The real estate homebuying process is rife with potential pitfalls.
But what’s the No. 1 mistake that buyers can make that could cost them thousands of dollars?
Seeing properties with the listing agent.
That’s according to the Colorado Exclusive Buyer Agent Association (CEBAA), a nonprofit trade group whose members are broker-owners and agents who only represent homebuyers — never sellers — to avoid the potential conflicts of interest that can come with dual agency situations.
By definition, none of CEBAA’s members are listing agents or brokers.
3 videos, including ‘one big mistake’
CEBAA and website Buyer Agent Search have rolled out a series of one- to two-minute videos designed to educate homebuyers about the most critical mistakes they can make when house hunting.
“The No. 1 mistake buyers must avoid is to see properties with the listing agent,” one video says.
“Where are the listing agents begging for you to get in contact with them? On yard signs, on websites that show houses for sale, at open houses, at model homes in new developments.
“Once you see a property with the seller’s agent, it will be almost impossible to get a buyer’s agent to represent you for that particular property. You have been claimed.
“Safeguard yourself by proactively choosing a buyer’s agent, even before getting approved for financing.”
The video then points viewers to BuyerAgentSearch.com and CEBAA’s HomeBuyersColorado.org, where they can search for and see ratings and reviews of buyer’s agents, including buyer’s agents that represent both buyers and sellers.
Both sites require consumers to enter the home characteristics they’re interested in as well as their contact information to see any agent profiles.
Who represents whom, anyway?
“Basically if they see the home with the listing agent, the listing agent already has a contract in hand to get the best terms and the best price for the seller,” CEBAA’s association manager, Kathleen Chiras, told Inman. Chiras is also the president of Skyfor Inc., which owns and operates the Buyer Agent Search site.
“So as a buyer, they can pick pretty much anybody other than the listing agent and be better off. There’s opposite objectives going on there between buyer and seller.”
On HomeBuyersColorado.org, CEBAA advises buyers to interview their agentand ask:
- How would you represent me as a buyer client for properties listed with your firm?
- Will you change your relationship with me to “dual agency,” “designated agent” or “transactional broker”?
- Will that affect your ability to negotiate on my behalf?
The vast majority of real estate brokerages nationwide represent both buyers and sellers. An agent can be, and often is, both a buyer’s agent and a listing agent.
The video’s message may therefore not resonate with some agents and brokers.
Many believe that the most knowledgeable person about a property — and therefore the best person to contact about said property — is the listing agent.
Chiras said that it’s the buyer’s agent’s job to interface with the listing agent and be a buffer between the buyer and the listing agent — without inadvertently disclosing any secrets such as what the buyer is willing to pay.
Buyer’s agents also get paid “a fairly hefty commission” to conduct research for the buyer — looking into water and electricity rights, for example, Chiras added.
“If there’s more information that needs to be found out about the property, that’s what the buyer agent role is,” she said.
In regard to buyers being “claimed,” Chiras said listing agents may declare to be the “procuring cause” of a deal if they meet with a buyer first.
“When somebody does go look at a home with a listing agent, the listing agent can then say the prospect found them first and so therefore they don’t have to pay a buyer’s agent,” she said.
“Usually that makes most buyer agents stay away from that situation. Most buyer agents don’t want to be in a fight with their peers.”
Libby Levinson, broker associate at Kentwood Real Estate in Denver, generally agreed with CEBAA’s advice, especially about buyers working with their own agents.
But Levinson disagreed with the idea that a buyer couldn’t find an agent to represent him or her after seeing a home with the listing agent.
“Whether you are working with an exclusive agent who only represents buyers, or an agent who represents both buyers and sellers, the buyer ultimately makes the choice of who they would like to work with,” Levinson told Inman via email.
“A buyer can always find another agent to represent them if they chose to put an offer on a house they saw either with the listing agent or at an open house.
“The issue of procuring cause is generally an issue between the listing agent and the seller. Ultimately the listing broker’s job is to sell the house for the seller,” she added.
“The buyer always has a choice of who they want to work with up until they’ve executed an Exclusive Right to Buy contract with the broker they have chosen.
“The takeaway is that a buyer should feel comfortable with the broker they’ve decided to work with prior to executing this agreement.”
Tips for buyer’s market, seller’s market
The series also includes videos with tips for homebuyers in a buyer’s and seller’s market respectively. Neither mention listing agents.
“Denver, Colorado and Boston, Massachusetts are just two of many cities in the U.S. who have experienced very strong seller’s markets over the past six months,” CEBAA said in a press release.
“A seller’s market occurs when there is not enough inventory of homes for sale to meet the demand, creating multiple offers on desirable properties.
“However, this trend is flattening out, and in certain locations and price points it is actually more of a buyer’s market.
“An experienced and knowledgeable agent can help their client assess the type of market and formulate a strategy.”
For those in a buyer’s market, CEBAA says two mistakes to avoid are 1. Taking too long to buy because you hope to hit the bottom of the market, and 2. Making a bid that’s vastly below market value.
For those in a seller’s market, CEBAA advises buyers not to wait too long to submit an offer and to make sure the first offer is the best one.
Stacie Staub, a broker associate and director of marketing at Live Urban Real Estate in Denver, said she was “a bit concerned” about the videos’ content.
“In these videos, there are very specific promises made to the consumer: ‘Avoiding this one mistake WILL save you thousands of dollars.’ There is no way that this organization can guarantee that using one of the buyer agents from their list WILL save a person money when they purchase a property,” Staub told Inman via email.
“And, ‘If you make this mistake you are GUARANTEED to lose in a bidding war.’ Again, there is no way that this company can GUARANTEE that homebuyers who do not hire one of their agents will lose the chance to buy a home in a competitive buying situation.
“These types of generalizations being used to both frighten and entice consumers into registering on their website to ‘Receive a list of qualified buyer agents,’ is, in my opinion, very misleading.”
In response, Chiras said, “[I]n the first video, the point is well taken that the word ‘could’ is probably better than the word ‘will.'”
But she disputed Staub’s characterization of the “guaranteed” statement in the seller’s market video, saying that the statement “is referring to a list of seven activities to avoid, and has nothing to do with hiring one of ‘our agents.'”
‘All kinds of strategies’ work
Staub said the Denver area has had a seller’s market for months now and there are “all kinds of strategies” that work in competitive situations because every situation is different.
“Sellers aren’t always looking for the fastest contract or the highest dollar amount, and good buyer agents and transaction brokers know how to negotiate a deal that works for everyone,” she said.
“Currently, around 25 percent of deals in the Denver area are falling apart. One of the factors contributing to this trend is the speed of the market. Buyers are pushed to write fast contracts without thoroughly considering if the home or deal is right for their situation.
“Another factor is appraisals. When buyers are advised to write a high, quick contract just to get a home ‘Under Contract,’ it often doesn’t appraise at value, and then we see homes coming back on the market.
“As far as seeing properties with a listing agent, of course we recommend that buyers are properly represented by an agent that is committed to working hard to get them into the right home for them, and sometimes that does end up being someone they met through a listing.”
Chiras agreed with Staub on these points.
Exclusive buyer’s agent or buyer’s agent?
Levinson recommended working with an agent who represents both buyers and sellers because she said such agents “have a better feel for the marketplace.”
“The Denver market has been very hot with multiple offers placed within days of a home hitting the market,” she said.
“This spring I put eight listings on the market within a very short amount of time. This was invaluable for my buyers because I knew how buyers were structuring their offers and why sellers were chasing the offers they were.
“As a result of viewing so many competing offers on my own listings, I was able to advise my buyers on the key points that would set their offer apart to ultimately win in a bidding war situation.”
In response, Chiras said, “I don’t think Libby can assert that an agent who represents both buyers and sellers have a ‘better feel for the market place’ compared with Colorado exclusive buyer agents.
“Most of them represented buyers and sellers before deciding to specialize in buyers. Also, at their annual meeting just a few months ago, they invited a top listing agent to share the strategies he uses to when looking at multiple offers to help his clients select the best ones.
“Also, these agents have spent many hours and thousands of dollars to consult with an attorney to help them write up special clauses to give their buyers an advantage in the bidding wars.
“I think we would all agree that specialists tend to have more knowledge and expertise in any field than generalists, especially when they are constantly attempting to learn about the other side of the negotiation in order to develop the best strategies for their buyer clients.
“Also, when members of CEBAA believe a client might be better served by a buy/sell (traditional) broker, they will do what is in the client’s best interest. Just today, both of my EBAs deferred a client to a good traditional agent affiliate because she was more of a specialist in land in the front range counties of Colorado.”
Chiras added that over 85 percent of her list of recommended brokers work with both buyers and sellers while the other 15 percent are exclusive buyer agency companies that have no listings.
“Oftentimes I suggest people look at both because there is an advantage to buyer agent specialists who have honed their property-finding, negotiation and closing skills with just buyers,” she said.
“I also know that some of my brokers claim they can be better buyers agents because they really understand the perspective of the listing side.”
Ultimately, CEBAA and Buyer Agent Search intend to reach consumers, not other agents or brokers, with the video series.
They are marketing the videos through press releases posted to their respective sites as well as video stills that will be posted to Pinterest and Instagram, Chiras said.
They will soon release a couple more videos in the series, she added.