1801 Manhattan Ave
WHAT IS A BROKER, VERSUS AN AGENT?
WHO DOES A BROKER REPRESENT?
HOW DOES A BROKER GET PAID?
WHAT DOES A SELLER'S AGENT DO?
ABOUT BUYER AGENCY
WHAT WOULD A BUYER'S AGENT DO?
HOW DO I SECURE A BUYER'S AGENT?
WHAT IS DUAL AGENCY?
A broker is an individual or company specially licensed by the state
to run and supervise a real estate transaction business. A real estate salesperson, or agent,
is a representative of and an extension of the broker under whom
they are employed. They are also professionally trained, examined
and licensed by the state. A real estate agent may legally conduct
real estate transactions only under the auspices and supervision of
a licensed broker. A real estate broker may also serve as a salesperson concurrently.
A broker may represent a seller (Seller's Agent), a buyer (Buyer's Agent), both parties (Disclosed Dual Agent), or neither (Transaction Broker). Please see the New Jersey Real Estate Commission's Consumer Information Statement for more details about these distinctions. The broker who has an exclusive sales representation agreement with a seller is known as the "listing broker," and their agents are the "listing agents." Typically, the listing broker will advertise the property to other brokers, who may assist in the sale by introducing buyer/customers of theirs to the property. This is called "co-broking." If a deal is made, to distinguish the parties involved, the broker/agent who introduced the buyer to the property is called the "selling agent (/broker)" - not to be confused with "seller's agent (/broker)." (back to top)
Brokers generally work on commission only, so their time, efforts, and expenses are invested in the hope that a transaction will culminate, at which point they are paid at the closing. If the broker's efforts do not result in the closing of a transaction, the broker does not get paid. In New Jersey, it is customary for the seller to pay the broker's commission, although there are circumstance where the buyer will pay the broker's commission. In a co-broke situation, typically the seller pays their listing broker, who then shares the commission with the selling broker according to a previously agreed-upon split. With leasing, it is negotiable and often fluctuates with the market at to whether the landlord or tenant pays the brokerage fee. The parties are advised to calculate over the life of the lease what their net cost/income will be factoring in the commission. Sometimes it is helpful to discuss with the other party if it involves a matter of cash flow. (back to top)In a nutshell, a seller's agent/broker does what you don't have the time, expertise, or impartiality to do. When representing a seller, the broker's customary activities include, but are not limited to the following:
A seller's agent also owes you the following strict fiduciary duties:
There are also many subtle enhancements that the broker may add to the process, depending upon the specific needs of the seller and of the transaction. For instance, the broker/agent may provide reassurance to a nervous seller if the transaction experiences delays, advise him or her on cosmetic improvements to make or not to make to the property before presentation. If the property is a coop or condo, the broker may coordinate with the property management office to ascertain costs, fees, and procedures for transferring the property unit, and review the buyer's Board application for accuracy and completeness before submitting it to the Board for review. (back to top)
"Let the buyer beware" is a familiar saying in our culture that leaves many property seekers wary and confused in the complex world of real estate. "If the listing broker represents the seller, who's representing me?" The first point that any buyer should understand is that along with state-mandated responsibility to the seller, a real estate broker or agent is equally mandated to be honest, fair, and ethical in their interactions with buyers. While they may be required to withhold information that could be detrimental to the seller such as his/her financial pressure to sell, he/she may not knowingly withhold detrimental information about the property itself. The buyer is also protected by the practice of hiring a qualified New Jersey State licensed attorney to review and advise on such items as the contract of sale, property financials, tax liability, and title searches, and to attend the closing to ensure that all paperwork is complete and legally binding.
Nonetheless, many buyers find it tiring to deal with a myriad of listing brokers about their individual properties. They feel they're being constantly "sold," and they end up wading through a lot of trial and error shopping of inappropriate properties. They browse endless open houses in competition with other buyers. Some are simply uncomfortable with the notion that no one is specifically looking out for their interests. Often, a listing agent whose property did not fulfill the buyer's needs may begin to work with that buyer in locating and presenting properties listed by other brokers, in the capacity of Transaction Broker. As the agent begins to screen and pursue properties on the buyer's behalf and a rapport develops between the two, a sense of partnership can emerge and the buyer may want that agent to represent him or her, and may choose to enter into an exclusive buyer's representation agreement. (back to top)
As above, an agent does what you don't have the time, expertise, or impartiality to do. When representing a buyer, the broker's customary activities include, but are not limited to the following:
A buyer's agent also owes you the following strict fiduciary duties:
One of the benefits of having a buyer's agent is that they can communicate "in shorthand" with sellers' agents, who may speak more directly and succinctly about a property to a fellow broker than they might to a potential customer, thus saving the buyer time, energy, and unnecessary running around. Also, the buyer's agent may provide general information and professional advice to a first-time buyer, or recommend an attorney, mortgage broker or lender, home inspector, or other professional needed in the transaction. In the case of a coop or condo purchase, the broker may also coach and assist the buyer in preparing their Board application, review it for accuracy and ensure that all information is complete and presented in the best possible light for the Board review. (back to top)
When considering the possibility of buyer agency, both the buyer and the agent are faced with the issue of loyalty. The agreement described above puts the buyer in a clearly more advantageous position, since they're gaining the market knowledge and representation of a real estate professional. They have someone scouring the market on their behalf, relieving them of the tedious task of combing through ads and making endless phone calls. But given a real estate agent's typical compensation basis, how will the buyer's agent be motivated to stay on board and truly work for the buyer, knowing that a sale might not eventually close, and that the buyer may continue to pursue property leads through resources of his own, including other brokers who may be searching the very same listings simultaneously?
The buyer's agency agreement must provide assurance to both parties that a good chance of success will result from the partnership. The buyer may offer to guarantee to the agent that within a limited period of time, they will not enter into a contract to purchase any property without the buyer's agent being compensated. In other words, the buyer agrees to allow the agent to represent them exclusively, and thus be guaranteed at least the value of a co-broke commission when a property is purchased. The amount could be either a percentage of the final purchase price, or an agreed-upon flat sum based on either the estimated purchase budget or the estimated amount of work involved. In the rare case where the agent may present, and the buyer selects a property for which the owner is unwilling to pay any commission, the buyer would pay the agreed-upon commission to the broker. However, the buyer is likely to have obtained a correspondingly more advantageous purchase price for the property, since the seller did not have to factor a full broker's commission into his or her decision. (back to top)
Dual agency occurs when a seller's agent becomes the buyer's agent in the same transaction, or vice-versa. For example, a buyer answers a seller's agent's advertisement for a property and chooses to work directly with that agent. Or a buyer's agent acquires a listing, or their company acquires a listing that the buyer becomes interested in. In New Jersey, dual agency is commonly practiced and legal as long as the status of the agent is fully disclosed to both the seller and the buyer in a transaction, before any inquiries or discussions of the property take place. This is to protect the confidentiality of information about both seller and buyer, so that neither is provided with proprietary information about the other that could be detrimental to that party in price negotiations.
In disclosed dual agency, the agent works for both the seller and the buyer, and may provide any or all of the above-referenced services to both parties except for disclosure of confidential information. The agent may transmit offers and counter-offers but may not actively advocate one's financial interests over the other's. It is important to note that a licensed agent is also prohibited from revealing confidential informaton to a real estate agent representing the other party that could give their client a negotiating advantage.
Some buyers and sellers find efficiencies in working through dual agency by avoiding second-hand interpretation as well as the uncertainty of not knowing the other party's possible other interests and negotiating activities. For example, an exclusive seller's agent may not be required to disclose to the buyer/buyer's agent the existence of competing offers, whereas a disclosed dual agent would have an obligation to the buyer to do so.
A FINAL WORD ABOUT BROKERAGE...
Buying or selling real estate involves some major decision-making, often accompanied by issues that can be personal and/or emotional. For some people, discussions of money can produce confusion or anxiety. Whether you're the buyer or the seller, you stand to benefit from the objectivity of a third party to the transaction, since their advice is unencumbered by the personal impact of the decisions being made. Which type of representation is best for you depends upon the circumstances, the professionals involved, or your personal preferences and comfort level.
more information on the above, please call Paula Brown