Not all buyer agents in Massachusetts are the same. Learn the difference between an exclusive buyer agent and a designated buyer agent. You should demand 100 percent loyalty 100 percent of the time. The following is an excerpt from an interview on The Money Show on Boston Herald Radio on February 27, 2015. Host Rick Shaffer discussed exclusive buyer agency with Rich Rosa, co-owner of Buyers Brokers Only, LLC, which serves home buyers in Massachusetts, New Hampshire, and Rhode Island.
The following is the transcript of the excerpt about the difference between an exclusive buyer agent and a designated buyer agent.
Rick Shaffer: Explain what a buyer’s broker is. Most people know what a seller’s broker is. I think a lot of people are still not fully versed in what a buyer’s broker is.
Rich Rosa: Sure. Well, in Massachusetts there are basically two types of buyer’s brokers, or buyer agents. One is referred to as a designated buyer agent. The other is what's called an exclusive buyer agent. Like you said, everyone understands that the listing agent represents the seller. They have an obligation to look out for the seller's best interest, get the highest price, things like that. The buyer agent, whether it’s a designated buyer agent or the exclusive buyer agent, their duty is to the buyer, not the seller. The difference however is when you’re a designated buyer agent, you work at a real estate firm that represents both buyers and sellers.
The issue that can come up is when the designated buyer agent that you’re working with is listing the property for sale. You choose to make an offer on that property. That buyer agent then turns into what’s called a dual agent. What that means is that the dual agent is representing both the seller and the buyer. As you could see that could be a problem. You’re no longer getting the full 100 percent loyalty that you were getting prior to that. The other issue that comes up is that if you're interested in a property, the buyer is interested in a property that someone else in that designated buyer agent’s firm is listing for sale, that designated buyer agent represents you. Everyone else in their office does not represent you. In fact, they technically represent the seller.
You could see where there could be a little bit of a problem there, where your buyer agent works with the listing agent in the same company. There are also situations sometimes where companies are giving buyer agents compensation or incentive to have their buyers buy properties that are being listed by that company. With an exclusive buyer agent, you never have to worry about whether or not they’re going to try to get you to buy a house they list because they don’t list any property for sale. You don't have to worry about anybody else in the office listing property for sale because everyone in the company just represents buyers. It’s really ... As you could see, lots of people use designated buyer agents too, but as you could see, it’s a cleaner transaction when you're dealing with an agent that’s only representing buyers.
Rick Shaffer: I'm surprised. I must admit, I wasn't aware that, that company is ... That dual agents used designated buyer brokers as opposed to exclusive buyer brokers will give incentive to the buyer brokers to sell properties that are being listed by that firm. I would think that would be, on its face, a conflict of interest and illegal, but apparently, Massachusetts does not seem fit to make it illegal. Correct?
Rich Rosa: That's my understanding, yeah, that does go on. I don't know the specifics of it. I've never worked with a traditional real estate firm, but it is my understanding that, that is something that happens, whether it's compensation or some other incentive, I'm not 100% sure. Massachusetts does allow dual agency.
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