To fully appreciate the importance of an Exclusive Buyer Agent (EBA), it helps to understand a bit of history on real estate agencies.
Traditionally, real estate brokerages represented only sellers, never buyers. This allowed them to retain the full commission on the sale of the property. With the rise of EBAs, these brokerages were faced with having to share part of that commission with the homebuyer’s agent. Seller’s agents not only realized the potential loss of revenue, but they also recognized the fact that for a home buyer, using an EBA made logical sense.
So, these brokerages sought to change state laws to allow them to “represent” both the seller and the buyer simultaneously. And in many states they were successful and a new form of brokerage called a “dual agency” was created. A dual agency is analogous to a law firm representing both the plaintiff and the defendant.
The laws governing dual agencies vary from state to state and are typically ignored. Given the financial upside for a broker or agent to “represent” both parties, they are not only reluctant to provide disclosure of their representation, they typically withhold specifics about the services they are not allowed to provide. Most laws in essence, reduce a broker or agent representing both parties to being merely a facilitator, basically passing offers and counteroffers back and forth. The services they are not allowed to perform are among the most valuable an agent can provide, such as negotiation.
While the intent of the laws was to protect buyers and sellers, they are commonly ignored. A recent survey revealed that only 30% of homebuyers received disclosures at their first meeting and 25% at the time of the contract.
There are a myriad of other problems that can arise when dealing with a dual agency situation. The bottom line is, there’s only one way to ensure that your, and only your, best interests are being represented when purchasing a house. And that is to work with an Exclusive Buyer Agent.