Thanks to Beth Young and to The Southampton Press for covering this current and important real estate topic…md

Publication: The Southampton Press

Acting on homebuyers’ behalf

By Beth Young

 

Most real estate transactions in the United States are conducted with someone representing the buyer in the transaction. On the East End, however, most buyers have gone into transactions without anyone acting on their behalf. That is changing rapidly as the market sours here.

Michael Daly, who owned the RE/MAX Beach Properties franchise that closed its doors in Southampton due to the credit crunch this past summer, is hoping to fill the void in buyer’s brokerages on the East End by opening his own buyer’s agency, True North Associates, out of his North Haven home.

“In the last 10 years, listing brokers have had control of the business. All you had to do was list a property, and it would sell,” he said. “The market’s changed, and appreciation for the buyer’s broker has grown exponentially.”

He’s not alone in his belief that the current real estate climate makes it an important time for real estate agents on the East End to become familiar with watching out for a buyer’s fiduciary interest in transactions, rather than the seller’s interest.

Rick Hoffman, a regional vice president at the Corcoran Group, said that agents at Corcoran are taking seminars in how to act as a buyer’s broker, and often partake of continuing education classes in the subject. Vice President of Operations Marty Gleason is also available to agents to discuss the nitty-gritty details of acting as a buyer’s agent.

While Mr. Hoffman said that a “nominal” percentage of Corcoran Group agents work as buyer’s brokers, he added that the company is very receptive to the concept. “It’s always good when we offer clients more options,” he said.

There is no extra certification required to become a buyer’s broker—a standard real estate license covers buyer’s brokers as well—but John Viteritti, who teaches continuing education courses in the subject at New York University and at Long Island University’s continuing education program offered on the Stony Brook Southampton campus, said that he’s seen “a tremendous increase” in classes on the topic.

Mr. Viteritti said that as many as 62 percent of the real estate agents in the country represent buyers, but in New York agents are just starting to represent buyers.

“I think it’s just a matter of, it’s the way it was always done,” he said. “Now a lot of New York purchasers come from other states that have buyer agencies.”

The concept of a buyer’s broker is a very simple one. Traditionally on the East End, while real estate agents spend most of their time with potential buyers, they are acting in the seller’s interest. Mr. Daly said that such a relationship breeds mistrust, perhaps rightly so.

“Part of the reason the public doesn’t trust real estate agents is that you would think my job was to help you find the house you wanted at the price you wanted,” he said. “In modern-day real estate, the public is starting to understand that it’s ‘buyer beware.’”

The financial arrangement with a buyer’s broker is no different than the one between listing brokers and sub-brokers who are seller’s brokers, meaning the commission is still split between the brokers and there is no additional cost to either the seller or the buyer.

Mr. Daly said that it is a buyer’s broker’s responsibility to do due diligence on the market on the behalf of the buyers, including helping to arrange inspections, and researching comparable sales and market prices.

As prices begin to sag, the number of houses sold here plummets, and buyers, wondering if this is the bottom of the market, begin seriously looking for properties. Mr. Daly said that another factor right now makes it important for buyers to have someone advocating on their behalf and asking questions about what they are buying. “We’ve become hyper-focused on the quality of homes,” he said. “Buyers are smarter about finishes, granite, hardware, fixtures. People know the difference between Waterworks and Home Depot.”

Though Mr. Daly, who said he is currently working with seven clients, said that he initially encountered some resistance from traditional real estate agents when he approached them as a buyer’s agent, said that brokers here are beginning to see the advantage of buyer’s agencies.

“Some agents say, ‘Let me talk to my manager,’ and the manager over-thinks it. It’s not adversarial. It’s about teamwork, like any negotiation should happen,” he said. “The buyer’s agent has with him a motivated buyer who has the objective to make a purchase.”

Mr. Viteritti said seller’s brokers are prohibited from refusing to work with buyer’s brokers by New York State law, and many of them are beginning to realize that buyers who are working with their own broker are far more likely to be serious—a big boon at a time when properties aren’t moving.

“He’s already dealt with the tire-kickers,” said Mr. Viteritti of the buyer’s agent. “Chances are, they’re statistically more likely to be real buyers. That vetting had already been done.”

Mr. Daly did caution that listing agents need to understand that if they share confidential information about a listing with a buyer’s broker, it’s the buyer’s broker’s responsibility to share that information with his or her client.

“People should be open and should be honest about transactions of this nature,” he said, adding that the culture of dishonesty in business transactions that led to the stock market meltdown has led the term “moral hazard” to become one of the buzzwords of 2008.

“I’m not saying that people have been dishonest, but locks are put on doors to keep honest people honest,” he said. “Buying a house is the largest purchase people make in a lifetime. To do that without representation, that’s not being responsible to yourself.”

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