A home buyer could lose big money by not working directly with an agent whose solely represents them, the Consumer of America warned today.
A couple looking to buy a $200,000 home who contacts an agent representing a seller could overpay to the tune of $10,000 to $20,000 because the agent will ask them how much they can afford to pay to maximize the price, said CFA Senior Fellow Stephen Brobeck.
As another example, a buyer looking at a home during the summer could be told by an agent solely representing them the house needs to be weatherized to make it comfortable during the summer and keep heating bills down while an agent representing the seller might not give that warning, Brobeck added.
The answers were in response to a report the Consumer Federation released highlighting the problems consumers have in working with reality agents.
While most people believe real estate agents are legally required to represent the interests of the home buyer or seller they are working for, many aren’t, the study warned. The report explained a fiduciary agent for a buyer seeks to help the buyer purchase a desirable house for the lowest sale price.
On the other side of the coin, fiduciary agent for a seller is obligated to help the seller find a buyer who will reliably and timely purchase a house for the highest sale price.
However, often many agents represent both seller and buyer in the same transaction to maximize the commission in the deal.
This can create serious conflicts of interest, including breeches of confidentiality the Consumer Federation cautioned.
However, home buyers and sellers have significant power in getting agents to treat them fairly since there is considerable competition among agents, the report said.
The Consumer Federation recommended a buyer or seller ask an agent before they sign an agreement if the real estate professional will be solely representing their interest throughout the entire home purchase process.
“They should also ask the agent for a completed form that discloses this relationship,” the consumer group said.