Agency Disclosure Revealed
A: After getting a nice little comment thread going on the "Buyer Beware" article I posted a few days ago, I wanted to bring to light what Jan brought up; that is, "..why don't NYC brokers use a buyer disclosure form"? The answer: Agency disclosure is NOT required if the property in question is a building with more than 4 units.
According to June Liu of the DOS Licensing Services:
"If the buyer is looking into buying an apartment in a building with more than 4 units, than you DO NOT need to provide the client with an agency disclosure. But if it is a single house (1-4 family) than you need to provide the client, no matter if it is a buyer or seller, with an agency disclosure form and have them sign it before showing them the property."New Agency Disclosure Requirements For NYS:
Prior to the revisions to Section 443 of the Real Property Law, only one agency relationship disclosure form was required for buyer/seller and landlord/tenant transactions. The combined form used the terms "seller/landlord" and"buyer/tenant" interchangeably. On and after January 1, 2007, the combined form will no longer be permitted and, rather, two separate disclosure forms will be required; one for seller/buyer transactions and another for landlord/tenant transactions. The two forms provide expanded, clearer definitions of the different agency relationships and explain the fiduciary duties owed by brokers and salespeople under each type of agency relationship.
NOTE: We are 2 weeks into this new poilcy. I'm sure REBNY and other organziations have been in talks with ALL the major NYC brokerage firms about this. As any word of change hits, I will post on UrbanDigs. For now, I will continue to verbally disclose my role as buyer broker before working with any new client.
More importantly, here is in black and white how the Division of Licensing Services in NYS defines a buyer broker and a seller broker. I've had this debate many times, and sometimes it gets heated, as some argue that the buyer broker is working on behalf of the seller. This is technically correct as the buyer broker's paycheck at closing will come from the seller's commission that is ultimately SPLIT between both brokers involved in the transaction. However, I will stand my ground and get confirmed by what I will list below from the DOS, that as a buyer broker my fiduciary responsibility is to the buyer and keep their interest in mind during the buying process, especially when it comes to bidding and negotiating where I will do my best to get the property at the lowest price possible for my buyer client.
Disclosure Regarding Real Estate Agency Relationships
Sellers Agent: A seller’s agent is an agent who is engaged by a seller to represent the seller’s interest. The seller’s agent does this by securing a buyer for the seller’s home at a price and on terms acceptable to the seller. A seller’s agent has, without limitation, the following fiduciary duties to the seller: reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and duty to account. A seller’s agent does not represent the interests of the buyer. The obligations of a seller’s agent are also subject to any specific provisions set forth in an agreement between the agent and the seller. In dealings with the buyer, a seller’s agent should (a) exercise reasonable skill and care in performance of the agent’s duties; (b) deal honestly, fairly and in good faith; and (c) disclose all facts known to the agent materially affecting the value or desirability of property, except as otherwise provided by law.
Buyer's Agent: A buyer’s agent is an agent who is engaged by a buyer to represent the buyer’s interest. The buyer’s agent does this by negotiating the purchase of a home at a price and on terms acceptable to the buyer. A buyer’s agent has, without limitation, the following fiduciary duties to the buyer: reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and duty to account. A buyer’s agent does not represent the interest of the seller. The obligations of a buyer’s agent are also subject to any specific provisions set forth in an agreement between the agent and the buyer. In dealings with the seller, a buyer’s agent should (a) exercise reasonable skill and care in performance of the agent’s duties; (b) deal honestly, fairly and in good faith; and (c) disclose all facts known to the agent materially affecting the buyer’s ability and/or willingness to perform a contract to acquire seller’s property that are not inconsistent with the agent’s fiduciary duties to the buyer.
My posts on Buyer Brokers -
NY State: A Buyer Beware State
NOTE: In the buyer's agent relationship disclosure as shown above that:
A buyer’s agent does not represent the interest of the sellerIt's what I have said a number of a times here on UrbanDigs. Now, its up to you to determine whether or not the buyer broker you have been working with has been servicing your needs with YOU in mind, and NOT their commission! If I had to list the criteria of what a buyer broker should bring to the table in order to service your needs, it would include:
Comments? Thoughts? Arguments? Lets get it on!
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Comments (11)
1. In Arizona (and California) where attorneys are not required in a transaction, we use Agency Disclosure on commercial as well as residential.
2. Also, we have new home developments everywhere. Buyers must understand that when they walk into the sales office the sales person works for the seller (developer) and NOT the buyer. Use an agent.
3. I do not trust most agents (competancy issue) so I am against agents who get a listing (represents seller) and winds up trying to represent a buyer. How can they possibly negotiate in good faith on behalf of the buyer if they know all of the particulars about the seller? They can't. Moreover, brokers will tell their agents to just step back and act "neutral".
Act neutral? That's not how you earn the 6-7% commission. I earn it when I get 75% of what my client wanted and the other side gets 25%!
4. The actual disclosure form doesn't mean a lot to clients amongst a sea of forms. Most people don't read and most agents can't explain.....
Posted by Larry Nusbaum | January 18, 2007 11:15 AM
Can you explain what exactly a buyer disclosure form is? Is it a contract between the buyer and the agent? I'm new to all of this...thx.
Posted by newbie | January 18, 2007 2:25 PM
Great work Noah - Now, let me ask you something - this has nothing to do with declaring who you are working for, but I am curious - Who do you get paid from when you sell? Do you split on a co-broke with the listing agent? Or does the buyer pay your firm at closing?
Newbie - Like Larry above you said "Most people don't read and most agents can't explain....."
Posted by Christine | January 18, 2007 4:35 PM
Sure newbie, as noted on the DOS website, the purpose of the form is to...:
New York State law requires real estate licensees who are acting as agents of buyers and sellers of property to advise the potential buyers and sellers with whom they work of the nature of their agency relationship and the rights and obligations it creates. This disclosure will help you to make informed choices about your relationship with the real estate broker and its sales associates.
It says clearly above that, THIS IS NOT A CONTRACT! It simply defines the role of the agent in the transaction and the rights that go with that.
Make sense?
Posted by Noah | January 18, 2007 5:00 PM
Thanks Christine,,I split with the co-broker at closing the commission paid by the SELLER. So, if its 6%, each broker gets 3%, or whatever the seller negotiated beforehand with the listing agent when they signed the marketing exclusive agreement. A tiered structure is not uncommon these days; 6% co-broke, 5% direct...could negotiate a bit less over $1M.
Posted by Noah | January 18, 2007 5:02 PM
noah,
i think that the disclosure form also does not apply to co-op's as they are not real property, rather the owners purchase stock in the corporation and become shareholders in that corporation.
can you confirm this?
thanks,
-rudy.sellsius°
Posted by rudolph d. bachraty III | January 19, 2007 9:27 AM
Rudy,
While your right in the definition of a co-op, I dont think that the 'non real property' is the reason why the disclosure form is not needed.
Rather, that the co-op building usually qualifies as a building with more than 4 units, and therefore, does not warrant a agency disclosure form. If the co-op has less than 4 units, I believe it will require this form.
Posted by Noah | January 19, 2007 9:29 AM
I'm also a newbie here.
Question: if there's no contract that governs a potential buyer & buyer broker relationship, what will happen if the potential buyer terminate his relationship with his buyer broker and negotiate with the seller broker ?
Posted by Richard | January 19, 2007 1:04 PM
Nothing! There is no such thing as buyer loyalty here in NYC, and the buyer can do whatever they want.
Just sucks for the buyer broker who put in alot more time than most buyers think, when it comes to servicing a buyer, and gets nothing at the end of the day while the buyer bids for the property they they found and presented as a good value given market conditions. Part of the business I guess.
Posted by Noah | January 19, 2007 1:15 PM
QUESTION: Say my buyer's agent (we have no written agreement, just an understanding that the agent is a buyer's agent) has been showing me properties, and accompanied me to a property (a property that I found and was not presented to me by the agent). However, since visiting that property a few months ago, I have become unhappy with the agent's service. How long is our verbal agreement binding? In otherwords, how long do I have to wait before I can place a bid on the property we saw together with a different buyer's agent?
Posted by Mike | January 22, 2007 2:34 PM
Mike - unfortunately for the broker, there is no such thing as buyer loyalty. Thats the hard part about working with buyers only, in this business.
If you feel like the agent has not been servicing your needs, you have every right to change brokers and be represented by a different agent from a different brokerage.
As far as you finding the listing, I view it much differently. Any real estate agent can setup a search and send listings, and what they send you is largely a function of the quality of the systems they use and the time they put into you as a client.
For my clients, I focus on the best of breed, property valuation and bidding strategy aspects of buy-side in NYC to service my clients; so, its often that they find something I missed, and send the listing to me for review. In the end, they want me to see the property so I can guide them later. So, if the agent works like that, its not a big deal that you found the property.
Posted by Noah | January 22, 2007 2:59 PM