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Buyer Agent vs. Seller Agent: What Do I Get For My Money?

By Tina Cassidy, Globe Staff
Sunday, April 2, 1995

When Julie Bell VanLaanen and her husband moved from Germany to Shrewsbury about 18 months ago, they hired a buyer agent to find a reasonably priced home in the right location.

Their agent not only found them the perfect home in about four months, but when she told them they could get the house for several thousand dollars less than they had offered, she was right.

She steered the couple away from condominiums at a time when the market was still unstable. And the buyer agent negotiated with the sellers to fix the pipes, after she discovered problems with the plumbing.

"Our experience was so positive," said VanLaanen, 33, who is originally from Colorado, where buyer brokerage has been entrenched and embraced for years.

The number of buyer agents in this state has increased dramatically during the past three years, from virtually none to thousands, though no exact figures are available.

The National Association of Realtors, and large local firms such as DeWolfe New England, have embraced buyer agency, while a number of local real estate boards have supported it.

For example, the Massachusetts Association of Realtors this summer will offer a certification program for brokers who want to learn how to exclusively represent buyers.

"A lot of people are interested in working that way, and we want to be able to offer them some educational programming," said Angela Portosa, MAR's director of education.

Meanwhile, consumers here are becoming more familiar with the stories about buyers using agents who help them negotiate their real estate transactions, rather than the traditional real estate agent, who represents the seller.

"The word is out," said Leo Berard, president of the National Association of Exclusive Buyer Agents. "The demand is really growing very, very rapidly."

But that doesn't necessarily mean consumers fully understand the roles each kind of agent plays, what services should be expected, and why in some instances tension still exists between the "opposing" agents.

Understanding the difference between buyer agents and traditional real estate agents is akin to mastering the subtle difference between defense and prosecuting attorneys. Their jobs essentially are the same. The people they represent are not.

Their relationship often appears adversarial, although they usually insist they work toward the same goal: justice in a court of law, or in the case of real estate agents, closing the sale of a home at a fair price.

And, as is occasionally the case with lawyers, both types of agents are usually paid out of the settlement, or sale of the house, although the amount and terms are negotiable upfront.

For example, if a buyer agent's client pays $100,000 for a house, traditionally the seller pays a 6 percent commission from that price to pay his or her listing agent -- although, there are no formal guidelines dictating the amount of commission, which is fully negotiable.

The commission, however, is almost always evenly split with a buyer agent involved in the sale.

In other circumstances, a buyer might negotiate a flat fee up front for services, perhaps $3,000, no matter the price of the house.

Buyer agents assert that traditional real estate agents are often reluctant and sometimes refuse to share their commission with a perceived adversary.

Some seller agents say the buyer should pay for representation directly, not out of the sale of the home.

It was a point of dispute between VanLaanen's agent and the seller's broker.

"There was," she said, "a problem with money."

Interestingly, in a recent survey done by the Massachusetts Homebuyers Club, 40 percent of consumers who recently purchased residences said they feel agents are overcompensated.

And, by a two-to-one margin, said they would rather pay a flat fee than a commission, based on the sale according to the survey.

Until recently, nearly all of the real estate agents in Massachusetts represented the seller. Then the state required that they disclose that fact to buyers before showing property.

The Massachusetts Consumer Protection Act mandates that traditional agents must still act fairly, honestly and ethically with buyers they bring to the table.

They must also inform buyers of any known defects the property contains.

That is why traditional agents, while conceding that they work for the seller and with the buyer, see no problem helping those looking for a home as well.

"My job is to be your lead marketing agent," said Karen LaChance, president of the Greater Boston Real Estate Board's Residential Association of Realtors. "Once a buyer is attracted the Realtor walks the buyer through the process on behalf of the seller and makes sure inspections are done in a timely manner."

Still, buyer broker advocates say they can provide a broader range of services than traditional agents.

"You could, for example, actively pursue a for-sale-by-owner or do a cold call," said Sandra L. Hudson, director of educational and professional services for DeWolfe New England. "A buyer agent is not just a hired gun who is out to get the lowest price . . . but to get the best home at the best price."

Then there is the lesser known distinction of dual agency, whereby an agent broker represents the buyer and the seller in the same transaction.

Many in the real estate industry, however, feel no one's interest is best served in this instance.

"What concerns us most . . . are the people who are trying to do both," said David King, spokesman for Carlson Real Estate/Better Homes and Gardens. ''Dual agency is like buttering your bread on both sides. It tastes great, but it's going to leave a mess on your hand."

Advocates for buyer agents say they look beyond the Multiple Listing Service to find homes for their clients, looking at foreclosure lists, or perhaps even knocking on the door of a house that is not for sale to see whether the owner might have a change of heart.

That compares to traditional agents, who have a particular listing they are trying to sell.

So if a potential buyer walks in off the street and asks to see homes for sale in that town, the broker will likely show their own listings first.

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