The Disadvantages of Not Having Your Own Buyer’s Agent

By MICHAEL EDLEN | Special to the Palisadian-Post

The recent game-changing class action lawsuits have resulted in new real estate forms and procedures, which have introduced new complexities, particularly in defining relationships between agents and prospective buyers.

While many processes remain the same, understanding these changes is crucial, especially for buyers considering navigating the market without dedicated representation or by working solely with the listing agent.

Buyers Risk Exposures

1. Misaligned Interests

The primary fact to consider for buyers who rely on the listing agent is not understanding the agent’s fiduciary duty. The listing agent, by their legal fiduciary obligation, must prioritize the seller’s best interests, not the buyer’s. This may influence their negotiation efforts, leading to a less favorable outcome for the buyer, and may not insure that the buyer has top quality representation or advocate for the buyer during renegotiations based on inspection findings.

2. Increased Responsibility

Without an agent, the buyer must handle every aspect of the transaction themselves. This includes:

– Conducting a thorough property evaluation

– Deciding which forms to include in the offer

– Preparing and presenting the offer package to the listing agent

– Reviewing counteroffer terms and navigating potential bidding wars

– Managing all aspects of the contract, from reviewing disclosures and public reports to scheduling and attending inspections

– Handling loan and appraisal processes, as well as renegotiating with the seller based on inspection outcomes

All of these tasks require a significant amount of time, expertise and attention to detail.

3. Lack of Protection

Since the listing agent’s fiduciary duty is to the seller, they are not required to disclose potential drawbacks or issues that might affect the buyer. Without a buyer’s agent, the buyer might miss important details that could have been crucial in making an informed decision. Also, an agent could save costs for the buyer by recommending some actions the buyer would not have considered.

4. Missed Opportunities for Buyers

Buyers risk losing their ideal home if they cannot resolve issues during the transaction, which can lead to frustration and disappointment on both sides.

Risks to Sellers

1. Potential Complications

If a seller enters escrow with a non-represented buyer, they must hope the buyer has legal counsel to ensure that all necessary forms and procedures are followed correctly. The seller’s agent will still need to review all buyer-related paperwork due to their fiduciary responsibility to the seller, often resulting in additional work and potential added costs.

2. Escrow Challenges

Should issues arise during escrow—such as discoveries during the property inspection process—a non-represented buyer would need to negotiate directly with the listing agent. Without another agent to mediate, resolving these issues can be more difficult, potentially jeopardizing the transaction.

3. Dual Agency Conflicts

If the buyer chooses to be represented by the listing agent, that agent must balance representing both parties. This dual agency scenario can lead to conflicts of interest, making it harder for both parties to proceed smoothly through the transaction.

Risks to Both Buyer and Seller

The likelihood of a failed escrow increases when either party is not properly represented. Even if the buyer hires an attorney to save on agent fees, attorneys may not be as effective in handling the emotional and personal issues that often arise during the escrow process.

1. Increased Likelihood of Escrow Failure

About 25% of escrows fail to close for various reasons, even when each party has their own agent. The chances of friction, misunderstandings and disagreements increase when the same agent represents both sides, or when there is no buyer’s agent involved.

2. Financial Loss for Sellers

If an escrow falls apart, the seller may face delays and additional costs in relisting the property, potentially resulting in a lower final sale price.

Conclusion

While new procedures introduced by recent legislation and court decisions have made agency relationships more transparent, the fundamental processes of real estate transactions remain largely unchanged. Buyers now have greater awareness of their options, but it is clear that having a dedicated agent is in their best interest.

Professional fees are nearly always a part of real estate transactions, and attempting to save on these costs by going it alone or relying on the listing agent can easily result in greater expenses or missed opportunities.

Michael Edlen has been a trusted advisor to thousands of people for 35 years. He and his team maintain a 95% escrow closing rate. Contact him for a complimentary consultation at 310-600-7422 or michael@edlenteam.com.