Buyers should beware using seller's agent!

There's an adage that says you get what you pay for. The warning is especially relevant for homebuyers who work with the listing agent in a so-called single-agent transaction.

"I've heard too many war stories about buyers who think they'll get a better deal by going directly to the listing agent of the property," says Bill Golden, a Re/Max agent in Atlanta. "Most often, they do not get a better deal, and they end up not being represented properly in the negotiations."

In fact, buyers who use the listing agent aren't represented at all, which is why single-agent transactions seem abhorrent to many real-estate professionals.

"If you were being sued by someone, would you use the same attorney as the person suing you? Of course not," says Deb Tomaro, a Re/Max agent in Bloomington, Ind. But data from the National Association of Realtors seems to suggest that as many as 10 percent of residential transactions could be single-agent deals. (The trade group doesn't have direct figures on buyers using listing agents, but instead relies on member surveys, which track real estate firms, not individual agents.)

Confusingly, the terms "dual agency" and "single-agent" transaction mean the same thing, with the difference being that of perspective: The agent sees his or her role as that of a dual agent because the agent represents both parties, whereas a buyer would view a deal with only one agent as a single-agent transaction.

Why do buyers work with the listing agent?

Typically, buyers who choose to work with the listing agent say they do so because they think they're getting a better deal. But agents like Jon Sterling of Chase International in Tahoe City, Calif., have doubts.

"The idea that buyers can negotiate to get the listing agent to give up part of their commission because the buyers are unrepresented is a myth," he says. "Sure, some people have been successful doing that. It's the exception, not the rule."

It also doesn't make much sense when you consider that sellers, not buyers, typically pay commissions, according to associate professor Eric Chen, who teaches business at the University of Saint Joseph in West Hartford, Conn.

"If the buyer is working with the listing agent, be aware of the conflict of interest problem that exists," says Chen. "Remember that the listing agent is interested in getting a deal done, and the higher the purchase price, the bigger the commission to the agent."

Do buyers actually pay more?

Data are mixed on whether buyers in single-agent transactions end up paying more, according to Bennie Waller, a finance and real estate professor at Longwood University in Farmville, Va., who has co-authored two papers on the topic. But the reason for the mixed results, says Waller, most likely has to do with the time the property is on the market. Single-agent deals that happen within 30 days of listing typically sell for a 10 to 18 percent premium. But when the property sells within the last 30 days of the listing contract, the price actually drops by 5 to 6 percent.

What's the harm?

The problem with the single-agent deal is that it makes it impossible for the agent to fulfill a fiduciary duty to both parties.

"The agent has an inherent conflict of interest when working with the buyer," says John O'Brien, a Chicago attorney who handles real estate transactions. "It is very difficult for the agent to keep his knowledge of the buyer's negotiating points, including their best price, from becoming known to the seller, either directly or through the agent's advice to the seller regarding counter-offers."

Beyond price, buyers should understand that a single-agent deal creates the opportunity for a problem on virtually every deal point, says Chen.

"Because of the conflict of interest, there is a real chance that the agent doesn't have the buyer's best interests in mind," Chen says. "It doesn't necessarily happen every time. However, the pressure, opportunity and rationalization are all there for the seller's agent to act in their own client's interest and against the interests of the seller."

Not everyone sees an automatic conflict of interest.

"There are some who feel that it is an automatic conflict to represent both parties," says Sterling Watkins, a broker-owner with Help-U-Sell of Folsom, Calif. "I happen to disagree. If no confidences are violated, each party has a chance to make a decision at every turn in the road."

Although Watkins certainly has the minority opinion on the matter, it's worth pointing out that most real estate firm contracts do contemplate the possibility of a single-agent deal. But, as Chen says, "that language usually looks an awful lot like a waiver."

GEORGIA IS A DUAL AGANCY STATE!!!!! BUYER'S BEWARE!!!!!!  Georgia is a Dual Agency State. 99% of homes sold in South Georgia are sold by the same listing agent and it's not to benefit the buyer or seller...... 

http://www.bankrate.com/finance/real-estate/buyers-using-sellers-agent.aspx

MAJOR FEDERAL CRACKDOWN ON REALTY FEE KICKBACKS UNDERWAY

The federal government has issued a warning to realty agents, builders, title agencies, mortgage brokers and other industry participants: Get ready for a wave of RESPA crackdowns, and financial penalties that could make your head spin.

In remarks last week, the federal government's top Real Estate Settlement Procedures Act (RESPA) investigator, Ivy Jackson, said that a recent $450,000 settlement with Tulsa realty agents and builders is just the tip of the iceberg. Potentially dozens of additional crackdowns are in the wings.

Jackson heads HUD's RESPA enforcement unit, and has unleashed dozens of on-staff and contract investigators -- often ex-FBI, Customs Bureau or financial regulatory agency sleuths -- to break up what she called "blatant violations" of federal anti-kickback rules among realty agents, title companies, lenders and others nationwide.

"We are doing investigations in every state," she said, and "we anticipate a very busy (enforcement) year." Jackson's office gets hundreds of tips a year about alleged payoff arrangements involving realty agents, brokers, lenders, mortgage brokers, builders and title and escrow agencies every year. The tips come mainly from local competitors inside the industry, but also are sent in by individual consumers, federal banking regulators, and state officials.

The Tulsa settlement, unveiled in late March, involved allegations that realty agents and builders created shell corporations that bought into local title companies, and then distributed referral-fee kickbacks based on which agent or builder made the referrals to the companies. The participants all denied wrongdoing, but agreed to pay nearly half a million dollars to settle the case.

That settlement followed a much larger agreement with Chicago Title Insurance Co., involving alleged referral-fee payoffs in Texas. In that case, Chicago Title paid the federal government $5 million and the Texas Department of Insurance $1.2 million . HUD alleged that Chicago Title knowingly participated in schemes involving falsified closing documents and illegal payoffs. Chicago Title denied all wrongdoing as part of its settlement.

Jackson told a, real estate lenders and brokers, conference last week that "we are using every resource at our disposal" to move against realty agents, mortgage brokers, lenders and title companies "who ignore the rules" on referral fees. Jackson said that over 60 major investigations, or settlement cases, are currently underway, and that the department now routinely works with state real estate and financial regulatory officials, insurance commissioners, and state attorneys general to identify and stop illegal activities.

She conceded that until recently, RESPA enforcement was less prominent than it is now. But HUD has recently tripled its RESPA investigative staff, and has a contract with a company in Virginia that provides ex-FBI, ex-Customs Bureau and other trained law enforcement and financial investigators to deconstruct even the most sophisticated cover-ups of referral fee arrangements.

In the Tulsa case, for example, Jackson said the realty agents and builders created a "multi-tier" kickback scheme which appeared to pass federal legal tests at the surface level, but failed at the next level below. RESPA prohibits anyone from giving or accepting a kickback, or other thing, of value in exchange for referral of settlement business. HUD regulations permit realty, lending, and title agencies to create "affiliated business" arrangements and joint ventures, but require the participants to have bona fide economic stakes at risk in the ventures. The rules also require distributions of joint venture profits according to ownership shares, rather than on the basis of numbers of referrals of business.

According to HUD, the Oklahoma realty agent and builder ventures distributed profits, based on volume of referrals,and allowed some participants into the scheme for nominal, below-market investments. HUD also charged that the title companies marked up some customers' fees illegally.

I really hope they come our town soon…… 

http://realtytimes.com/agentnews/agentconcerns1/item/10614-20050404_respacrackdown