A person that goes through the training, passes an exam and receives a real estate license from the state, is a real estate licensee and can work as a real estate agent. But that person is not a REALTOR®.

What is a Realtor®?
A REALTOR® is a member of the National Association of REALTORS® (NAR), the largest professional association for real estate licensees in the country. The word REALTOR® is a registered trade mark of NAR and can only be used by members of NAR. a REALTOR® can be a real estate agent or a real estate broker. The term REALTOR® does not signify the type of license a real estate licensee has but rather that person’s affiliation with the National Association of REALTORS®.

And what about a real estate licensee?

A person receiving a real estate license is authorized by the state to work as a real estate agent. The official term states typically use for a real estate agent is real estate “salesperson”. A real estate agent can become a REALTOR® by applying for membership to their local association of REALTORS®. One may not become a member of the National Association of REALTORS® directly, but rather through their local  association. Every state has a state association of REALTORS® as well as several local or regional associations.

For example, in Northern Virginia, for a real estate licensee to become a REALTOR® one must apply for membership to the Northern Virginia Association of REALTORS® (NVAR). The licensee pays dues to NVAR and automatically becomes a member of the Virginia Association of REALTORS® as well as the National Association of REALTORS®. In turn, NVAR shares the licensees dues with the state and national associations.

Ok, so why does association membership matter?

As a real estate licensee, one is bound only by the laws of the state he/she operates in. On the other hand, REALTORS® have to follow a strict code of ethics, which if they don’t, can be fined and penalized. The REALTOR® Code of Ethics imposes more requirements and in certain cases sets higher standards than state laws do.

It is worth reading the Code of Ethics to understand the responsibilities REALTORS® have to the clients, customers, other REALTORS® and the public.

In the D.C. metro area the majority of real estate licensees are REALTORS®, so as a real estate buyer or seller you are most likely to work with a person who subscribes to this higher standard of practice. In rural areas however, that is not always the case. Not being a REALTOR® does not mean that one is not honest and ethical, however being a REALTOR® shows that one has made that extra commitment.

When planning to buy or sell a home, don’t hesitate to contact me for highly ethical, committed representation.

]]> http://www.calltheo.com/realtor-real-estate-agent-whats-the-difference/feed/ 0 http://www.calltheo.com/what-is-a-buyers-agent/ http://www.calltheo.com/what-is-a-buyers-agent/#comments Mon, 01 Mar 2010 04:39:55 +0000 Theo http://www.propertylicious.com/?p=699 Real estate agents often assume that buyers know what a buyer’s agent is. More often than not, this is not the case. Furthermore, even among the buyers who understand the concept of buyer agency, few fully understand the implications of not working with a buyer’s agent, and what working with a buyer’s agent means from a legal perspective.

In explaining buyer agency, I will start with an example from another profession, where representation is a much easier concept to understand.

• Let’s say you had a dispute with your neighbor and go to court. Your neighbor is represented by a lawyer. Wouldn’t you want to be represented by your own lawyer?
• Let’s say you are doing a business deal. The other party has a lawyer looking over the contracts and terms. Would you not want your own lawyer to look over them?

Of course real estate agents are not lawyers, but the concept is that each party in the transaction should have representation. First I will explain who represents the “other party” in real estate (the “other party” being the seller) and then how a buyer’s agent represents the buyer. And to put things into perspective, I won’t go into detail but I will say that, a real estate transaction is governed by a wide body of federal statutes and state statutory and common law.

When a seller lists a property for sale they sign a listing agreement. That listing agreement is a contract between the real estate broker and the seller, spelling out the duties and responsibilities of each party to the other. One of those duties, is the duty of the listing agent to represent the seller’s best interest at all times. If the listing agent doesn’t do so, he/she can be sued in the courts, fined by the Real Estate Board, lose the real estate license, etc. Depending on how bad the screw up was, it may even mean prison time. In other words, a crooked listing agent doesn’t have a lot of room to be crooked without risking everything.

If a buyer shows up unrepresented to a listing agent and indicates an interest to buy the home listed by the said listing agent, the listing agent is allowed by law to help the buyer agent purchase the home (unless the seller has expressly prohibited this in the listing agreement). In this situation, the listing agent is helping the buyer buy the home, but the listing agent’s duty still is to represent the seller. As a result, the listing agent can not help you with a home inspection, or provide advice, or pretty much do anything other than try to convince you that this is the perfect house and you should pay top dollar for it. Just to clarify, the listing agent is not trying to trick you, but this is what the listing agent is obligated to do by the law and according to the listing agreement.

This situation poses another problem. When a listing agent is helping an unrepresented buyer to buy the agent’s listing there is always the possibility that the buyer will, rightly or wrongly, be left with the impression that the listing agent is actually looking out for the buyer’s interest. This opens up the listing agent to a lot of liability. Picture this scenario:

• Buyer: Goes to listing agent and says: “I want to buy your listing, but I am concerned about the noise from the street.”
• Listing Agent: “There is barely any noise. It is a great home, I’ll prepare the contracts”

Buyer moves in and the street is noisy. Buyer sues listing agent.

• Buyer: “You told me that there is no noise”.
• Listing agent: “I didn’t realize that by noise you meant the highway behind the back yard”
• Buyer: “I thought you represented me! You were helping me right the contract.”

This is a very simplistic scenario, but the point here is that the listing agent, by helping the buyer, opens him/herself to liability. That is why many listing agents avoid putting themselves in such position. The best and most honest agents I know, would recommend that the buyer find a buyer’s agent to help them prepare an offer.

So now you decide that you will work with an agent. You find someone that seems good and call them up. You tell them that you have found a home and you want to make an offer. You sit down with the agent and make an offer. You tell the agent all your financial info and how much you are willing to really pay.

Guess what? This agent, by law, represents the seller. The law states that all agents, unless they have an agreement to represent the buyer, they are obligated to represent the seller, regardless of who the listing agent is or what company she/he works for. In fact, the agent that you picked, by law is obligated to tell the listing agent that you are willing to pay more than you are offering, or that you are desperate to move quickly and this house is perfect for you, or that you are completely unqualified and they shouldn’t even look at your offer. Whatever that agent knows about you, he/she is obligated to tell the listing agent. The law says that this agent that you picked is a “sub-agent” of the listing agent. If something like that has happened to you, don’t blame the agent.

Now you’re thinking: “So how do I get represented as a buyer? Who protects the buyer? Does the law care about the buyer?“

Absolutely. It took many years to get there, but in the nineties all states started passing laws recognizing buyer agency and protecting the buyer. In our area we have pretty strict buyer agency laws. Maryland requires that the agency disclosure is written. The buyer and agent have to sign an agreement that indicates what relationship they will have.

In D.C. buyers must be provided with a written disclosure about agency relationships. If the buyers desire to have the agent represent them, they must have a written buyer agency agreement. In Virginia the law requires that a disclosure about agency relationships takes place at the earliest possible time. In other words, prior to the agent showing a home or prior to the buyer sharing potentially confidential information. If the buyer wishes to have a buyer’s agent, there must be a written buyer agency agreement.

So what is a buyer’s agent and what does she/he do?

The buyer’s agent represents the buyer, the same way the listing agent represents the seller. The buyer agency agreement spells out the duties and responsibilities of the agent and the buyer during the term of this relationship. The buyer’s agent is responsible to represent you in the transaction, share with you any information he/she learns about the seller, the seller’s situation, etc and look out after your best interest at all times. If a buyer’s agent violates any of the terms of the agreement, he/she can be held liable.

As a buyer, when working with an agent, you want to have a written buyer agency agreement to protect your self. Otherwise, what the relationship between you and the agent was, and what the agent should or should not have done, is open to interpretation.

It is also a good idea to look for an Accredited Buyer Representative (ABR). These three letters after a Realtor’s name are a  designation held solely by agents who have met the educational and practical requirements set forth by the Real Estate Buyer’s Agent Council (REBAC) and who demonstrate skills and knowledge to best represent homebuyers. In order to earn the ABR designation, Realtors must complete specialized training in buyer-representation, and have an established track record, with proven experience in representing the concerns of home buyers.

How does the buyer’s agent get paid?

In practice, Buyers’ Agents get paid by the listing agent. When a listing agent enters a property into the MLS she/he automatically extends an offer of co-operation to the other agents members of the MLS. As a result, the agent that represents the buyer receives his payment from the listing agent. Even though this might sound as a conflict of interest, the law is very clear that payment does not determine agency. In other words, an agent is not obligated to represent the person who pays him/her. As a result, a buyer’s agent is paid by the listing agent but is free to fully represent the buyer. Of course, if the buyer wishes, the buyer can agree with the buyer’s agent to compensate the agent directly instead of letting him/her accept payment from the seller.

Occasionally, some skeptics argue that despite the fact that an agent works as a buyer’s agent, it is still in his/her interest to get a transaction closed quickly, since payment comes from the listing agent. Even though this might be the case in some rare situations, I believe that most agents have the intelligence to understand that such behavior, not only opens them up to liability, but it is also bad for their long-term business and certainly not good for their reputation.

What if I end up not liking my Buyer’s Agent? How long is the buyer agency agreement for?

In the buyer agency agreement that you will sign, you can specify the term of the agreement. If no expiration date has been specified in the agreement, by law, listing and buyer agency agreements expire in 90 days. If you are not happy with your buyer’s agent, when the agreement is over you are free to work with a new buyer’s agent. Personally I have the agreement expire in 180 days, simply because sometimes 3 months are not enough to find a home (six months is usually plenty). However, to make sure everyone is comfortable with this, I provide a guarantee, written into the agreement, that allows either party to terminate the agreement by providing 48 hours written notice.

I hope this post shed some light into the practice of buyer agency. Personally I always work as a buyer’s agent, as I’d like to make sure that my buyer clients are protected and also know that I work for them 100%. I believe in buyer agency and as an Accredited Buyer Representative (ABR) I have represented many people during the purchase of their home. For help from a knowledgeable and experienced Buyer’s Agent you can’t go wrong with me! Contact me to schedule an informal meeting and discuss how I can help.

When you consider state licensing laws, federal and state antitrust laws, consumer laws, the Real Estate Settlement Procedures Act (RESPA), the Foreign Investment in Real Property Tax Act (FIRPTA), federal, state and local fair housing laws, the Americans with Disabilities Act, data security laws, anti-solicitation laws, and the Truth-in-Lending Act, the number is considerable.

In our metropolitan market there are 3 jurisdictions – Washington, DC, Virginia and Maryland – and they all have somewhat different laws and requirements.

In all three jurisdictions, as a result of all these laws and regulations, real estate professionals are required to provide certain disclosures to their clients. The purpose of this post is to give you an initial idea of what some of these laws, regulations and disclosures are about. Please read them for your information. If they seem complicated do not worry about it because I will explain everything in detail when we meet.

• Property Condition Disclosure

Sellers must typically provide prospective buyers with a property condition disclosure form or a disclaimer form. The disclosure form carries some post-sale risks for the seller, therefore most sellers decide to provide a disclaimer form.

The disclaimer form informs prospective buyers that the seller is not a home inspector or other expert, and that buyers should take whatever steps necessary to perform their own due diligence. The disclaimer form in no way protects the seller from hiding latent defects or misrepresenting other serious problems with the property.

• Home and Condominium Owners Associations

If a property is part of a Home Owners Association or a Condominium Association prospective buyers must receive certain documents with information about the rules, regulations and financial state of the association. Buyers have 3 days to review the documents, during which period they may void the contract.

• Home Inspection

Buyers have the right to hire a home inspector to inspect the home they are interested in purchasing. I strongly recommend that you always perform a home inspection.

At the same time there are a few things to keep in mind: Home inspectors can often have different opinions on the same home issue and while I have seen some inspectors miss problems, I have seen other inspectors report every minor detail.

When selecting a home inspector it is important that you select one who is a member of the American Society of Home Inspectors (ASHI) or another professional organization. I can provide you with a list of dozens of inspectors for you to select from, or I can recommend inspectors that past clients have used.

The inspectors I typically recommend, do a very thorough job, point out and explain any problems that they find and also provide good home maintenance tips to the buyers.

• Lead-Based Paint

The Federal Government has designated any home built in or before 1978 as “target housing” for potential presence of lead-based paint. Lead-based paint is a potential health hazard, particularly for young children.

Although the use of lead-based paint had stopped a few years before 1978 the government officially banned it that year.

Agents must provide buyers with an EPA (Environmental Protection Agency) pamphlet describing the hazards of lead-based paint. Furthermore, buyers have the right to make their home offer contingent on a lead-based paint inspection.

In the event that a seller accepts a lead-based paint inspection and the home fails the test, if the buyer does not proceed with the purchase, the seller must disclose the test failure to all potential future buyers.

View the required EPA pamphlet on Lead-Based Paint (PDF file).

• Agency & Client Representation

According to local laws a real estate agent must disclose to the buyer and the seller at the earliest practicable time who they represent. The law allows a real estate agent to represent both the buyer and seller in a transaction. I perceive this to be a conflict of interest. I believe that all buyers should be represented by their agent, and that is why I only work as a buyer’s agent.

In a buyer agent relationship, even though the agent represents the buyer, the agent is compensated by the seller’s agent. As a result, buyers receive committed representation without any cost to them.

Unfortunately, I have seen people not take advantage of working with a buyer’s agent and as a result lose money, usually by overpaying. Learn more about buyer agency.

• Discrimination

It is illegal for real estate agents to discriminate based on a person’s race, color, religion, gender, national origin, elderliness, familial/marital status, disability, age, orientation, personal appearance, matriculation, political affiliation, place of residence or business, source of income and ancestry.

When we work together, please respect the fact that it could be illegal for me to comment on, or discuss, any subjects that involve any of the above mentioned protected classes.

• Affiliated Business Arrangements

The law requires that a real estate company that has a business relationship with a mortgage lender, settlement company or other service provider, disclose that relationship to the client. To avoid any conflict of interest, I typically do not refer clients to any companies that are affiliated with my company unless it is to my clients’ best interest.

• Financing & Settlement Services

The law makes clear that buyers have the right to select their own lender, settlement company or other provider. Usually my clients will ask me to recommend a lender or settlement company. I typically recommend a few companies that have performed well for past clients. It is illegal for me to receive compensation (in any form) from these service providers. The only reason I recommend them is because they are competitive and past clients have been happy with their services.

But wait! There is more!

These are just a few of the things that affect the real estate industry and your home purchase. You don’t need to worry about any of that but you should be informed and aware of their existence. When preparing a contract, you will receive copies of everything you sign, and we will discuss everything in more detail. In the meantime, if you have any questions, please feel free to contact me.