal agency between the buyer and the agent. So let’s say that is the case in our hypothetical scenario. Your agent and you have not signed a buyer’s agency agreement so your ‘agent’ is really a transaction broker.

One day, you are walking down the street, or browsing the web, when you see the condo of your dreams. It’s is for sale by the owner (we call them fsbo’s). Since you’ve got no contractual duty to include or compensate your agent in a transaction regarding this new fsbo property, what do you do? How do you handle it? The possibilities range from:

offering to sign a buyer’s agency agreement right away so that you will compensate your agent and they will represent you from start to finish in your fsbo deal.

informing your agent about the fsbo property you’ve found so your agent can find out if the seller is willing to pay a commission to your agent for bringing a buyer (you) to see the property and to handle the transaction on your behalf.

– you drop your agent like a hot potato and avoid his or her calls, emails and questions and persue the fsbo on your own. When they track you down to ask where you’ve been, you lie and say you no longer have any interest in buying.

Of course, there are many shades of grey in between these three options but you get my gist. I’m curious to hear what you all think is the right / best / moral / ethical/ honest / expedient way to handle this type of situation.

Does it matter what stage you are at of the buying process? What if you’ve found a place together with your agent, have made an offer which was negotiated by your agent, have done a home inspection with your agent, and are still in attorney review on the first property when you come across the fsbo you now wish to buy instead? You certainly have the right to cancel the contract on the first property and buy the second. But does that change your answer?

Remember, situations like this do on occasion arise in Hoboken, I’m posing the question merely because I’m curious to see what you all have to say on the subject and what your experiences in similar situations may have been.

Posted by Lori Turoff | Currently 17 Comments »

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