"Buyer brokerage" is a phrase you're likely to hear a lot about in the '90s. It's an idea that seems to be catching on.
What it means is a real estate agent who represents the buyer instead of the seller, which is a change in the way the industry has traditionally done business.Though you may not realize it, the agent who drives you around, shows you dozens of houses, and counsels you on prices, neighborhoods and mortgages, nevertheless is working for the seller - whoever that turns out to be.
It may seem odd, but the agent with whom you have established a relationship is legally bound to represent a stranger in any negotiations on the house. The reason is that the seller is paying the fees, both for the agent who listed the house and the one who brought you in to see it.
The hazy role of real estate agents has led to the growth of buyer's brokers. These agents also take you around to houses, but they agree from the start to represent you - not the seller - in the ultimate negotiations.
In most cases in residential real estate, the seller still pays the fees for both the selling agent and the buyer's broker, although the paperwork may be a little different.
"What I do and what most agents are doing, they're not charging the purchaser," said Pat Derwinski, an agent with Weichert, Realtors in McLean, Va. "We're still getting our commission from the seller."
That's also true in California, said Victoria Schammel of John Douglas Co. in Los Angeles. "We will go out and represent the buyer, but the seller still pays the commission," she said, adding she had never heard of a case of a buyer actually paying a commission.
If the seller is still paying the fees, what difference does buyer brokerage make?
One example: If you say to a traditional agent, "Offer $103,000 for this house, but we're willing to go as high as $108,000," the agent is legally bound to tell the seller if asked. With a buyer broker, there's no such obligation.
Derwinksi said that as a buyer broker, she also is free to tell her customers about any defects she spots in a house, advise them how much to offer and give other factual information - even if what she says is detrimental to the seller. When she's acting as a buyer's broker, she leaves a card making that clear to any seller whose house she visits.
Some sellers may figure that since they're paying the commissions, they don't want to work with buyer's brokers. That's their option, Derwinski said, estimating that up to a quarter of sellers in the northern Virginia area indicate in multiple-listing agreements they won't deal with buyers who come in with buyer brokers.
Most real estate firms that offer buyer brokerage also are willing to work the traditional way, but there are agencies that deal only with buyers.
One of them is Buyer's Resource, which has offices in 14 states and is headquartered in Denver. McGraw Milhaven, an official with Buyer's Resource, said that when potential customers come in, "They think they want a buyer's broker, but they don't want to pay any more."
Once assured the cost will not be any higher, most are happy with the arrangement, he said.
Buyer brokerages sometimes do charge buyers an initial fee, usually $100 to $250, but that generally is refunded at closing.
A 1991 survey by the National Association of Realtors found that at least 9 percent of homebuyers had paid a fee for an agent's services. NAR estimated that buyer brokerage may account for between 10 percent and 20 percent of all real estate transactions.
If you're in the market for a house this year, consider seeking a buyer broker. If you use a traditional agent, make sure you know where you stand with her legally. In some states, agents are required to tell you, but good agents everywhere will give you the information as soon as you start working with them.