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 »

2011 Jan 25th

A Nightmare Realtor Story

A True Story As Told to HREN by a Hoboken Condo Buyerrealtor

Bob Buyer sees an ad for a property that looks interesting so he calls the listing agent.  The listing agent doesn’t call back but instead has a team member (let’s call her Tracy) respond to buyer’s call.  Bob Buyer sets up an appointment to view the property with Tracy and believes that Tracy is the seller’s agent since the listing is with Tracy’s firm.  Tracy tells buyer that she is the buyer’s agent.

WRONG – the listing agreement for any property is between the seller and the brokerage firm.  ALL agents from that firm are agents of the seller.  If Tracy wants to represent the buyer and the seller (called dual disclosed agency) it must be DISCLOSED in writing to the buyer that she is a dual agent.

Bob Buyer feels he has no choice but to continue to pursue the purchase of the property with Tracy.

WRONG – A buyer always has the right to terminate a relationship with any agent unless the buyer has signed a written contract (called a Buyer’s Agency Agreement) with that agent.  It is uncommon for buyers in Hoboken to sign Buyer’s Agency Agreements.  The buyer should have simply sent an email to Tracy saying “thanks but I am no longer interested in using your services” and gone and found his own agent from a different agency.

According to the buyer, Tracy could not have been more problematic.  She kept pushing the buyer to raise his offer and, whenever the buyer stood firm she told him he should look elsewhere.

WRONG – Agents when acting as dual agents are still bound by the Realtor Code of Ethics. Article 1 clearly states that Realtors must treat all parties honestly.  Tracy cannot put the interests of the seller before those of the buyer.

After agreeing to terms and signing a contract she would not let the buyer see the unit again (she claimed the owners would not let her) even though she knew Bob desperately wanted to take measurements of the kitchen and bathrooms for his contractors to use.

After showing up late for the home inspection, Tracy told the inspector he had only 1 hour to inspect the property even though the home inspector needed two hours.

WRONG – the home inspection is a right given to the buyer in the sales contract.  Refusal by the seller’s agent to allow an adequate time for the inspection can be considered breach of contract by the seller.

Tracy was always late for appointments, when the buyer had his lawyer conclude the negotiations because Tracy would not communicate the buyer’s interest to the seller, Tracy yelled at the buyer, and was generally rude.

The property in question was sold for over half a million dollars.  Tracy’s brokerage firm earned commission on both the buy side and the sell side.  In the end, Tracy’s share of that was at least $6,000, very likely more.  Bob Buyer felt there was nothing he could do but grin and bear it.

WRONG – if you as the consumer find yourself in a situation like this there is recourse.   Real estate is a highly regulated industry.  The NJ Real Estate Commision has a Consumer Inquiry and Response Center.  The consumer can contact them by phone, mail, fax, on-line or in person.  You can submit an inquiry or file a formal complaint.  All Realtors are bound by the Code of Ethics.  An ethics complaint can be filed with the NJ Association of Realtors.

When the level of wrongdoing is high enough to potentially cause financial damage to the consumer, a civil action can be brought against the realtor and his or her firm.  If you are involved in a real estate transaction you are probably represented by a lawyer.  Ask your lawyer for advice!

Why does all this matter?  First of all, consumers deserve better treatment than the above scenario.  When agents act badly, unethically or illegally it tarnishes the reputation of not just that individual agent but the entire industry.  Some of us sincerely wish to raise the bar.  Calling out the bad guys helps everyone receive better treatment and raises the standards to which the rest of us are held.

Posted by Lori Turoff | Currently 6 Comments »

2010 Jul 12th

Are You Really Sure You’re Not Working With an Agent?

Misguided Buyers  confused

I had an interesting conversation with some Hoboken condo buyers the other day.  They were not customers of mine but were buying in Hoboken and for other reasons we got to chatting.  They were in contract for a condo in Hoboken in a building with which I am extremely familiar.  I asked them who their agent was and they replied “oh, we aren’t using an agent“.  They had seen the property on the internet and called the listing agent directly.  They viewed the property with the listing agent, made an offer through the listing agent and negotiated the sales price with the listing agent.  But they were convinced that they weren’t using an agent.

A few days later I was on a listing appointment with sellers who were in contact for a new contruction condo in Hoboken.  Similarly, they told me that they weren’t using an agent for their condo purchase.  They had gone to the sales office, viewed the property and made their offer through the sales office.  Yet they also believed they were “not using an agent”.

When you, as a buyer, deal directly with the listing agent or the sales office to purchase a property, that listing agent, know it or not, IS YOUR AGENT.  The listing agent loves when this happens because he or she gets both sides of the deal and makes double the commission.  Right there – if buyers realize this single fact – they could avoid making their first mistake.  If I were a buyer negotiating an offer directly through the listing agent one of the first things I would ask for during my price negotiations is that the listing agent cut his or her commission.

The first couple went on to tell me about some specifics the listing agent told them about the building.  Many of them were simply not true.  For example, the listing agent actually told the buyers that they could build a deck on the roof.  He failed to mention anything about needing to get a building permit and possibly a zoning variance from Hoboken City Hall.  Or that City Hall almost never grants them anymore.  Clearly, the listing agent was either simply ignorant or would say just about anything to get the property sold, especially to his own buyers ($$$).

Hoboken Buyers Need a Wake Up Call!wake up call

The listing agent works for and is an agent of the seller. He has a fiduciary relationship to the seller.  There are many states that have made it illegal for the same agent to be on both sides of a deal because it is viewed as a conflict of interest.  New Jersey is not (yet) one of those states.  New Jersey does have rules that require the agency relationships to be disclosed to the consumer in writing.  (As a lawyer, I can tell you that the “Consumer Information Statement” disclosure form typically used by agents is one of the worst written legal documents I’ve ever seen.)  Yet how many of these agents actually understand and can explain what it means to be a “dual agent”?  So what is a buyer to do?

Any time a buyer sees a property on line, or at an open house, or in an advertisement of any type, chances are that property is in the multiple listing system.  That means that you can view the property with the agent of your choosing and let them work on your behalf while the listing agent works on the seller’s behalf.  That is the whole point of the multiple listing idea.  Any agent can sell any property.  Even if you are looking at, say, Toll Brothers properties at Hudson Tea, Harborside, or Maxwell Place.  Before you go, find an agent you like, trust, and wish to work with and bring them with you to the sales office!  Or if it’s a spur of the moment visit, walk into the sales office and state “I have my own agent but she is not with me today – if I look at your properties will you allow him or her to represent me?”.  If the answer is no, walk out.  Come back later with your own agent.

The same holds true when visiting an open house. When you enter the property and you’re asked to sign in, let the  hosting agent know that you are working with your own agent.  Should you decide you’re interested in the property, you’ll be able to move forward with your own agent at your side.  If you don’t care, and you do work with the listing agent, be aware that anything that you tell that listing agent must be disclosed to the buyer.  That is part of the fiduciary duty the listing agent has to the seller.  During price negotiations, if you say “let’s start at $475,000 and see what the seller says before we go up to $500,000”, the listing agent must tell that information to the seller!  Forwarned is forearmed.

Posted by Lori Turoff | Currently 60 Comments »

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