Will the REAL Exclusive Buyer's Agent Please Stand Up?

What exactly is an "Exclusive Buyer's Agent"?

A: An agent who represents only buyers, never sellers, with no risk to their buyers of dual or designated agency on any home they want to buy.
B: An agent who gets permission from their buyer in advance for the agent's company to also represent the best interests of the seller (or a competing buyer) on the same home.
C: An agent whose buyer signs an "Exclusive-Right-to-Represent-Buyer" Agreement regardless of whether or not the agent gets permission in advance from their buyer for the agent's company to also represent the best interests of the seller (or a competing buyer) on the same home.

Buyer agency has become very popular since it was introduced to consumers in the early 1990s. However, consumers need to ask some questions of their buyer's agent to better understand the level of representation they will be getting. Questions need to include if the agency relationship is exclusive or non-exclusive and if dual and/or designated agency is practiced by their buyer agent's firm. Some buyers request that their buyer's agent provide "exclusive representation" so they would not risk divided loyalty with a seller client or another buyer client who is represented by the same firm. Buyers need to have a clearer understanding of the three ways that the term "exclusive buyer's agent" is used by real estate agents before they choose an agent to represent them on their next home purchase. Let's discuss each of the following scenarios:

A: An agent who represents only buyers, never sellers, with no risk to their buyers of dual or designated agency on any home they want to buy.

According to the National Association of Exclusive Buyer's Agents, (NAEBA), this is the only correct answer. This is also the definition you would find for "Exclusive Buyer's Agent" in "Don't Risk It! A Broker's Guide to Risk Management", published by the National Association of Realtors® in 2000: "Exclusive Buyer Representation - Also called exclusive buyer agency, this is the practice of representing only buyers, never sellers. The company never lists a seller's property and thus never has a seller as a client."

The definition above is also the definition used by the news media in articles written for the benefit of home buyers who are looking for consumer advice in preparation for the purchase of real estate. Internationally acclaimed finance specialist Suze Orman endorses the National Association of Exclusive Buyer's Agents in the "Finding a Buyer's Agent" section of her popular web site, www.suzeorman.com. Consumer advice columnists Ilyce Glink and Robert Bruss recommend exclusive buyer agency as an alternative to buyer agency to consumers who want to avoid the risk of dual agency - when one broker represents both parties. Ilyce Glink advises: "If you're trying to eliminate potential conflicts in your deal, you may want to try (exclusive buyer agency). Exclusive buyer's agents never represent sellers. They only represent buyers, and they typically will take buyers wherever they want to go in a metro area." Robert Bruss differentiates between the different types of buyer agency services in his article Do Home Buyers Need Their Own Agent?: "Any real estate agent can be a buyer's agent to help locate your home purchase. In addition, there are a few exclusive buyers' agents who represent only home buyers, never accepting listings from home sellers."

And June Fletcher from the Wall St. Journal.com writes:

"Exclusive buyers agents can focus on their customers and their needs in a way many sellers agents can't. They don't have to spend their time holding open houses, staging properties, or doing all the other marketing tasks that consume much of a listing agent's time. They can concentrate on previewing homes, investigating comparable houses, helping the buyer understand financing options, negotiating the deal and making sure all the inspections and escrow items are done in a timely manner.

What's more, home shoppers who use exclusive buyers agents don't run the risk of falling in love with one of their agent's own listings. When that happens, the agent becomes a dual agent -- beholden to both the seller and the buyer, and thus, beholden to no one. Because this limits the amount of advocacy and advice the professional can give either party (for instance, a dual agent can't tell the seller the highest price that a buyer is willing to pay), it's illegal in some states.": www.realestatejournal.com.

B: An agent who gets permission from their buyer in advance for the agent's company to also represent the best interests of the seller (or a competing buyer) on the same home.

The news media is doing a great job of advising consumers to ask for an exclusive buyer's agent in order to avoid the the conflict of interests that exists with dual and designated agency (which legally is "dual agency" in NC, since the same broker represents both parties.) But the problem now is that consumers have started asking for an exclusive buyer's agent, so listing agents are representing themselves to consumers as "exclusive buyer's agents," and are advising consumers they can provide exclusive buyer agency representation - even when their company represents the seller too! The reason for this is that the NC Real Estate Commission does not recognize the definition for exclusive buyer's agent published by NAR in 2000, and since then, picked up and popularized by the mainstream news media. As a result, many real estate agents whose companies represent buyers and sellers at the same time regularly advertise themselves to consumers as "exclusive buyer's agents".

C: An agent whose buyer signs an "Exclusive-Right-to-Represent-Buyer" Agreement regardless of whether or not the agent gets permission in advance from their buyer for the agent's company to also represent the best interests of the seller (or a competing buyer) on the same home.

The NC Real Estate Commission, for example, allows NC real estate agents to call themselves "exclusive buyer's agents" if their buyers sign an "Exclusive-Right-to Represent-Buyer" Agreement, even if their company will be representing the seller on the same home that the agent's buyer wants to purchase. So just because you have an "Exclusive-Right-to-Represent-Buyer" Agreement with your agent, that doesn't mean that your agent's company is only going to represent you. Your agent may start out representing only you, but in the future if you ever wanted to make an offer on a home listed by your agent's company, you would be required to permit the company to represent the seller, too.

The NC Real Estate Commission does not consider it a deceptive practice for agents to use the term: "exclusive buyer's agent" in this way because this usage is so pervasive throughout the real estate industry in NC. So the doctrine of "Buyer Beware" still applies to NC consumers who want an exclusive buyer's agent to represent them in their next real estate purchase transaction. NC agents are required to disclose the following agency representation options to consumers in NC: "Buyer's Agent, Seller's Agent, Dual Agent and Designated Agent", as defined in the NC Consumer Disclosure Brochure, but disclosure of the option of "Exclusive Buyer's Agent" is not required, so the definition varies according to each agent's own interpretation, if it is disclosed at all.

A refreshing exception is Ohio, where their state legal disclosure, "Consumer Guide to Agency Relationships," was developed jointly by the Ohio Association of Realtors and the Ohio Division of Real Estate & Professional Licensing. Under Ohio license law, each brokerage must disclose which of five agency policy options their company practices and offers to consumers, including an option for exclusive buyer agency: "Under this policy, your brokerage only represents buyers, and does not take listings, practice subagency or dual agency."

Real Estate industry expert and columnist Peter Miller sums up the argument best for including exclusive buyer agency as an additional agency option in the NC Consumer Disclosure Brochure: "Brokerages should always include listing brokers and buyer brokers, exclusive or not, so that individual professionals can pick the practice strategy they prefer while consumers can find the widest array of services. Exclusive buyer brokers changed the marketplace by popularizing the core concept of buyer brokerage. That's a transition which now helps millions of purchasers get a better deal in the marketplace - and that is a significant accomplishment."

Since no legal regulation for exclusive buyer agency exists in NC, before proceeding with a self-proclaimed "Exclusive Buyer's Agent," consumers are advised to question their real estate agent's interpretation of this loaded real estate term.

Julie P. Tuggle is broker-owner of Carolina Buyer's Agent, an exclusive buyer agency in Charlotte, North Carolina that represents only buyers, never sellers, on the purchase of Charlotte real estate with no risk to their buyer-clients of dual or designated agency on any home they want to buy. Contact Julie.