Buyer Representation in Texas

The Agent Showing You Houses May Not Be Your Agent

Many people think that if a real estate agent is showing them houses, that means the agent is their agent and looking out for their best interests. This is not the case in Texas, which is why the Texas Real Estate Commission  requires that real estate agents go over the Information About Brokerage Services  before they start showing you houses. That document explains that there is a difference between the various roles that different types of agents perform in the home buying/selling process.

Click to see entire document

This is one way you can know that you are working with a PRO! If an agent is showing you houses and has never discussed the legally required Information About Brokerage Services and buyer’s representation, then you are working with an Amateur…not a Pro! Is that what you want when dealing with one of your largest financial investments? What else will they refrain from telling you?

Read: Texas Laws on Brokerage Services & Dual Agency

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About the MLS 

Many people misunderstand the purpose of the Multiple Listing Service (MLS). They think it is just a home search tool. It’s true that the MLS is the tool real estate agents use to list homes for sale. It is also the tool that buyer’s agents use to find houses to show to buyers.  And it is the source of information for home search websites like Har.com, Realtor.com, Zillow, etc. (The MLS gets those listings first, because it’s the source database for those listings.)

After a home is listed in the MLS, then the data is shares–via a process called IDX–with other home search websites. Without the MLS, (which was created and maintained by REALTORS) Zillow and the rest of the online home search websites would not have many homes listed on their websites. 

By the way, did you know that when you sign up for home searches on Zillow, they SELL YOUR INFORMATION TO REAL ESTATE AGENTS and other parties who will pay for that info? See Zillow’s Terms of Use below…

“B. Certain Third-Party Services.

(i)Referrals and Lead Sales. As part of the Services, you may be connected with a real estate professional. You authorize us to make such referral or lead sale and acknowledge that we may be paid valuable consideration for facilitating such connection. As part of the Services, you may be connected to a party that provides mortgage loan origination services, title and escrow services, or other settlement services. If any of these parties have an affiliated relationship with any of the Zillow Companies, then one or more of the Zillow Companies may receive a financial or other benefit from the referral between such affiliates.”

 

What most people do not understand is that the purpose of the MLS is for licensed real estate agents to advertise homes for sale and offer to share their sales commission with member agents who help them obtain a buyer for their listing.  It’s the way that member real estate agents get other agents to help them sell a house. That’s why you have to be a paid member with a state license in order to use the MLS. (It is illegal  in Texas to pay real estate sales commissions to unlicensed  people.)

 

So when a listing agent puts a house for sale on the MLS, the agent is agreeing up-front to share part of the ONE sales commission with other agents…which may vary depending on whether the agent is a “Buyer’s Agent” or “Subagent.” This is all predetermined before a buyer ever sees a listing through the MLS…and before the first offer for the house is written.

 

Here’s another thing that most consumers do not know, while we’re talking about sales commissions…
Real estate agents are not (usually) paid employees of the brokerage where they work…they are “straight commission.” They do not receive an hourly or salary paycheck from their brokerage for showing houses to people just for fun.  Almost all real estate agents are  Independent Contractors who only earn a living by receiving sales commissions for selling homes. Plus, they pay all their own expenses. This is why professional agents are careful with their time and only show houses to clients who are ready, willing, and able to purchase a home. If they waste time showing houses to people who just want to look at houses for fun, then they are not earning their living.

 

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Buyer’s Agent vs Subagent

So by default, a real estate agent who is a member of the MLS is always representing the seller as a Subagent, unless they have a signed Buyer’s Representation Agreement with the buyer to become the Buyer’s Agent.

There are different rules for how a Buyer’s Agent can work with a home buyer vs. how a Subagent can work with a home buyer. 

 

From the Information About Brokerage Services document…

 

Let me illustrate. In the MLS, there are two versions of a listing’s printout…one that is specifically for buyers:

And one that gives more details to the agent:

In this example, a Subagent would be required to say the listing Days on Market was 228 (which is true for that listing)…but the Buyer’s Agent would be free to say the cumulative days on market for the house was actually 302 days. Plus, the Buyer’s Agent can show their clients the full price history…a Subagent is not allowed to lie, but also cannot volunteer information that damages the seller’s position (because the seller is their client…you will want the same protection when you are a seller).

Notice above that the listing says the Original Price was $499,000, but if you look at the price history, the Buyer’s Agent could show that there was another listing for this house, with another brokerage, which started at $519,000 in April 2018.

 

Also…look what a Buyer’s Agent could reveal right away regarding “Previous Flooding onto the Property”…

A Subagent does not have to volunteer this information unless specifically asked by the Buyer. So the Buyer could waste time making an offer on the house and then get this information on the Seller’s Disclosure after the fact. But a great Buyer’s Agent should be looking out for you without asking. They have a Fiduciary Duty to look out for your best interests.

Furthermore, a Subagent cannot do a CMA and tell you that the home is overpriced…but as your Buyer’s Agent, I will! I will do everything I can to make sure you know all the pricing details on a home when you decide to make an offer. This is to help prevent you from overpaying for the home.

Please know that Texas is a non-disclose state and only members of the MLS have actual sales data. Tax appraised values are not accurate for market value in Texas! And even Zillow only gives themselves 1-star on their Zestimate’s accuracy (see here). There is a method for doing a proper Comparative Market Analysis for a home that is similar to how a lender’s appraiser is going to determine a home’s value. Hire an experienced agent who knows what they are doing!

Read more: Pricing a Home Correctly

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How Can I Make Sure My Agent is On My Side?

As you can see, if you want all the pertinent information available to make the best buying decisions, then it is important that you obtain your own representation with a Buyer’s Agent.  Having a Buyer’s Representation Agreement benefits you by:

• Protecting your confidentiality
• Allowing me to provide you with all the information at my disposal, including advice on the price
• Allowing me to negotiate based on your best interests
• Giving you a partner who is loyal to you

And the Listing Brokerage (Seller’s Broker) shares the real estate commission, as allowed by the home seller, with your dedicated “Buyer’s Agent.” They agree to do that when they list the home on the MLS (see graphic above). So it usually does not cost you extra to have your own buyer’s representation.

 

 

Sheila’s Release Clause

The Buyer’s Representation Agreement is for your protection; it is not meant to “tie” you to me…it’s meant to “tie” me to you. To prove this, and because I’m confident that you will enjoy working with me as your real estate agent, I put a release clause in Para. 17 stating that you can cancel the agreement at any time for any reason.  I do not want you to worry about being “stuck” with me! I’m a Five-Star award-winning real estate agent, but if you are not happy with me, then you are free to cancel our agreement. 

I only work with Buyers with whom I have a Buyer’s Representation Agreement. This just simplifies things because then I don’t have to worry about whether I’m giving you too much information (or properly representing the Seller). As my client, I can give you my full professional opinion at all times and answer any and all questions that you have.

Once you have a Buyer’s Representation Agreement in place, you should always state that up front to other real estate agents (at open houses) and builder’s sales reps (if touring new home models) because, by law, they need to know that you have representation.

 

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List of My Valuable Services

My job isn’t “just” helping you find a house to buy…I’m helping you through the entire 2-4 month process of buying a home. There are over 100 tasks that I perform during the purchasing process. I’m looking out for you every step of the way and keeping my eye on the listing agent, the seller, the builder (if applicable), the lender, the inspector, appraiser, HOA, and the title company. I’m on YOUR side because I’m YOUR agent.

I help with price analysis, contract negotiations, legal paperwork, inspections, appraisal issues, repair negotiations, home warranties, HOA compliance inspections, hazard insurance, surveys, title commitment, home warranties, and more. I have the expertise to help solve complicated problems that often occur in the process and I work to make sure that you don’t lose your earnest money or worse.

Real estate is a huge financial and legal commitment. Don’t you deserve to have a Five-Star real estate agent on your side? 

Here’s How I Add Value to Your Home Buying Process:

1. Premium, customized home search (based on my knowledge of the area school ratings and flood zones) to filter out homes that don’t meet your criteria. You can’t get this level of a home search on your own!
2. Online home review BEFORE you tour a house, to look for potential defects such as high-risk flood zone, high-voltage power lines, MUD tanks, previous flooding, and other issues…so you don’t waste time touring undesirable homes.
3. Detailed home tours (in-person or via VIDEO* for out-of-town clients), where I help identify the features and benefits of each home and neighborhood as well as any potential home defects (so you don’t end up with a “money pit”).
   

   *I’ve sold many homes “sight unseen” to out-of-state an out-of-country clients, via my HD video walkthroughs (view sample). I will even video the inspector summary and final walkthrough for you. 

4. Hyperlocal knowledge and expertise so I can point out the amenities, PROs and CONs, and HOA details of most neighborhoods in this area.
5. “Sheila’s Home Buyer Guide” for THIS AREA (not generic) that includes helpful info about the INs and OUTs of the home buying process here in Texas. Remember that real estate laws are different from state to state.
6. Detailed pricing data and expert Comparative Market Analysis (CMA) on the house you select to purchase, so you can make a good decision regarding the price. Pricing homes is my superpower! 😊
7. Expert contract creation and negotiations to help you get the house you want…even in multi-offer situations.
8. Assistance with hiring home inspectors, reviewing inspection reports, and guiding you on necessary repairs/costs so you make the wisest decision.
9. Floorplans! I can create a floorplan of any home you purchase, whether provided by the home seller or not.
10. Project management of all the legal deadlines and requirements throughout the transaction. You’ve got enough to deal with the packing, moving, and job/school relocation activities!
11. Assistance in managing the title commitment/insurance process and working with the title company.
12. Assistance with home surveys and their impact on your transaction.
13. Assistance with appraisals and their impact on your transaction. I know how to protect you if the appraisal “comes in low” (which can happen in super-hot seller markets).
14. Assistance with HOA compliance documents, fees, and procedures.
15. Help with obtaining home owner’s insurance and flood insurance.
16. Guidance with choosing a home warranty as needed.
17. Helpful information regarding all the utilities (MUD info) applicable to the home you purchase.
18. Helpful “Planning the Move” information and “Info About New Home” that will help make your transition easier.
19. “Moving Survival Kit” provided as my Closing gift. This contains the things you will need on your moving day (but are usually packed) such as: soap, trash bags, paper plates, cups, toilet paper, snacks, box cutter, etc.
20. Guidance on your homestead tax exemption and how to apply for it in a timely manner to reduce your property taxes.
21. Helpful monthly home maintenance reminders, to take care of your investment!

Whew! That’s way more than “just” showing houses. 😄

Here are some other articles about “buyer representation”…

• Should You Use a Buyer’s Agent?
• What is a buyer’s agent, and do I need one?
• How a Buyer’s Agent Can Help Your Home Search
• Do I need a Realtor to buy a house?

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But I’m Buying From a Home Builder – So I Don’t Need An Agent

A home builder is a seller…so you still need your own representation! Believe me when I tell you, that sales rep sitting at the builder’s model home may be a super-nice guy or gal, but he/she is paid to look out for the builder’s best interest, not yours. 

The builder’s sales agent is not going to tell you that they are building in a high-risk 100-yr flood zone, or that there is a landfill or prison a half-mile away from the neighborhood or that the specific schools zoned to the neighborhood are low-performing (notice how they talk about the school district?), or that the neighborhood is struggling to sell homes (and home values are falling).  The builder’s agent will not tell you that the last three buyers who bought the same floorplan that you want, paid $30,000 less than the price he or she is showing you now…but I will! What’s more, the sales agent will show you that the house originally listed for $100K more than current list price to make it sound like a great deal. That’s a builder’s “trick.” 

Did you know that most home builders require their sales agents to “hang up” their real estate license (go Inactive) to work for the builder? This is so the sales agent doesn’t have to abide by the same rules and ethics that a licensed REALTOR® has to abide by.

And please know that you are not necessarily going to save money by not having your own agent. Just like regular home sellers, builders pay the buyer’s agent’s sales commission and they build that cost into their sales price. If you don’t have your own agent, that just means the builder makes more money…it doesn’t mean you get a better price. 

And always remember that you still need a home inspector when you buy a new-construction home. The builder’s inspection process is not for your protection…it is just part of their system. In my experience, new homes typically have longer inspection reports (more stuff to fix) than good-condition resale homes because the “kinks” haven’t been worked out yet…by the first owner.

Once you have a Buyer’s Representation Agreement in place, you should always state that up front to builder’s sales agents (if touring new home models) because, by law, they need to know that you have representation.

Read More

• Buying New vs. Resale Home
    
• What To Expect When You Buy a New Construction Home

 

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But I Want To Save Money Working Directly With a Listing Agent

Some inexperienced buyers think they will save money if they skip their own representation and just work directly with the listing agent. Congratulations! You just let the listing agent/brokerage keep the entire sales commission for NOT representing you. 

Before a listing agent can put a home for sale on the MLS, he or she must have a signed listing agreement where the seller has already agreed to allow the listing brokerage to share part of the sales commission with buyer’s agents.  As I showed at the beginning of this article, when the listing agent puts the home on MLS, they already agree to share their commission with the buyer’s agent. They do this as an incentive to get buyer’s agents to bring home buyers to the property and help the buyer through the entire 2-4 month sales process. This is the purpose of the MLS!

If you buy without your own agent, then the listing agent gets to keep the entire sales commission…it’s already in the “contract” (listing agreement) between them and the seller. Sales commissions are NOT negotiated when an offer is made on the house…they are agreed to in advance. So don’t make this amateur mistake.