MEASUREMENT OF HOUSES

Home buyers are demanding more and better information when they shop for houses. The State of California has responded to this demand by passing a number of new laws which require more real estate disclosures. Although there is still no law that requires the disclosure of the exact finished floor area in a house, it’s probably only a matter of time before sellers and their agents are going to have to get out the measuring tape.The total floor area of a house is one of the most important things a buyer needs to know. But, until recently, there has been no national consensus on how to measure a house. For years, architects, builders, real estate agents, lenders and appraisers have been using a hodge-podge of methods to estimate residential floor area. In commercial real estate, where floor area is bought, sold and rented by the square foot, no one would tolerate this kind of vagueness and uncertainty. In fact, standards for measuring office buildings have been in effect since 1915.This tradition of ambiguity is based on the theory that sellers and their agents will avoid liability if they don’t make any claims about floor area. But some buyers think this is just another way that real estate sales people are trying to trick them.

WORKING WITH BROKER

The real estate industry resisted the idea of buyer agency at first, but buyer’s agents are gaining widespread acceptance as consumers demand more representation and protection. Experienced buyer’s agents look out for the best interests of their clients and yet know how to cooperate with other agents, making the real estate transaction a win-win situation.Real estate offices have traditionally focused on obtaining and promoting listings because listings attract buyers. Brokerages have always had an economic incentive to bring in their own buyers. When the office represents both buyer and seller the office gets the full commission. If an agent from another cooperating office brings in the buyer then both offices have to share the commission.However, buyers who work with the listing agent don’t always get the best deal. In an informal 1992 survey of relocating employees conducted by U.S. Sprint, buyers using buyer’s agents paid 91 percent of the list price, while buyers using traditional agents paid 96.5 percent. Buyer agency has been endorsed by mainstream consumer advocates such as Ralph Nader, Money Magazine, Kiplinger’s Changing Times and the Consumer Federation of America.
AgencyAgency can be a confusing subject for both consumers and real estate practitioners. Basically, there are three types of agents – the seller’s agent (or listing agent), the buyer’s agent and an agent who represents both seller and buyer (called a dual agent). The agent represents the client (the principal) in transactions involving third parties. California law requires licensed real estate agents to present an agency disclosure form to all potential clients.In a real estate office (or brokerage), the broker is the agent. The principals (clients) can be buyers, sellers or both. Brokers often have other licensed salespeople or brokers working for them under contract, called associate licensees. However, the broker is always the agent in the transaction and is responsible for the actions of any associate licensees.Dual agency is legal in every state as long as it’s fully disclosed. The advantage of dual agency is a smoother transaction, because there is only one agent acting as a mediator between the buyer and seller. The disadvantage of dual agency is that neither the buyer or seller are fully represented, and the buyer is usually not as well represented as the seller. The agent almost always has a written contract with the seller, while buyer broker contracts are still not widely used.The dual agent has an obvious conflict of interest, even though experienced real estate agents act in a professional manner and do their best to serve the interests and needs of both parties. The dual agent can’t disclose to the buyer that the seller is willing to sell the property for less than the listing price, without written consent. Also, the dual agent can’t disclose to the seller that the buyer is willing to pay more than the price offered, without written consent. The dual agent has confidential information about both parties which could significantly affect the ultimate price and terms of sale.The dual agent has an incentive to serve the buyer, because they don’t get a commission if they don’t complete the sale. However, the dual agent may have a stronger incentive to serve the seller, because a higher price means a higher commission.