Home buyers seek agents, too

Lisa Villanueva almost bought the wrong house - even after seven visits to the Scottsdale, Ariz., property.

What stopped her?

A buyer's agent hired by Ms. Villanueva and her husband, David.

Such agents inform prospective homebuyers of anything wrong with a house, and provide information about the neighborhood and the real estate transaction itself.

The couple turned to Curtis Hall, a buyer's agent based in Tempe. He advised them to not to buy because the house would be hard to resell. His research determined that since homeowner's association rules were not enforced in the neighborhood, property values would be adversely affected.

Mr. Hall also pointed out that with an empty lot adjacent to the house, the couple couldn't know what type of house would be built next door.

For Ms. Villanueva, these revelations helped. Her focus, she says, had been on the positive characteristics of the Santa Fe-style house.

With Hall's help, the couple eventually chose a different home in Scottsdale. "It's like having someone kick the tires for you," Villanueva says.

Demand for buyer's agents appears to be growing. Last year, nearly half of the 5.1 million existing home sales in the United States involved a buyer's agent, according to the National Association of Realtors (NAR).

Experts credit the rise in popularity to the increasingly high-stakes nature of home-buying. Home sale prices have risen an average of 4.1 percent annually from 1990 to 2000, according to NAR. This year, the organization forecasts sale prices to increase by 4.6 percent.

When hundreds of thousands of dollars are at stake to purchase a new home, real estate experts say an agent can reduce the buyer's risk of making costly mistakes.

Prospective buyer's agents must become NAR members and take courses offered by the Real Estate Buyer's Agent Council. Approximately 32,000 accredited buyer's agents work in the US.

Monica Heckman, of Monica Heckman/Buyers Only in Greenville, S.C., works as an exclusive buyer's agent. She does not list or sell properties. Ms. Heckman says that, for her, it's not feasible to perform both tasks.

"You cannot get the seller the highest price and at the same time, get the purchaser the lowest price in the same transaction," she says, adding that agents assume liability for any representations they make about a property.

As a rule, the seller pays the buyer's agent commission through the transaction. The fee is included in the sales price in 90 percent of transactions, according to Hall.

Although real estate commissions are open to negotiation and vary in different regions of the United States, they average about 6 percent. When a buyer's agent and a listing agent are involved, the agents split the commission.

A consumer should be aware that the buyer's agent may have an interest in seeking a higher purchase price when the commission is based on the purchase price, says Andrew Good, regional vice president for the Better Business Bureau in eastern Pennsylvania.

But Mr. Good says brokers' ethical obligations require them to act in fairness to the clients.

To trim costs, some buyers are "unbundling the transaction," says Hall. For example, a buyer might find the property, and then pay a buyer's agent to structure parts of the transaction for an hourly or flat fee.

Jeffrey Hutchins, a lawyer who deals with real estate at Broude and Hochberg LLP in Boston, advocates the use of buyer's agents, but cautions homebuyers to seek out agents who will explain all of their legal obligations.

"In Massachusetts, and perhaps other states as well, there's an issue where the buyer is relying on representation in making an offer on a residential piece of real estate. The buyer should be aware that submitting an offer has legal consequences," Mr. Hutchins says. "You can be bound at the first step, and some buyers are not notified about that by their buyer's agent."

In Colorado, most complaints against buyer's agents come from buyers who claim their interests were not effectively represented in the transaction, says Fran Winston, an investigator with the enforcement section of the state's Real Estate Commission. Complaints involve zoning issues, home inspections, and the quality of financing.

Before enlisting the help of a buyer's agent, talk to a potential agent's past clients, say experts.

"More than half of buyers find real estate agents from a referral like that," says Kevin Roth, a senior economist for NAR. He recommends buyers have a clearly written contract agreement in place before working with a buyer's agent.

The real estate industry has a lexicon of its own. Different labels carry shades of meaning. A sample:

Real estate agent: A licensee who acts as an intermediary between parties in a property transaction. Represents the seller or the buyer, as the case may be.

Real estate broker: Licensed by the state to carry on the business of dealing with real estate. Responsible for the supervision of Realtors, and other sales agents. Responsible for negotiating commission percentages and essentially acts as the manager of transactions at a real estate company.

Realtor: A real estate broker or sales associate who is a member of the National Association of Realtors (NAR) and abides by its Code of Ethics. The word "Realtor" is trademarked by NAR.

Buyer's agent: Legally represents the buyer under oral or written contract.

Exclusive buyer's agent: As above, but lists no properties, and only represents buyers.

Listing agent: Lists the house on the market. The listing agent represents the seller.

Dual agency: When the buyer and the seller use the same agent.

Single-agency practitioner: An agent who represents buyers or sellers, but will not represent both in the same transaction.