If a buyer agent has the buyer's interest in mind, does the buyer agent become liable if the buyer gets foreclosed on because of a declining market? As everyone points fingers in every direction but their own, clients of exclusive buyer agents are starting to consider the role their agent played in current real estate market problems. Did the buyer agent advise the client adequately enough about possible market turns?
One of the new topics now circulating is how much agents knew about their "client" when they watched the closing occur on a property that the buyer could marginally afford. If the agent knew the market had a probability of turning down, and they said nothing to the buyer, did the agent have the buyer's interest in their mind at the closing - or just the paycheck? And, is a verbal warning of a possible market change enough care and/or notice?
"Everyone" knows that real estate operates in cycles. In the past it was at a ten year rate more or less. But with the unusual 2000-2005 record years of appreciation, people in the real estate profession were as caught up in the appreciating market as buyers and sellers were. It became sort of humorous when the NAR economists would preface their statistical reports with disclaimers of unusual data, only because there seemed to be no end in sight.
Buyers, sellers, brokers, agents, economists, builders, lenders, originators, investors, specuators, inspectors, title companies, and on and on, all wanted the market to rise endlessly. However, who was in the best position to advise buyers about their particular transaction? Buyer agents had become the latest, greatest advisors for real estate enthusiasts. Buyers were (and still are) told they need a buyer agent to "protect" them. But do buyer agents provide any more protection when it comes to changes in the market than another type of agents does? And, how much of the advice a buyer agent gives has to do with market conditions, and how much has to do with a specific property and the purchase process?
One of the preliminary roles of any agent is to qualify customers. Why spend time looking at million dollar homes when the buyer can only borrow a hundred thousand? It is more efficient to say, "Here is a list of properties that you can buy," rather than the opposite. So if buyer agents had pre-qualified their cients, why are there so many foreclosures? Did so many of the lenders miss the qualifying step of the lending process? Probably not. But the buyer agents were at least as philanthropic with their qualifying criteria as lenders were. And if a lender qualified the client, who is the agent to say no to a deal? Except for the idea that the buyer agent is supposed to be thinking of their customer - not the deal.
This is a new conundrum for buyer brokers and their agents. It will only take one lawyer (start the Jaws Music) to start a new feeding frenzy on buyer agents. Maybe it will become a movie, "The buyer agent who knew too much." And is it really the responsibility of a buyer agent to caution a buyer about market changes? Hmmm, sounds like a new disclosure coming. Of course, all agents really do for their "huge" income is show houses and cash checks. LOL!!
Heath Coker, Associate Broker
Robert Paul Properties
www.CapeGroup.com / firstname.lastname@example.org
508-274-5613 Licensed in MA
Its a beautiful day on Cape Cod!
@CapeGroup Skype: heath.coker