While you may just want our help buying your new dream home, and we’re at the ready to help you with that, but you may want to know a little bit about how we got here.
In the days past, real estate agency (representation) was simple and one sided. The Seller hired and paid an agent to list, market and sell their real estate. In residential real estate, the commission has varied up to 7% of the contract price and has always been negotiable. The following were the basic steps:
1. Listing Agent would list advertise the property
2. Buyers would call or visit to express interest.
3. Listing agent would host the potential Buyers for a tour of the property.
4. If Buyer wanted to make an offer, Listing Agent would place the proposed terms in a contract which was presented to Seller.
5. Listing Agent represented Seller as a “Client”
6. Listing Agent did not represent Buyer.
As real estate sales evolved, agents began exclusively representing Buyers, Buyers who had little or no access to information about real estate that was for sale. This trend made total sense. What did not make sense was that the Seller continued to be the only party to pay a commission in the transaction. This was because the law of Agency in Georgia had yet to catch up with the trend of Buyer Representation, and the Buyers agent was yet to be recognized by the law in Georgia. To allow Buyers to be represented and for Buyers’ Agents to get paid a commission, a “work around” was adopted in custom that comported with GA Law of Agency. This work around had Seller paying the whole commission to the Listing Agent, and then the Buyer and Listing Agents would agree between themselves to divvy up the commission.
In residential real estate, before computers, Buyers Agents would load their Clients up in their car to drive around and look at neighborhoods and homes. Showings were then scheduled. New listings were released weekly in books or sheets that were physically delivered by the Multiple Listing Service (“MLS”) to the brokerage houses where they were gobbled up by agents anxious to review the new listings and status updates to existing listings. Additionally, Buyer Agents (and their access to the MLS information) were essential to Buyers who wanted to get the best view of the market.
As we all know so well with the advent of Zillow, Realtor.com, Redfin etc., Buyers, now, can and do shop for homes online from their computer or smartphone. Buyers can also easily study comparable sales, trends and area information through these same online channels. The main service that Buyers really do rely on their agent for are the tasks relating to drafting and negotiating contract for the purchase of real estate. Under the current “work around” on commission that we talked about above, Buyers may think, “Since Seller is paying my Agent, why not use a Buyer’s Agent”. While technically, the Seller is paying both sides commission, we all know the total commission cost for the Buyer’s Agent and the Seller’s Agent is “baked in” to the listing price. Sellers are smart, they know what they will be netting on the sale. Buyer’s do not really avoid paying the Buyer’s Agents’ Commission. They pay it in the purchase price.
So, Buyers only now need help drafting and negotiating a contract and everything else they can do from the comfort of their own home. How can it be that agents can draft contracts for their Clients without having a law license? Hence the advent of the contract forms the powers that be have created a massive “suite” of forms for Agents to “fill in” for their Clients. We all know that contracts can be a lot more complicated than that which can be addressed by a form. Furthermore, since no form can adequately address all the myriad issues that arise with every contract, a section was included in every contract called “special stipulations”. In this section, agents are invited to draft their own clauses to address whatever terms are not adequately handled in the body of the form contract. Special Stipulations should only be drafted by a licensed, experienced attorney.
The evolution and regular revision of these forms has largely existed to create protections for real estate agents and brokerages, many times at the expense of the Buyers. Currently, most Buyers allow themselves to be blindly herded through their transactions using these forms. Some don’t even read them. Confusion, misunderstanding and disputes are rampant. It cannot be disputed that Buyers will benefit from legal representation in the drafting, negotiating and administration of their binding contracts to purchase real estate.
