PA Consumer Notice

Welcome to Pennsylvania! Real Estate has many differences from state to state. It is important to understand your rights and benefits in the State you wish to Purchase or Sell Real Estate. First thing you may want to do is download and read the “PA Consumer Notice”.

As it states this is not a CONTRACT! What it doesn’t tell you is that your actions may cost you Thousands  $,$$$. and not choosing is a choice!

It is Your Right in PA to Have Representation!

If you have any substancial conversation with a Real Estate Agent, go into an open house or new construction you should be offered a copy of this form.

This disclosure talks about representation but that goes hand in hand with contracts and money so it is very important to understand how it works and how to benefit. Let’s break it down…To start you need to understand how Agents get paid and some of the laws of Agency. The easiest way is to follow the money and the contracts that control Agency.  

A seller wants to offer a home for sale. They could sell it themselves (FSBO) or contract a Real Estate Agent to represent them in the sale. The Listing Agent would then become the Seller’s Agent. The Seller’s Agent works under the umbrella of thier Office/Broker. The Seller chooses an Agent/Office by signing a listing contract that would spell out the terms of the agreement as well as the commission to be paid. (generally a percent of the sale price 4% to 7%). This is gross commission paid to the Listing Agent’s Office. The Listing office agrees to split the gross commission with the cooperating Selling office. (usually 50% but it does not have to be). The Listing and Selling Agents will have a negotiated split with their representative office. (negotiable but let’s assume 50%). 

Let’s assume a 6% listing commission would breakdown; 3% Listing Office and 3% Selling Office or 1.5% Listing Office, 1.5% Listing Agent and 1.5% Selling Office, 1.5% Selling Agent. The exact breakdown of the commission doesn’t impact the legal responsibility. The money trail leads to the Seller so all Agents would have a fiduciary obligation to the Seller! ( All Agents need to hold the Seller’s benefit above even themselves and certainly above your best interest) Your actions may choose for you, Caveat Emptor “buyer beware”. You may wind up with a seller an 1 or 2 Agents against you! Hardly seems fair that you have to go against licensed professionals. Good news… You Don’t!

Do I need representation?  You Decide! I say “choose, don’t lose”! Your actions may determine who gets paid commission regardless of Agency so please understand your rights and how not to get caught. Not knowing is not a defense if it happens to you.

So how does a Buyer’s Agent work? The Buyer can choose to have their own Buyer Agent by signing a Buyer Agent Contract and have that Agent represent them in the transaction just like the Seller has a Listing Contract.

How much does representation cost you as a buyer?   In most cases it is FREE!!  Remember the Listing Office/Agent have offered a split of the commission received to the Buying Office/Agent and by signing the Buyer contract it states that you may receive full benefit and representation even though the Buyer Office/Agent may receive commission from the Selling Office/Agent. Your Agent does not  actually work for FREE, Your Agent would be paid by the Listing Office/Agent/Seller.

Can I have more than 1 Buyer Agent? Yes, but remember the seller is only paying 1 commission so you would be responsible for any additional commissions. One Good  Buyer Agent is enough! How many homes do you see with 2 or 3 Listing Offices competing for 1 sale?

Can’t I just call the Listing Agent? Absolutely! Remember though the Listing Agent owes his loyalty to the Seller,  anything you say or do, can and will be used against you in the transaction because the Agent is under contract to the Seller. (see Duel Agent)(see Procuring Cause)(see Single Agency) below.

I like to just go to open houses? Open houses are a great way to showcase a home for the Seller. It is also a great way to eliminate homes as a Buyer. What if you love the home and want to make an offer. Who represents you? The Agent sitting the open house is who gets paid for the sale. YES! even if you have a contract signed with a Buyer Agent. (see Procuring Cause)(see Designated Agent) below.

We have discussed the Seller Agent and the Buyer Agent. Let’s go over a few scenarios that may cause a problem with Buyer Agency.

SCENARIO 1: You have signed a Buyer Agent Contract and really like and trust your Agent. You have just looked at 3 homes and on the way home you see an open house sign so you decide to just take a look. You enter and the Agent (not Listing Agent) asks you to sign in. No conversation of representation is discussed. The Agent seems a bit pushy and you just try to avoid them. You really like the house and call your Buyer Agent to write an offer.

PROBLEM…

Procuring Cause: Procuring Cause states that the commission goes to the person that physically introduces you to the home. That would be the Agent sitting the open house. Your Buyer Contract is valid as far as representation goes but you would now be responsable for the commission. You want to use your Buyer Agent but don’t have the money to pay them. You don’t trust the  Open Agent that was in the house who will now receive the commission. Maybe you liked the Agent in the Open. The problem now is that you may still owe a commission to your Buyer Agent even if you use the other Agent because of your contract. Catch 22!

How does the Open Agent represent you?  Because the Listing Agent and the Open Agent work under the Broker umbrella (same office) the Broker would designate the the Listing Agent to the Seller and the Open Agent would be your designated Buyer Agent which is really the same full representation for you and the Seller but the Broker is considered a Duel Agent.

What if the Open Agent was the Listing Agent?  An attorney cannot represent both the plaintiff and the defendant on the same case however an Agent can represent both the Seller and the Buyer as a Duel Agent if both parties agree. Duel Agent: A Duel Agent is not for or against you and this is a lesser form of representation for both Buyer and Seller. They have to be fair but they can’t help you structure the transaction to benefit you if it hurts the Seller. I want someone fighting for me and my best interest so you can see this may not be an ideal situation. It’s legal, it’s done and in some situations it works OK but try to avoid it if possible.

 What about the commission?  Buyer Agency is about the relationship and representation and it is agreed that they may receive compensation from the Listing Office/Agent/Seller. The Seller is only paying 1 commission and if Procuring Cause kicks in and the commission goes elsewhere because of your actions you still have a contract that says you owe the commission.

How can this be avoided?  Easily! Have your Agent accompany you for all previews of homes or register you with Opens or new construction prior to preview. You can also ask the Agent in the open or new construction prior to preview if they will honor your Buyer Agent.

If yes, feel free to look around and you are completly protected.

If no, promptly leave and call your Buyer Agent to schedule a preview.

(TIP: have a few of your Buyer Agent’s cards to present to open homes or new construction)

SCENARIO 2:  You have been trying out several Real Estate Agents looking at homes and found the Agent you want and signed a Buyer Agent Contract. A home you looked at previously with an Agent you couldn’t stand just reduced $25,000 and  you want to make an offer.

PROBLEM…

It’s that Procuring Cause again! Another catch 22… Because you didn’t choose a Buyer Agent to begin with you may end up in a Duel Agent situation if you saw the home with the Listing Agent or owing a commission or being forced to use an Agent you didn’t choose.

How can this be avoided?  Easily! Work with a Buyer Agent Contract that has an out clause and if you find that the Agent is not a good fit for you, Terminate the contract and get a full release for all homes shown during the contract and released from that day forward. You are now completly free to work with the Agent of your choice on any home.

(TIP: negotiate the terms of release prior to signing any Buyer Agent Contract)

SCENARIO 3:  You see a home online and call the Listing office and arrange a preview with the floor Agent (not Listing Agent) The Agent mentions that they are a Single Agency Company and do not practice Dual Agency.

PROBLEM…

Single Agency: Single Agency means that every person in that Company works for the Seller and the Broker cannot designate an Agent to represent each party. They may offer to pay for an attorney for you to review your agreement of sale. This is not common but does still exist.

How can this be avoided?  Simple! Work with your own Buyer Agent.

SCENARIO 4: You see a FSBO sign (For Sale By Owner) and would like to see the home.

Who pays the commission?  Many FSBO’s are willing to cooperate meaning they will pay a commission for a sale but choose to represent themselves on the listing side. They may not cooperate and you may choose to negotiate the commission into the Transaction using your Agent or you may terminate your contract prior to seeing the home and represent yourself and/or hire an attorney to complete the agreement of sale for you. Talk with your Agent honestly and openly and almost any issue can be resolved favorably for everyone with a little creativity!!

(TIP: your Lender, Agent and Title should all be working as a team,  your team and be helping to find solutions to get the best deal possible and protect you in the process.)

Checkout the next section on how to choose a good “Buyer Agent”