Q: In your book, 100 Questions Every First-Time Home Buyer Should Ask, you advise never telling your broker how much you are willing to pay for a house. I am about to make an offer on a house and I have told my broker how high I am willing to go for this property.
While I’m terrified that I have screwed up, my broker’s firm does not represent the sellers and she is not representing any other buyer at this time who is interested in this property. I am the only client she has shown it to.
My broker has been very helpful. I am buying in Dallas, but live in Cambridge, Mass. She has done a lot of work to find me good options in the neighborhood in which I am interested. I feel like I can trust her. I have also been working closely with a mortgage broker whose name she gave me, which also seems to go against your advice.
How should I minimize the impact of this mistake? Do you think I need to move onto another property?
A: The short answer is I think you’re going to be fine.
But since many agents disagree with my advice to play your financial cards close to the vest, allow me to back up and explain my thinking.
In general, it’s better if you don’t share your financial information with your real estate agent — especially if your agent also represents the seller. That’s because sometimes agents let proprietary information slip out and that can compromise your ability to negotiate the best deal.
Let’s imagine that your agent represents buyers but her colleague in the office represents the seller in the transaction. If your agent inadvertently discusses the deal and what you are willing to ultimately offer with someone else in the firm, that could be overheard by the wrong set of ears. The agent representing the seller would have a fiduciary responsibility to the seller to report back on the conversation.
Many states have agency laws which state that agents working with buyers are buyer’s agents and agents working with sellers are seller’s agents. A buyer’s agent would owe her fiduciary duty to you. You’d only get into trouble if your agent also represented the seller in the same transaction (she’d be a dual agent) or if your buyer’s agent was representing another buyer who was bidding on the same property.
If that was the case, you’d simply ask the managing broker of the firm to assign you to another agent who could represent your interests.
It seems to me that you’re working with a competent broker and that she is representing you well, so I think you’re going to be just fine.
Also, since you’re buying long-distance, you need to have an agent who you can trust, which it seems like you do. I’m sure your trust is well-placed since your agent seems to have found you good things that meet your needs and wants.
As far as the lender goes, it’s fine to work with the broker she suggested, but you should also do some of your own legwork and find out what other reliable lenders in the area are doing. You can ask your agent to give you another name, but you should also go online to BankRate.com and see what lenders in Dallas are offering in terms of loan programs, interest rates and points. Make a few phone calls and follow up.
By educating yourself, you will soon know if the mortgage lender your broker has steered you to is offering you a good deal or is pricing your loan above the market.