Monday, September 03, 2007

Virtual Buyer Agent Not Telling the Whole Story

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There are many new business models popping up in the real estate industry. Some that are very consumer focused, and others that only try to be, but do not fully understand the scope of what a Realtor is supposed to do—specifically a Realtor who specializes in buyer agency, and more specifically a Realtor who specializes in exclusive buyer agency. It’s called advocacy.

Advocacy means that a professional takes the time to understand what their buyers are looking for, they preview properties to help buyers save time, they look for red flags, and they are supposed to recommend various inspections based on the red flags that they observe. Red flags that may not have been picked up by the buyer—had they gone by themselves. Buyers need to understand that they can negotiate rebates with any buyer’s agent, but sacrificing advocacy is a big mistake.

One particular virtual real estate company on the web entices buyers with a 75% rebate offer—spreading inaccuracies, as another well-known discount broker has done recently. For example, they say that buyers cannot look at properties on their own when they go with a traditional Realtor, or inadvertently, with a Realtor who exclusively serves buyers only. This is not true. Buyers can arrange and coordinate with their agent on how they should go about looking at properties on their own. The company claims that its’ agents do not depend on commission, and therefore, not influenced by commission. However, the company itself—which is the broker—does depend on commissions. How else can their business survive?

While the inaccuracies are plentiful, the major drawback of this company is that they do not preview properties and attend showings. Therefore, they cannot point out red flags that can go unnoticed if not picked up by a general inspection. They do not offer buyer advocacy, but rather, send buyers off to fend for themselves with minimal service. Perceived savings can become diluted if something is missed, goes wrong, and a lawsuit results. A buyer’s advocate will point out red flags and recommend various types of inspections to further investigate potential problems. A buyer's advocate will assist buyers at every step. Sometimes, a property will require more than a general property inspection, and these specialized reports are beyond the scope of a general property inspection—for example, geotechnical reports, and reports from structural engineers. If an agent does not go to the property, they cannot spot red flags. If they cannot spot red flags, they cannot recommend further investigation.

“A red flag can be anything that alerts you to a potential problem or that just doesn’t seem right…Noting red flags in a transaction may result in the buyer’s request for repairs, but it is far better than overlooking them, which can leave the buyer and seller vulnerable to a lawsuit, as well as the real estate agents, their brokers, and the general property inspectors.” (Nichols p.17)

Barbara Nichols, “The No-Lawsuit Guide to Real Estate Transactions”

Bottom line—there is much more to real estate than searching for properties on the Internet. The Internet is a wonderful time-saving tool for buyers and sellers alike, but it is most powerful when used in conjunction with the full services of a real estate advocate.

Inform and empower yourselves, but have an advocate on your side at every step of the way. Unless you are a seasoned real estate buyer, a self-service real estate option can be risky. If you would like to have a rebate…negotiate for it--if it's legal in your area--but don’t sacrifice the advocacy you would not otherwise receive from a self-service business model.

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