Another Buyer Broker Story

The right of a consumer to be represented themselves by a real estate agent has been the law in Connecticut for at least a decade now, but it is still not understood by many people.  In the commercial arena, where many buyers are more sophisticated, and are used to buying and selling real estate under earlier regulations, it has been slow to take full effect. The way that the law is currently written, it requires a real estate agent to have a written representation agreement with a buyer, before s/he shows that person any listings other than his/her own company's listings, where the listing agreement with the seller would give the agent representation of at least one of the parties. A dual agency agreement must also be signed by all parties, when the agent represents both the buyer and the seller.

Why am I explaining this again?  Because so many people do not understand the law.  I got a call a couple of weeks ago from an attorney, skilled in real estate, and also licensed as a real estate agent.  He told me that he had recently bought a property, which he had previously called me about (to ask questions about the area, not to represent him on a specific property).  He said that he realized only after the deal was done that the listing broker had gotten paid to represent him, because he didn't have a buyer broker agreement.  He had thought, as many people do, that he would save money if he was not represented.  The way it works, though, is that the agent is (almost always) paid by the seller, as a result of a listing agreement, and that fee is named in that agreement, regardless of whether another agent is involved.  That means that, if there are two agents, the agreement between the two agencies (almost always) divides that commission.  If there is no selling agency, the listing agreement would still be in effect, so the listing agency would get that commission.  While that listing firm would owe certain duties to anyone, and would do the necessary work to put the transaction together, the fee wouldn't change just because the buyer chose to be unrepresented.  Brokers who do not represent a person, though, cannot give advice on value, except to state the listing price.  So that question--what's it worth?--can only be answered legally by an agent who represents you.

So why don't buyers want to sign buyer broker agreements?  Sometimes, they want the right to buy something without the agent, or with another agent.  Sometimes that's fair, although sometimes it isn't, depending upon the amount of ground work that has already been, or is being, done.  Sometimes they aren't authorized to sign, which is a problem that the CT Legislature plans to take up this year--it can be fixed by having a commercial buyer broker agreement signed later in the process.  In some cases, they are dealing with more than one agent in different areas, a problem that can be fixed with the proper documentation.  Many times, though, it's just a knee-jerk reaction against signing anything.  But when's the last time you saw a doctor?  If you declined to sign the HIPAA form, I bet that you didn't get in.  (And, actually, I'd put my money on a bet that you signed it, and never even read it.)  Why should real estate not have paperwork also?  It's good business, and good practice. And, it's the law.

Finding What's Not There

Usually, when you are looking for something to purchase, you expect to choose from among the options available, either at a retail outlet, or on line.  Real estate has become very different these days.  There is often a disconnect between what sellers are offering, and what buyers want to buy.  And that's where the agents come in.


In the olden days, we sat down with people, and showed them a physical book of properties available, or took them in our cars to see what was listed.  Now, we've become experts in finding what is not on the market.  We frequently scour an area, or brainstorm together at an office meeting, to try and locate what a buyer or renter is hoping to find.  It's not uncommon for us to chase down leads, or contact out-of-town owners upon seeing a half-empty parking lot or signs of disuse, in order to present more choices to clients. 


That's where the distinct advantage of a local company comes in.  We are big enough to network all over the world, to promote listings on line, and to have the technology necessary to accomplish transactions.  However, because we know Connecticut, and have our whole team of local experts, we can search with purpose, having a good idea of where things not on the market currently may be located, or carved out of a larger property.  In one recent search, only a couple out of almost 20 properties were being marketed for sale or lease.  The others came through networking with owners, agents, State and town officials, and each other.


That's the future of real estate brokerage--agents as consultants--and we are in the vanguard.  We advise people who have found buildings and land, people who are looking, and people who haven't looked.  We seek out alternatives, identify and sometimes eliminate obstacles, and smooth the way with regulations.  It's the best way for us to work--as partners with our clients--and the best way to access our services.  Sometimes change really is good for everybody!

Supply and Demand

Nationally, the residential real estate market is out of whack in the supply and demand, with many fewer listings than buyers, and that's the main thing holding down sales in some markets.  That is usually not the issue in commercial real estate, since there are so many different types of properties, and they aren't often fungible.  There is a problem, however, in that we see many buyers and tenants who cannot find the kind of properties that they are seeking; that is a different variant of supply and demand.


We seem to see more of that issue now.  Why would that be?  First of all, it's much easier for buyers to see what's on the market by searching on-line themselves.  So, when they get to us, they have seen what's there, and they are looking for what's not there.  Secondly, it seems as though there are more Section 1031 tax-free exchanges, where buyers may be more constrained in what they need to buy, and in more of a hurry.  Thirdly, the lingering effects of a bad market have caused many sellers not to list.


What are the lessons here for buyers and tenants, sellers and owners?  If you are a buyer/tenant, it's more important than ever to make sure that you have a real estate agent who knows the local market, since you may be looking for that proverbial needle in a haystack.  We are doing more and more searches for what isn't available, and you can find those things, but you have to know where to look.  For sellers/lessors, the lesson is simpler:  List now.

Investment Fever

The recent travails of the stock market have proven to be a boon for investment real estate.  The appeal of being able to see what you own, and touch it, is proving irresistible to investors from here and abroad.  We are seeing feeding frenzies for apartments, where buyers are making offers sight unseen, and office buildings, where we are surprised at the final sales prices.

Investors are being priced out of NYC and Boston, and are turning to us to look for available product.  We are happy to oblige, and are getting used to learning the nuances of moving money from country to country.  It's nice to know that the United States is still the place where people feel that their money is well spent.

If you are a buyer, you have new competition from overseas.  If you are a seller, you have new buyers.  This may be the time to cash out, and it may not matter whether you own apartments, retail, industrial, or commercial real estate.