What to Expect from a 'Buyer’s' Agent
Real estate agents owe their clients what is known as a “fiduciary duty.” Although it sounds like legal jargon, it simply means that the agent is obligated to act in the best interests of his or her client.
What are these interests? At their most basic, the seller’s interest is to sell the home for the most money possible while the buyer is interested in purchasing the home for the least amount of money possible.
Of course, both parties have ancillary interests such as the protection of their privacy. The fact is, a seller’s interests and a buyer’s interests are completely different and, in fact, conflict with one another.
Let’s take a look at some of the specific interests that a real estate agent’s fiduciary duty includes.
Above and beyond the homeowner’s disclosures, the real estate agent must disclose all information he or she has that is relevant to the principal’s interests. This includes any facts the agent may have about the value or desirability of the home and any knowledge about the other party that may affect negotiations.
An example of the duty to disclose is the seller’s agent that finds out, somehow, that the buyer is willing to pay more than what he originally offers. Since the agent has a fiduciary duty to the seller, she must disclose this fact.
Suppose the buyer’s agent knows that the seller is going through a divorce and is highly motivated to sell the home quickly. This is valuable information for his client and must be disclosed.
Hand in hand with disclosing the opposing party’s secrets comes a duty to protect those of the principal. If the seller’s client is motivated to sell the home because of a job transfer, yet wants this information kept from the buyer, his agent has a duty to keep the information confidential.
Real estate agents are obligated to obey all client instructions, as long as these instructions are legal. The seller’s agent is obligated to follow the instructions of only the seller and the buyer’s agent is obligated only to the buyer.
The duty of loyalty demands that the real estate agent act solely in the best interests of the principal to the exclusion of all other interests, including his or her own. In layperson’s terms, loyalty means that the seller’s agent must do everything he or she can to gain an advantage for the seller. The same applies to the buyer’s agent and the buyer.
While the above doesn’t include all fiduciary duties of a real estate agent, it includes those most important to the consumer.
There is no shortage of real estate agents in this country. Furthermore, the seller pays the buyer’s agent’s fees, so there is no reason not to have your own real estate agent.
Shannon O'Brien on April 21, 2012
What Else Should You Expect From Your Real Estate Agent?
Real estate agents who are members of the National Association of Realtors® (NAR) are the only agents allowed to call themselves Realtors®. NAR has its own set of ethics that Realtors® swear to uphold in addition to their statutory fiduciary duties.
You have been to a number of open house tours, met with your real estate agent discussing and reviewing listings, and you have finally found the house you want to buy. After diligently reviewing the terms of your offer, your seller accepts and you have an executed purchase contract. If you are a first time homebuyer, the entire experience may seem daunting, and maybe even a bit scary. Relax. Your agent should be able to prepare you for the next steps after receiving the seller's acceptance. Here are the steps buyers are expected to complete when an executed contract is in place.
1. Open Escrow with a Title Company
Once an executed contract is in place, your agent will arrange for you to deliver the necessary paperwork to open escrow with a title company. If earnest money down was part of your offer, you will need to deliver that as well. Your earnest money deposit will be cashed and held in an escrow account at the title company or with your agent's brokerage.
2. Order a Home Inspection
Home inspection rules vary from state to state. It is always advisable to get a detailed home inspection from a qualified inspector so you are aware of the status and condition of the house before you legally own it. Your agent will review the home inspector's report and the seller's disclosure statement and go over any discrepancies with you.
3. Order an Appraisal
Unless you are purchasing the home with cash, your mortgage lender will require an appraisal to be done on the home. Since your lender will only finance up to the appraised value, it is ideal to have this done as early in the process as possible. This way, if there are significant discrepancies between the appraised value and the offer price, your agent can leverage the information for a much stronger negotiation position before closing on the house.
4. Meet with Your Mortgage Lender
You will be working very closely with your lender in getting all of the information and documents they need to approve the final loan amount. You must be prepared to submit W-2 forms or signed tax records for the past two years, copies of your recent employment pay stubs, bank statements, and other proof of income. If the appraised value comes in below the offer price, you must be prepared to have proof of funds to cover the difference.
5. Review the Preliminary Title Report
The title company will handle all of the title work and you will get a copy of the preliminary report during the due diligence period. Your agent will review any significant issues with the deed that may prevent the clear transfer of title. The report will also outline any judgments, tax liens, encumbrances, and easement issues that will need to be addressed before settlement.
6. Negotiate New Terms at the End of the Due Diligence Period
Once you have completed the steps above, you will meet with your agent to discuss the need to adjust the terms of the contract. If there are significant repairs, discrepancies in the appraised value, or title issues, then your agent will be in a position to negotiate revised terms with the seller's agent. All revised terms agreed to by both parties will be documented and signed in an addendum to the original purchase contract.
7. Provide Proof of Home Insurance
Before finalizing your loan, you have the right to choose a company to insure the home. Once you have selected one, you will need to provide a copy of your home insurance to your lender in order to file your loan documents.
8. Get Certified Funds and Other Financial Arrangements for Settlement
A few days before your scheduled closing date, the title company will tell you what the exact amount is due at closing. You will either arrange to get a certified check at the bank and deliver it to the title company before you close, or order a wire transfer at the bank to take place on the day of your closing.
9. Do a Final Walkthrough
Usually a day or two before your scheduled closing date, your agent will arrange for you to do a final walkthrough. Bring a copy of the inspection report and the list of repairs you requested the seller to fix. Observe and verify that these items have been repaired as agreed.
10. Sign Closing Papers
Meet with your escrow agent on your scheduled appointment at the title company. You will sign all of the closing papers and settle the deed transfer.
Your agent should be able to walk you through each step of the process after acceptance. Staying informed throughout the process gives you an opportunity to anticipate and expect the next step. Buying a home involves a number of different parties, including your home inspector, appraiser, lending officer, escrow agent, your agent, and the seller's agent. Make sure your agent maintains an open line of communication throughout the process, so that you are fully aware of what's going on, and work toward a smooth and hassle-free closing.
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What to Do After Signing a Real Estate Contract