How the Law of Transparency affects you (on Buyer Agency)

July 23 by Marina Brito

On a Saturday night, you take a final look in your little compact mirror to double-check that your mascara, lipstick, and your hair are “just right”. Once satisfied with your great look, you walk into a chic bar hoping to meet someone nice, make a new friendship, and if the stars align, perhaps even get a date.

Transparency is something to look forward to

There’s a new dating law in town

As you are doing your mascara check, you remember that there has been a new law enacted which establishes that all men are required to tell women if they are already dating someone. And, before getting into personal details, everybody must sign a dating agreement.

So, you take a big breath and walk toward a lonely guy at the bar

You: Hi, I’m Jill.

Jack: Hi, I’m Jack. Just so you know, I’m already dating Sarah.

You: Oh, ok. Thanks.

You don’t want any complications so early in the game, so you move on to the other side of the bar.

At the other side of the bar, you meet Peter

You: Hi, I’m Jill.

Peter: Hi, I’m Peter.

You: How about this weather, eh?

Peter: Yeah, it’s something…

You: Do you live around here?

Peter: Um… yeah… but that’s a bit of a personal question… aren’t we supposed to have a signed dating agreement to talk about this?

A signed dating agreement?

Just to talk about “personal” things? How else are you supposed to get to know each other if not by talking about personal things?

Ok, you figure that Peter looks nice enough so you pull out a napkin and write: “Peter and Jill agree to date today from 10pm to 12pm to talk about personal things”.

There. This should cover you so that you can talk about personal things without committing to anything more at this point. Perhaps if you like each other after tonight, you can agree to sign another agreement later on. Or, at midnight, you are free to go chat with someone else.

Huh? This sounds really cumbersome

After all, you are only testing the waters to see if you meet someone nice. You’re not looking for anything serious yet.

The next morning

The next morning, on Sunday, you decide to visit an open house since you’ve been thinking about buying a home.

There’s a new agency law in town

The new Real Estate Agency Law governs how to interact with REALTORs®:

All REALTORs® must disclose their agency relationship up front.
All REALTORs® and their clients must have a written agency agreement.

Let’s look at these one at a time:

1. All REALTORs® must disclose their agency relationship up front

When you walk into the Open House, REALTOR® Ruben must tell you that he has an agency relationship with the seller of the home (i.e. that he represents the seller).

Ruben: Hi, I’m Ruben. Welcome to the open house. Just so you know, I represent the seller of this home.

You: Oh, ok. Thanks.

While being so forward and up-front right at the start doesn’t sound very nice, this disclosure is actually a very good thing. Just like with dating, it’s best to stay clear of complicated relationships at the beginning.

But you do like the home, so you contact REALTOR® Ellie, who can help you. Let’s see how that works under the new agency law:

2. All REALTORs® and their clients must have a written agency agreement

Prior to having a “substantial” conversation about a property, all REALTORs® and their clients must have a written agency agreement.

You: Hi Ellie, my name is Jill. I saw a home that looks perfect for my needs.

Ellie: Hi Jill, thanks for calling. How can I help?

You: It’s in the Happy School boundary. What do you think of it?

Ellie: The Happy School boundary is near the Metro. Plus, there are lots of amenities around.

You: Great! The home address is 123 Main St. Can you give me more info about it?

Ellie: I’d love to. But before we get into specifics of any property, by law, we must have a written Buyer Agency Agreement.

You: Yeah, I’ve heard about those…

Ellie: If you’re ok with it, let’s agree to work together for 1 week to allow us to see the home and to define your needs further. If we both think I can be of further help to you, then we can extend the agreement as needed.

Since Ellie sounds like a professional, and competent REALTOR®, you agree to sign the 1-week Buyer Agency agreement.

But, seriously, why all this paperwork?

Couldn’t Ellie just tell you details about the home over the phone? It’s not like they’re secret…

Actually, many details related to the home could be kept a secret. If you had gotten REALTOR® Ruben to tell you about the home, since Ruben represents the Seller, Ruben is only required to tell you actual “material” facts that he knows about the home (such as a caved-in roof, or that the fridge doesn’t work). But otherwise, it’s up to you to find anything that might not be in your favor (like the next-door neighbor being a convicted felon).

On the other hand, when you sign an agreement with REALTOR® Ellie to represent you as your buyer agent, Ellie is obligated to:

Help you find the right home for your needs (and not “sell” you a specific home)
Guide you to discover the hidden factors that could affect your buying decision
Keep your information confidential (financials, credit status, urgency, etc.)

But you have to have a signed, written buyer agency agreement to get this level of representation. That’s one of the reasons why having a buyer agency agreement is a good idea. Having a signed written agreement is also a good idea so that it’s clear to you what you are getting out of the relationship with your agent.

Having a written agreement fosters transparency

Thanks to this new law, there won’t be any incorrect assumptions by buyers believing that any agent they connect with represents them – when in fact – s/he might be representing the other party (and obligated to share your confidential info to them!

Following the law when it’s inconvenient to do so is a sign of character

It would be easy to overlook the law and follow the path of least resistance by skipping the written agreement up front. But then, how would you know that this Agent will do what s/he is supposed to do going forward? You certainly want to work with a REALTOR® who abides by the law and does things “by the book” all the time (not just when it’s convenient).

Fast forward 3 months

Peter and you (remember Peter, from the bar?) are having brunch together on the porch of your brand new home. That night, at the bar, turned out to be a very nice conversation, so you and Peter agreed to extend your dating agreement for 3 more months.

And your new home?

The home at 123 Main St. wasn’t the right one for you, but your REALTOR®, Ellie, and you, decided during the first week of your agency agreement that she could help you buy a home , and you mutually chose to extend your agency agreement for another 3 months. In those 3 months, Ellie helped you buy your dream home.

Of course, the “written dating agreement” law is not real, but the “Written Buyer Agency Agreement” is a real law in Virginia, active as of July 1, 2012; and is designed to foster transparency and trust in all Residential Real Estate transactions.

Next Step

Sample Buyer Agency Agreement

Download an example of a standard Buyer Agency Agreement. This is the one our clients are happy to sign with us. If you have any questions about this sample agreement, contact us, it’s O.K. for us to answer all your questions up front.

Photo courtesy of stevetulk on
http://www.flickr.com/photos/epicsurfgt/4137997182/in/photostream

Your turn, what do you think?

Please leave a comment!