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 »

2009 Jul 16th

How a Little Loyalty Can Save You Money!

Buying a Condo From the Builder’s “Sales Office” Can be Dangerous.hoboken restaurants

 I was recently working with a buyer (let’s call her “Sue”) who was looking for a one bedroom apartment in the mid-$300,000 range. We had gone out looking at properties two or three times but I hadn’t heard from her in a week, so I followed-up. Sue decided to buy a place directly from a developer in JC so she “didn’t bother to get me involved”. She agreed to buy the property at the full asking price and was already in attorney review.

I had not yet invested much time or effort with this particular customer, so losing the commission on this one transaction was no big deal. It does however illustrate a very good point.   By not saying “I’m already working with an agent”, Sue  not only cost me my potential commission but she may have hurt herself too.

It’s a basic tenant of real estate that the agent who lists a property for sale (the listing agent) always represents the seller.  The agents at the sales office of any new construction building are the listing agents!  By going to the sales office without us, Sue had in effect asked the seller’s agent to also represent her.  Now the ‘listing agent’ has become a ‘dual agent’ – representing the parties to both sides of the deal.

Let’s look at some of the reasons why you, as a buyer, wouldn’t want the seller’s agent working for you.  There are many (like the NY Dept. of State) who believe dual agency is an inherent conflict of interest (although in New Jersey it is perfectly legal and happens all the time.)  In situations where an agent serves in a dual capacity in NJ, the agent must disclose it to the customer and still has a ethical obligation to treat both the buyer and the seller fairly. Their first loyalty, however, must be to the seller as they are a fiduciary of the seller.   Being a fiduciary is a higher standard than just being fair.   When you walk into Toll Bros. or other sales offices, do they disclose that to you?  Do they have you sign disclosure documents when you make an offer on one of their units?  I wonder.

When Lori and I represent a buyer we are well above-average negotiators.  Lori is a lawyer and I am a CPA.  We have  40 years of combined real estate experience.  Even discounting our negotiating skills, our familarity with the purchase process and with Hoboken/JC real estate practices in general would have given Sue a tremendous advantage in negotiating the purchase price as well as navigating (and solving) the problems that inevitably crop up during attorney review, inspection, securing financing and the all the way up to closing.   Sue waived all of that expertise working on her behalf.  Is the developer really going to negotiate against themselves to get you a lower price?

As to the compensation, when a unit is sold (by an individual or by a developer) the seller offers a commission (in Hoboken typically 5% to 6%) which is split 50/50 between the listing agent and the agent representing the buyer. If an agent sells his or her own listing (as in this instance), he or she gets both sides of the fee because he doesn’t have to split it with the buyer’s representative. There are no “savings” for Sue by cutting her agent out of the deal.

Finally, Sue asked me to help her look for an apartment, I spent time searching the MLS trying to find appropriate places within her price range and with the amenities she required, I made appointments, collected keys and took her out a few times and then – she said thanks very much but I’ve cut you out of the deal without a second thought. Not very cool.

You know how some entertainers remind you to tip your waiters and waitresses after a show? Well, folks – show some loyalty to the agents that are working hard for you. It’s the right thing to do, and it will benefit YOU in the long run.

Posted by Lori Turoff | Currently 46 Comments »

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