Saturday, June 7, 2008
Who are you? A Client or a Customer?
To those not familiar with the real estate law, the words Client and Customer may mean the same. However, these two words have a huge difference to the real estate law and how the Fiduciary Duties of an agent is determined.
A customer is simply a buyer that an agent may offer assistance to make his or her purchase. A salesman at a clothing store, assisting a buyer with the purchase of a suit is a good example of this. The salesman may offer assistance in locating a suit that fits well for the buyer, and make suggestions and offer opinion about how good the fit is, but the salesman's fiduciary duty is to the store owner, not to the customer. The only duties owed to a customer are that the agent is to be fair and honest. Likewise, when an agent works with a buyer as a customer agent's fiduciary duties are to the seller, not to the buyer. This can be misleading because the agent helps you in locating the properties and making the offer. However, the agent must act in the best interest of the seller.
The duties offered to a client goes far beyond this; In addition to being fair and honest, an agent must be extremely loyal and put the interests of a client before his own; there should be no conflict of interest and the agent is accountable for his actions. In other words, the agent promises to be your best buddy that looks out for your best interest in the real estate transaction.
It is generally in the best interest of a buyer to be a Client as opposed to being a Customer as you are getting the fiduciary duties of an agent for no cost out of your pocket. The only disadvantage is if you are dealing with a seller that is not wiling to pay the selling agent's commission, which is not very common. In that situation, the buyer may becomes responsible for the selling agent's commission. One can run into this situation if you had registered with a builder or a "for sale by owner" first, and then found an agent later on and decides to buy that same property and the seller is not willing to pay the sales commission since the buyer came to him first without an agent. Most new construction requires that you specify your agent at the time you register with them, because they are not willing to pay an agent when they found a Customer of their own. Why should they split their commission, when they don’t have to? In this situation, the listing agent representing the builder can enjoy the full commission by themselves!
Generally, if the Client has consideration for his agent, this situation will never arise. If you don’t or can't trust your agent, my recommendation is that you find another agent. One should never sign up with an agent that you don't trust or feel comfortable with.
Now that I explained the advantages to a buyer as a Client, I should also state the advantage to the agent, which is that the agent is working with a buyer that has promised to compensate the agent for his efforts; a client that he can trust as well, for the mutual benefit of both. Who would you work harder for, one who makes a commitment or one who won’t? So, how do you become a client or a customer? That is determined by which agreement you sign; the Exclusive or Non Exclusive agreement.
at 4:47 PM