Some years ago our Ann Arbor real estate company published a report titled 37 Expensive Mistakes Ann Arbor Home Buyers Should Never Make Again! . The report has been downloaded thousands of times and I know many buyers have benefited from it. But in 2009 2010 we are seeing some new mistakes.
The purpose of this article is to give you some advanced notice of these two critical issues.
Mistake 1. Not learning about the different types of real estate agents.
In our market you can typically chose from seller agents, designated buyer agents, buyer agents, and exclusive buyer agents. Each one has different roles and obligations. The first step in understanding the options is to understand that your relationship is with the company, not just with the individual agent. Any contracts you sign will reference the company and any compensation must go to the company.
Of all the agent options the simplest to understand is exclusive buyer agency. This is where the whole real estate company represents only buyers. They never list homes and they never represent sellers. These offices give up the lucrative listing business to avoid the conflicts of interest that come from trying to represent buyers and sellers. Since they specialize they can often offer unique services and expertise. The term exclusive buyer agency was defined many years ago by both the largest national association of real estate agents and by the National Association of Exclusive Buyer Agents. Unfortunately these days some less than reputable real estate groups mis use the term to try to capture more business from home buyers.
The second option is buyer agency. In this situation the brokerage and everyone in it represents the home buyer, but only on that transaction. The company also represents home sellers. This often leads to dual agency where the company is representing the buyer and the seller on the same transaction. This is good for the company but bad for you. This is the primary concern with buyer agency, the probability that the company will change to dual agency. If you interview an agent from a company who offers buyer agency you need to understand and be comfortable with the potential to lose those benefits if you are interested in one of their listings.
The third option is designated buyer agency. Designated buyer agency is a creation of a large special interest group in the state and it effectively lets the broker of a company designate one single agent to work for you. Other agents in the company may be working against you by representing other buyers on the same property, or they can be working against you by representing sellers of property you are interested in.
In designated agency there is a supervisory broker who is responsible for managing the designated agents. Often that supervisor becomes a disclosed dual agent so you are back to dual agency. Normally designated agency agreements have you give up the right to have your own advocate from the very start if there is a situation where the agent can sell you one of their own listings or an office listing. This is one of the major problems.
One of the other significant problems with designated buyer agency is that you lose the benefit of the whole company s expertise. This often comes into play where one agent in a company knows something significant about the property you are interested in. Under buyer agency you have access to that knowledge. Under designated buyer agency you don t. An example of how this has been a very expensive problem for Ann Arbor real estate buyers is found in the next mistake.
Mistake 2. Not having an video inspection of a home s sewer line.
In Ann Arbor Michigan there are a lot of homes built between 1940 and 1965. Many of these homes had their sewer lines constructed out of a material called orangeburg pipe. These pipes were made out of layers of wood pulp glued together and for about twenty five years it was considered an acceptable material to use underground. The problem is these pipes are wearing out. And when they fail it can be an inconvenient and expensive repair.
This involves many neighborhoods in Ann Arbor, but if your agent is not aware of the problem and your home inspector doesn t think to recommend a sewer inspection, you could be in for a costly repair shortly after you move in. This has become a significant problem for buyers who use designated buyer agents because often the less experienced designated buyer agents don t have the knowledge to know which neighborhoods are likely to have this type of problem. In the larger offices there are agents with enough experience, but with designated buyer agency they don t share their knowledge with you. In fact, that experienced agent may be representing the seller and they may be hoping you don t do a sewer line inspection.
Our company helped a buyer buy a home recently where the sewer was failing. That seller had just purchased the home a year before and their designated buyer agent didn t warn them. If they had used a buyer agency company I m sure they would have learned and avoided the expensive surprise.
For more information on exclusive buyer agency visit the National Association of Exclusive Buyer Agents. Also, there is a lot of information on Orangeburg sewer lines now online including some Ann Arbor videos on Youtube.
Author Resource:
One Ann Arbor real estate company is always on the buyer's side: The Home Buyer's Agent of Ann Arbor http://buyersagentannarbor.com For information on Ann Arbor open houses visit http://ann-arbor-open-houses.com
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