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Whose side are you on?

Whose Side Are You On?

A 1985 study by the Federal Trade Commission found that 78 percent of home buyers believed they were represented in real estate transactions by the agent who showed them homes.

Wrong.

By contract, listing agents work for the seller, as do "subagents," those showing the property.

Buyers don't usually know that.

The percentage of confused, uninformed buyers was so overwhelming that real estate officials concluded something had to be done to increase public understanding.

The push for better "disclosure" was on.

Arkansas is one of only four states that does not have a disclosure law requiring agents to tell buyers who they represent.

The state Real Estate Commission will hold a public hearing this week on adopting such a regulation. At least three proposals will be considered.

"We're interested in fair representation for all parties," says one local broker.

"Generally, the system has worked," says Rusty Armstrong, president of the Little Rock Board of Realtors. "I've found if a buyer understands the relationship, they're OK. Problems arise when they don't understand."

Armstrong adds, "By law, we represent the seller, even if I'm showing houses to my best friend. If we have information that could help the sellers, we're supposed to tell them."

"Nobody is looking out for the buyer at all," says Roy Paulette, broker and owner of The Buyer's Agent of Greater Little Rock. "Traditional agents have got to represent the seller. That means the buyer is out there on his own."

Paulette's agency offers an alternative to the traditional relationship. The agency, which was established almost two years ago, is growing.

Paulette is confident buyer brokerage is an idea whose time has come.

New Name

In Old Game

Paulette believes eventually there will be brokers representing buyers and brokers representing sellers in all real estate transactions.

The soft-spoken, white-haired Paulette speaks from a comfortable but unembellished office.

He points out that buyer brokerage is not new to commercial real estate and has been used in residential real estate for years in states such as California and Florida.

Paulette compares the separate representation to what happens in a lawsuit or a tax audit. One wouldn't want an attorney arguing both sides of a case, he says.

The Buyer's Agent closed about 40 deals in 1990. That number may sound small when compared with large real estate agencies such as McKay & Co. or Real Estate Central.

But Paulette is especially proud of another number.

Of the clients the company shows property, it gets about 80 percent to the closing table. That number is closer to 20 to 25 percent for traditional agencies.

Paulette and three other agents are associated with The Buyer's Agent.

The Buyer's Agent has even had its own offer and acceptance forms drafted that are not weighted in favor of the seller. Paulette says most forms favor sellers.

Paulette has been associated with the real estate industry for almost 30 years. He began as a home builder and then worked in Arkansas Power and Light Co.'s residential marketing department for seven years.

Tom Hathaway, a Memphis, Tenn., broker, founded The Buyer's Agent in 1988 and began setting up franchises. Paulette's franchise covers the Little Rock metropolitan area, including Benton, Jacksonville, Cabot, North Little Rock and Sherwood.

There are no other franchises in Arkansas. Nationally, there are franchises in 30 cities in 19 states.

The franchise fee is $12,500, and Hathaway receives royalties.

"Buyer brokerage is a grand opportunity for the real estate profession to enhance its reputation in the eyes of the public," Hathaway says. "For years, only half of the parties have been represented, evidenced by the fact most complaints were filed by buyers."

Other than The Buyer's Agent franchises, there are about 1,800 companies nationwide practicing buyer brokerage, according to Hathaway.

Clients and professionals are convinced the system has merit.

One Memphis client says, "This is the sixth home I've bought and the first time I've really felt good about it."

A local closing attorney says, "I routinely see buyers losing thousands of dollars at closings because they lacked adequate representation during the home-buying process."

Word Of Mouth

Word-of-mouth advertising is the best kind for The Buyer's Agent.

The company also uses yard signs that initially caused a stir.

After a buyer moves into a home, The Buyer's Agent places a large sign - about twice the size of normal real estate signs - that reads, "The Buyer's Agent helped us save time and money."

Since it was determined the signs were within state regulations, there have been few problems. Cooperating brokers in a sale are allowed to place signs after new owners have moved in.

The Buyer's Agent is paid from the commission the sale generates, just as any other agent would be paid. The difference is the seller must agree to the buyer using The Buyer's Agent.

Paulette has never encountered a seller that had a problem with that.

"One of the biggest misconceptions in this business is that the commission is paid by the seller," Paulette says. "When you think about it, if a buyer didn't put up the money, no one would get paid."

Paulette admits not many real estate agents agree with that philosophy.

Many agents seem wary of The Buyer's Agent, as evidenced by their reluctance to talk about the company.

But as the concept becomes more common in this part of the country, understanding should grow.

"Because it's new, we're sort of learning the rules as we go along," Armstrong says.

Matching buyers and sellers is what it's all about.
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No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:The Buyer's Agent represents buyers of real estates, not the sellers
Author:Ford, Kelly
Publication:Arkansas Business
Article Type:company profile
Date:Sep 9, 1991
Words:928
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