Know who you're with!

Don’t Talk to Strangers! Don’t get in a car with a stranger! Don’t give strangers your personal information!

Those are all phrases we might use with our children to give them good advice. They are also good real estate advice. You’d be surprised how many people will get into a car and go see a house, or meet someone that they’ve talked to on the phone once or call on a sign and then meet the person who shows up. And in all these cases, the unsuspecting buyers make the assumption that they can trust the real estate person who shows up to protect their best interests—to work for them. WRONG!

Now, I’m not saying that the Realtor® who shows up is dishonest, untrustworthy or somehow out to do these buyers harm. In fact, the opposites are usually true and, in most cases, things work out OK. But, the buyers have made an erroneous assumption that, because they called the realtor and that person agreed to show them a particular house, that, somehow, that realtor has magically become “their agent”. In fact in almost all cases like those described, the agent who shows up to show them the house is, in fact, working for the sellers.

Why is this distinction important? Because human nature will inevitably lead the buyers to reveal information about themselves, their financial condition or their motivation for buying and/or liking the house that could work to their disadvantage. A real estate transaction involves quite a bit of negotiations between the buyers and sellers. The agents who work for one side or the other are constantly trying to find out anything about the other side that will help their side in those negotiations. And, you may have just jumped in the car with their negotiator and blurted out things that will come back to haunt you later.

So what should you do? For starters, know for whom the agent that you are with is working, before you go. If you do not have a contract with that agent, he/she cannot be working for you! By default, under Michigan’s real estate laws, that agent is working for the seller. Only the existence of a contract creates agency—the fiduciary responsibility between the real estate person and another party. If you don’t have a contract, you don’t have agency. Since the sellers do have a contract (the listing contract), the agency that they established with that contract extends to any other agent who might show the house (called sub-agency).

So that friendly, chatty, and inquisitive person sitting next to you in the car on the way to the house is an agent for the seller, if he/she isn’t signed up to be your agent. Watch what you say until you have a contract! That is why a good agent will inform you about agency and have you at least sign an agency disclosure that indicates that you understand who he/she is working for.

For more on real estate agency, go to http://www.MIHomeBuyer.com and click on the Real Estate Agency link.