Consumer Reports

July, 1997

Front Lines -- Legal Brief:

Putting the Real-Estate Agent on the Buyer's Side

by CR Staff

Home-buyers may not realize that the friendly real-estate agent who has shown them through dozens of homes and shared their secrets is legally obliged to use that information to help get the best possible price and terms for the seller.

Until a few years ago there were few places in the U.S. where buyers were legally entitled to any loyalty from real-estate agents. But now, an increasing number of states are requiring agents who did not list the house to be legally obligated to represent the buyer -- working out terms of sale in his or her best interest. The newest such law took effect on June 1 in Connecticut. Under that law, only the listing agent will always retain allegiance to the seller; other agents may still work for the seller by special arrangement, but they must disclose that fact to prospective buyers up front and in writing.

(Real-estate agents routinely swap information and show houses they haven't listed, splitting a commission on the sale with the listing agent.)

Nonlisting agents are now obligated to represent buyers in nine states (CT, MO, NC, NE, NH, NM, VA, VT, WA). In two other states (AR, CA), real-estate agents may act as facilitators, bringing buyer and seller together without holding allegiance to either. And many other states simply require disclosure of each agent's allegiance to prospective buyers.

The National Association of Realtors has been pushing for these new laws as one way to cut the number of lawsuits against its members. The suits come mostly from disgruntled buyers who didn't realize that the agent was not obligated to keep their secrets. If you're about to start shopping for a house, be sure you know whether your agent is really working for you or for the seller. Of course, real-estate agents have their limitations no matter whom they represent. An agent's word isn't a substitute for a professional inspection of the property and for a good lawyer.