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What Does Buyer Representation Mean in Hawaii?

Buyer representation in real estate is a bit like dating. You meet someone and exchange emails or talk on the phone (old school!), or like each other’s Facebook posts. Then you decide to meet for coffee or cocktails and see if they pass the “crazy test.” If so, you take it a step further and go see some houses together. Before you know it you’re experimenting with some kind of “relationship.” Are we? Aren’t we? Is this just casual, or is it something serious?

OK, it’s been a long time since I’ve dated. I’m assuming that’s still how it happens.

What if the buyer only went out home shopping with Perfect Agent the one time and thought it was just for fun? Perfect Agent, as fun as she is, on the first date should explain to the buyer that she’s not cheap or easy, that home buying comes with a bit of a commitment. Given, you’re still being polite, trying to decide if you both want date #2, so it’s hard to ask the buyer to jump in with both feet and sign the pre-nup (Buyer Representation Agreement) just because she bought coffee.

Let me digress and explain the baggage Perfect Agent is bringing to the relationship. She’s been burned before.

She is concerned about “procuring cause.” In real estate it simply means the reason you bought the house. If a buyer’s agent can prove to the owner’s agent that she’s the reason the buyer purchased the home, then she may have a legal claim to a share of the commission and try to collect, even if the buyer later brings another agent to the sale.

For example: Agent Amy has listed a home for sale. Our friendly Perfect Agent implies to the buyers that she is their agent simply by taking the buyers to see that home. Later those buyers ask Agent Cathy to help them contract to buy it. Possibly unknowingly to all parties involved, Perfect Agent may have a claim to Agent Cathy’s commission. Awkward.

So, Perfect Agent needs to explain procuring cause and implied agency up front, so everyone has the same expectations.

When coffee becomes a house-hunting date, to avoid any confusion and conflict later, Perfect Agent should ask the buyer to consider signing a Buyer Representation Agreement. This agreement says that the buyer is officially hiring the brokerage, Lots of Perfect Agents, Inc., to represent him in a purchase. The agreement states how the brokerage is to be paid, most often from the homeowner’s brokerage at the close of a sale, not usually in cash from the buyer.

What if the buyer didn’t really like Perfect Agent and after seeing a few homes, just wants to dump her? The Buyer Representation Agreement states how the buyer can cancel the contract (in writing!) if they’re not happy. In Hawaii, the contract is actually between Perfect Agent’s brokerage, Lots of Perfect Agents Inc., so even if Perfect Agent is not a great fit, her co-worker may be. So, the buyer should just ask to work with someone else. It’s not as awkward as dating her sister, don’t worry.

Infidelity. At some point in the relationship, the buyer may find himself straying a bit, just seeing what else is out there, maybe stopping by a few Open Houses. Average Agent chats him up and he thinks maybe he’s found a better deal on his own. However, the home owner has already signed a contract stating the amount they’re going to pay their broker, so there is no deal to be had here. And if the buyer were to proceed, he’d give up all of the valuable advice and services of his Perfect Agent. Fortunately, the diligent buyer re-reads that Buyer Representation Agreement and remembers that it is not for a specific property, but for a period of time. If he were to pursue a deal with Average Agent he may end up not only unrepresented, but also owing Lots of Perfect Agents Inc. money.

In any relationship, honesty is most important. Perfect Agent really wants to do the best job for the buyer, her client. In order to do that, she needs to know what you, the buyer, are thinking. If you’re unhappy with her service, say so. You’re the boss, so expect great work. If your situation has changed and you’re not looking to buy anymore, say so. And if you just need “a break,” be up front about it. She may also realize it’s not working out and can set you up with a better match.

A clean break. If you’ve tried to work things out, but you’ve had it with Lots of Perfect Agents Inc., the right way to break up is to cancel your agreement, per the terms of your contract, and in writing. If you continue to home shop, you must inform your new agent about your history with Ex-Perfect Agent and they can work out the details amongst themselves to make sure you have a clean break.

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David Buck

September 17, 2014

Great article & analogy!

David Buck

September 17, 2014

Great article & analogy!

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