John Kelly
(651) 238-5649
john@johnkellyonline.com





Buyer Representation

 

Minnesota law requires that early in any relationship, real estate agents must discuss with consumers what type of agency relationship they are offering. This is especially important (and confusing) in Minnesota, because there are 5 different types of agency relationships that consumers might choose to have with a real estate broker. It used to be very simple: Because the seller generally pays the real estate commission, all agents and brokers involved in the transaction represented the seller. Some states still operate that way; the idea is that you should represent the party that is paying you. But this created problems for buyers. There were 2 agents involved in most transactions. One agent listed the property and another agent showed the property to their buyers, wrote up the purchase agreement, and helped the buyers arrange financing etc. So buyers had good reasons to believe that the person who spent so much time with them and did all of these things for them must be representing them. After all, their agent had probably never even met the seller until the offer was presented. Surveys showed that most buyers believed (incorrectly) that their agent was supposed to be representing their best interests.

I believe that what we are doing today in Minnesota is better. But it is more complicated to explain up front. From a buyer's point of view, the most important thing I can stress is that you should find an agent who will represent only your interests. This means you should find somebody you trust, and enter into a contract for buyer representation. Before signing the agreement for representation, your agent should show you (and have you sign) the "Agency Relationships in Real Estate Transactions" disclosure. They should carefully explain all of the details about agency relationships, many of which I am glossing over here.

I'm leaving out many details, because I want to highlight the two things I consider to be most important from a buyer's perspective: Find somebody to represent your interests, and understand that the listing broker is representing the seller's interests and not yours. When you walk into an open house, the agent who greets you is almost certainly representing the seller. The agent should disclose this very early in any conversation with you. But really, as an informed buyer, you should already know it. You will begin to notice that many agents don't disclose their agency relationship immediately, especially at open houses. I don't think they are trying to be deceptive. It's just that a discussion about agency law is not a real ice breaker when you are meeting somebody for the first time. Even if a discussion about agency relationships isn't the first thing the agent discusses, it has to come up before there is any opportunity for you to divulge any information that you wouldn't want to share with the seller.

22 years ago, I was one of the first St. Paul area real estate agents to offer buyer representation. At the time, many people thought it was unusual. Of course now it is standard operating procedure for most Twin Cities real estate agencies. In addition to carefully representing buyer's interests as an experienced buyer broker, I also help them negotiate favorable mortgage terms, and arrange for home inspections.  If you have any questions, please don't hesitate to contact me. I will be delighted to hear from you.

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