Tuesday, November 12, 2024 / by Sharon St Clair
What Do You Want: A Fiduciary or a Functional Agent? Choosing the Right Real Estate Partner in 2024
In a groundbreaking shift for the real estate industry, recent changes now require homebuyers to sign a Buyer Agency Contract before an agent can show them any properties. This policy, enacted by the National Association of Realtors (NAR) following a significant 2024 class-action lawsuit, seeks to make real estate transactions more transparent and improve the quality of service homebuyers receive. But this new requirement isn't just about signing a piece of paper—it's about selecting the right real estate partner, someone who will act as a true fiduciary rather than a primary "functional" agent.
As a buyer, this new standard allows you to evaluate agents carefully before formalizing the partnership. With the Buyer Agency Contract now functioning as an "employment contract," it is essential to look beyond essential services and find an agent who aligns with your goals, priorities, and expectations.
Buyer Agency Contract: More Than Just a Formality
The Buyer Agency Contract is a formal agreement outlining the duties and expectations between a buyer and their real estate agent. The NAR's new rule, requiring this contract to be signed before any home showings, aims to ensure buyers understand the agent's role, responsibilities, and compensation structure right from the start. Here's why the contract is more than just paperwork:
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Agent's Duty to You: By signing, an agent commits legally to act as your fiduciary, putting your best interests first. However, not every agent brings the same level of expertise and commitment to this duty.
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Employment Contract: This contract now serves as a formal hiring agreement, underscoring the importance of choosing an agent like any professional partner. This is a significant financial decision; your agent's skills, experience, and dedication should meet high standards.
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Industry Requirement for Showings: Following the NAR's new regulation, no showings can legally occur without a signed Buyer Agency Contract. This formality emphasizes transparency and gives buyers more power in selecting the right agent for their needs.
Fiduciary vs. Functional Agents: What's the Difference?
A "functional" agent handles basic real estate tasks—showing listings, coordinating visits, and assisting with offers. They fulfill necessary actions but may lack the proactive service, market knowledge, and strategic guidance needed to give buyers an advantage. A fiduciary agent, on the other hand, goes beyond these basics, advocating for you at every step and providing insights that can save time and money and even prevent missed opportunities.
Why the Right Agent Matters: Cost of Being Underserved
Hiring a functional agent can seem convenient but often leads to missed opportunities, wasted time, and even financial losses. Here's how working with an underqualified agent can cost you:
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Missed Market Insights: Fiduciary agents possess deep knowledge of neighborhoods, pricing trends, and hidden market value. Buyers risk overpaying or missing out on the best deals without this insight.
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Weaker Negotiations: Fiduciary agents bring top-tier negotiation skills, working tirelessly to secure favorable terms on your behalf. Functional agents, in contrast, might settle for the easiest path, potentially costing you thousands in additional fees or lost credits.
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Lost Opportunities: Dedicated fiduciary agents stay aware of new listings and are responsive in fast-moving markets, helping buyers secure properties quickly. Functional agents may be less available, causing delays that result in missed opportunities.
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Limited Problem-Solving: A true fiduciary anticipates potential issues and has the network and experience to solve them effectively. Functional agents may lack these resources, leaving buyers to navigate complications alone.
What to Look For in Your Real Estate Team
Now that the Buyer Agency Contract is necessary, buyers have more reason to evaluate potential agents carefully before committing. Treat this choice as a professional hiring decision: ask for resumes, reviews, and proof of commitment. Here's what to prioritize:
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Experience and Specialization: Seek agents with relevant experience in your target market and property type, from single-family homes to investment properties.
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Testimonials and Track Record: Ask for past client feedback that reflects successful outcomes in similar scenarios. Look for signs of satisfied clients who achieved substantial results.
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Commitment to Fiduciary Duty: The best agents emphasize their dedication to acting in your best interests. Ask directly about how they define fiduciary responsibility and what that means in practical terms.
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Strategic Approach: A fiduciary agent creates a custom strategy for each client, guiding them through every step. Ask about their process, what to expect, and how they'll help you stay informed.
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Professional Network: Experienced fiduciaries have a network of trusted partners (inspectors, lenders, contractors) to support the buying process, saving you time and ensuring quality recommendations.
The Buyer Agency Contract: Your Power to Choose Wisely
The new requirement from NAR doesn't just add formality; it's a chance for buyers to actively choose the best possible agent. By enforcing this agreement before showings, the NAR aims to ensure that all buyers enter the home-buying process with transparency, accountability, and the right partner in place.
Take this as an opportunity to find someone who will provide accurate fiduciary service—someone who will go above and beyond to protect your interests, offer expert guidance, and secure the best possible deal for you. Selecting a qualified agent is an investment in your future that can ultimately help you gain more than just a house.
Final Thoughts: Seek Out a Fiduciary, Not Just a Functional Agent
Choosing the right agent is one of the most important steps you can take as a buyer. The Buyer Agency Contract requirement, introduced by NAR in response to the 2024 class-action lawsuit, is designed to empower you as a consumer, giving you the information and opportunity to select a top-notch professional.
In a high-stakes real estate market, don't settle for the functional—seek a fiduciary who will act as your advisor, advocate, and guide. With the right agent, you'll have the confidence, security, and expertise to make your home-buying journey successful.
The recent changes to the Buyer Agency Contract requirements are shaking up the real estate industry, prompting buyers to ask a vital question: what kind of agent do you want on your team? As of 2024, real estate agents must have a signed Buyer Agency Contract in place before showing any homes to a buyer. This isn't just a formality—it's an employment contract that should drive homebuyers to consider carefully who they're hiring. While some agents handle the basics, a true fiduciary goes beyond mere transactions, committing to serve in your best interests.
If you plan to buy a home, now is the time to evaluate what type of agent will serve you best. Let's examine why choosing the right agent matters, how the Buyer Agency Contract impacts you, and what qualities to seek in a dedicated fiduciary who will meet and exceed your expectations.
Buyer Agency Contract: More Than Just a Formality
At its core, the Buyer Agency Contract is a formal agreement between you and your agent, specifying the terms and expectations of your partnership. Here's why the contract isn't just a piece of paperwork:
Agent's Duty to You: By signing, the agent legally commits to act as your fiduciary, meaning they are obligated to prioritize your best interests over their own. However, not every agent brings the same level of expertise and commitment to this duty.
Employment Contract: This contract is essentially a hiring agreement. It's a signal to take your search for an agent as seriously as you would for any other professional partner. You're hiring someone to guide you in one of your life's most significant financial transactions, so your skills, experience, and dedication should meet high standards.
Legal Requirement for Showings: With the recent National Association of Realtors (NAR) policy, no showings can legally occur without a signed Buyer Agency Contract. This step ensures transparency and empowers you to control your decision-making process before seeing any properties.
Fiduciary vs. Functional Agents: What's the Difference?
A "functional" agent handles the essential tasks of real estate—finding listings, arranging showings, and assisting with offers. They complete the required actions but often lack the proactive service and strategic guidance that can make a real difference in competitive markets. On the other hand, an accurate fiduciary approaches the relationship with a long-term view, providing advice, insights, and negotiation power that can save you thousands of dollars—or the heartbreak of missing out on your dream home.
Why the Right Agent Matters: Cost of Being Underserved
Choosing an agent isn't just a matter of finding someone to unlock doors for you. Hiring a fiduciary rather than a functional agent can save you time, money, and frustration. Here are some key ways the wrong choice can end up costing you:
Market Insight: The right agent doesn't just show you listings—they have a deep understanding of local markets and provide insights on neighborhoods, pricing trends, and value. Without this expertise, buyers risk overpaying or missing out on great opportunities.
Negotiation Skills: A fiduciary agent has top-tier negotiation skills and advocates fiercely on your behalf. A functional agent may be unable to secure the best terms, potentially costing you thousands of extra fees or missed repair credits.
Timing and Opportunity: Fiduciary agents stay aware of new listings and understand the urgency of acting quickly in a hot market. Functional agents might be less available, causing delays that result in missed opportunities.
Problem-Solving: When issues arise—whether inspection findings or appraisal questions—a dedicated fiduciary will have the network and expertise to address them effectively. Functional agents may struggle to provide these solutions, leaving buyers to navigate challenges alone.
What to Look For: Building Your Real Estate Team
Choosing the right agent means knowing what qualities matter most. Don't assume all agents offer the same level of service—ask questions, request resumes, and be prepared to "interview" your agent before signing any agreements. Here's what to prioritize:
Experience and Specialization: Look for agents with specific expertise in your target market, including knowledge of local trends, property types, and negotiation nuances. An agent's resume should demonstrate experience relevant to your needs, whether single-family homes, condos, or investment properties.
Track Record and Testimonials: An agent's past clients can tell you a lot. Ask for testimonials or reviews that reflect not just happy clients but also successful outcomes in situations similar to yours.
Commitment to Fiduciary Duty: Ask your prospective agent how they define their fiduciary duty. Will they prioritize your goals above all else? Are they committed to transparency and clear communication?
Strategic Approach: The best agents develop a strategy tailored to each buyer. They'll take time to understand your unique goals, create a plan for finding your ideal property, and advise you through each step. Ask your agent about their process and how they'll keep you informed.
Professional Connections: Top-tier agents have connections to trusted inspectors, lenders, and contractors, helping you get reliable services throughout the transaction.
The Buyer Agency Contract: Your Power to Choose Wisely
The Buyer Agency Contract requirement has introduced a new level of accountability to the home-buying process. As a buyer, you now have the ability—and the obligation—to choose an agent who delivers the service and dedication you deserve. Think of this as an opportunity to find a genuinely trustworthy professional, not just someone to unlock doors and fill out paperwork.
Approach the decision like a hiring process: ask for resumes, clarify the services and expertise they offer, and make sure their values align with your goals. Remember, the wrong choice can lead to frustrations, missed opportunities, and financial loss. The right agent, however, will act as a powerful ally in achieving your real estate dreams, guiding you with expertise, dedication, and genuine care.
Final Thoughts: Invest in a Fiduciary
In a competitive and dynamic real estate market, having the right agent on your team can make all the difference. The Buyer Agency Contract is now required, but don't view it as another form. Instead, use it to build a robust and intentional partnership with an agent who will act as your true fiduciary. From their experience, negotiation skills, and market knowledge, a dedicated agent brings more to the table than meets the eye.
Regarding one of life's most significant investments, don't settle for "functional"—seek an agent who will act as your advocate, guide, and champion. With the right fiduciary by your side, you'll gain more than a house; you'll gain confidence, security, and the support you need to make the best possible decisions for your future.
