We are in the process of buying a home, that was a for sale by owner. With that said we hired a Broker to do the paperwork, and they are representing both us (buyer) and the seller, but we all had to sign an agreement that sets out the statutes to not have happen what you mention. The fee for the broker is 2% of our purchase price, split between us and the seller so 1% each.

A scam in the Real Esnake industry? I'm shocked. Shocked!

I'm not from Colorado, so I don't know the specifics of how your agency laws work. But in my jurisdiction, the "agent representing both buyer and seller" scenario is called "dual agency" and is illegal - however, the technicality of it is that it's only illegal for the agent to have a representation arrangement with both sides. In my area, if an agent was representing a homebuyer, he could assist the seller by performing acts not requiring professional advice/judgement, such as giving them the forms and presenting their buyer's offer, but not providing an analysis of whether or not it's a good offer.

With regard to the solicitation - at least from the details you supplied in the article, it's probably not asking to 'represent' you. There's only one commission ("the 6%", which is always a negotiable amount) and it comes out of the seller's proceeds of the sale. So if this offer were legitimate, they should be taking 2.8% out of the 6% as a broker's fee - this is standard - and leaving you with the remaining 3.2%.

I imagine the purpose of this letter, if it were a generic mass mailing, is to get someone who's interested in selling their home but hasn't put it on the market yet or who was thinking about selling by owner to call this company. Then, their names/contact info can be recorded and given to another real estate agent as a possible lead on a seller. I wouldn't call it a "scam", but I would call it a "scheme".

I am familiar with Agents for Home Buyers and other agencies like them and what they say is true. They work for buyers only and ask the seller to pay the usual 2.8% buyer agent's commission, just like any For Sale By Owner situation. In a more traditional scenario, the seller would list their house with a listing agent who would charge 5% -7% total commission and pay the agent who brings the buyer 2.8% out of that. Agents for Home Buyers or any other exclusive buyer agency really does only represent the buyer, leaving the seller to choose whether to hire their own agent, get a lawyer or represent themselves. It's against the Real Estate Commission rules for any agent to represent both. Correct me if I'm wrong, but you said the letter says they DON"T want to list your house, which means they ARE NOT asking to represent you as your agent. If you decided to work with their buyer, who may or may not like your house after they see it, 2.8% is all you would pay them in commission unless you get your own agent. If so, any additional commission is between you and your agent.

If I seem a little over the top with my reply, it's because my wife has worked as a buyer's agent for a while now and I get really tired of people always thinking there's some scam or scheme! Buyer's Agents are the consumer advocates of the real estate industry. She helps people buy good homes and they are grateful for her help. If you really want to know if this outfit is legit, call them and ask them what they are up to! They would probably appreciate the chance to explain how it works. Or you can go to the National Association of Exclusive Buyer Agents website for more information on Exclusive Buyer Agency.

Meanwhile, it's possible there's a happy homeowner in your neighborhood who's delighted to find out they may be able to unload their house without ever having to put it on the market.

I don't think I could do as good a job as Mike did in the post immediately above in explaining what's going on with the letter that Dave Taylor received...which is impressive...since I wrote the letter. I am Norris Minick and am the managing broker of Agents for Home Buyers in Boulder. As Mike says, we are exclusive buyer agents and we are members of the National Association of Exclusive Buyer agents. We never list property or represent sellers. We never work as "dual agents" or transaction brokers or any other neutral go-between between buyer and seller. We only work with Buyers...and we only work with them under an agency relationship...which means we are obligated to represent their interests...and only their interests...in the transaction. When we work directly with sellers on a "for sale by owner" property...whether that's generated through a mailing or via something like Craig's list...we absolutely clear with the seller that we're representing the buyer's interests and not the seller's...and recommend they get an attorney to take care of them.

We do send out LOTS of letters like the one that Dave received and was (maybe not surprisingly) skeptical of. Once a client has pinned down one or two neighborhoods...or complexes...that they are interested in...and has a good idea of the type of home they want to buy...we routinely send out 100-500 letters to the owners of appropriate properties trying to locate properties before they hit the market. Sometimes this just gets us a look at the property before it is listed and sometimes it gets us properties that wouldn't have been listed for a year or two. In some cases it can also get our client a good deal on a property...since SOMEONE is saving 2-4% on the listing side of the commission. Sometimes I think both the buyer and seller get a good deal.

Bottom line: This is no "scam." We currently have two clients under contract on houses in Louisville from letters we mailed there...and just terminated another over an inspection issue. And we closed 2 other properties earlier this year in Superior and Louisville. We've done other mailings in Boulder and Longmont for other clients...but haven't located the "right" property through those. So that's roughly 4 of 10 closings that we'll do by the end of this month that originated through the mailings...or 40% of our total. It's a very real part of our strategy for finding the best possible properties for our clients.

And, while these letters are mailed for the benefit of our buyer clients, the fact is that nearly every seller we've ever dealt with on these transactions has been thrilled to death at the end of the process. They got their house sold with only 1 or 2 showings, didn't have to deal with multiple real estate agents, and probably saved some money. We are buyer agents, but we don't mind making seller's happy if it results in a reasonable deal on a great house for our clients.

Thanks for coming by, Norris, and clarifying things. As it happens, I heard from a neighbor of mine who has also used your service with great results. Glad to clear things up!

Aloha
I'm formerly from Boulder, CO (26 years), but now live on the island of Kauai, HI. Here, dual agency is not illegal. HOWEVER, both the buyers and sellers have to be notified about the situation and both parties have to sign a document (that outlines the company's responsibilities) saying they agree to the situation. If both don't agree, then one party can be referred to another agent at a different agency so they are represented by someone else.
Debra

I dont get it--Can Mike or anyone explain to me how a buyer's agent is working in the sole interest of the buyer considering that the buyer's agent's payment is determined by a percentage of the closing price. I dont seem to understand how its in either parties interest (seller agent's or buyer's agent) to close the deal at less than the asking price. If you are a buyer and your agent gets 50,000 off the asking price doesn't that directly influence how much they will receive in commission?

Thanks