Who does a buyer’s agent actually work for?

Welcome to Part 2 of a three-part miniseries on representation in New York real estate, presented by More For LES.

In Part 1, we met Herb and Reba Suburbsky, Lower East Side sellers who are ready to swap a 2,200-square-foot condo and a short walk to Eel Bar for a backyard and the unpleasant commotion of a morning commuter train. (Sorry, we’re pro-city!)

They hired a listing agent to sell their nearly $5 million apartment, establishing an agency relationship in which the Suburbskys are the agent’s clients, or principals. Their (unnamed) agent has a responsibility to protect their confidential information, follow their lawful instructions, keep them informed, and put their interests first.

Now, let's return to the same apartment and the front door.

Meet the Lowereasts

Lyle and Lori Lowereast already live in New York City with their young daughter, Sida, but their current two-bedroom apartment is already a squeeze. Sida collects large stuffies — or, rather, implores her folks to remain at the likes of Coney Island and the Feast of San Gennaro festivities until they win the top prize at the Bushel Basket Toss.

They want more space for Sida, her stuffed friends, and possibly more children, but they love P.S. 110 and wish to stay on the Lower East Side.

One Sunday afternoon, they head over to an open house.

Lori is drawn to the light and the Dornbracht fixtures. Lyle, leaning into his Neanderthal tendencies, is curious about the Toto Neorest toilets. The 2,200 square feet, three bedrooms, three bathrooms, high ceilings, restaurant-grade kitchen and private outdoor space make it a dream find.

They are without representation.

The door opens to the Suburbskys’ apartment. Lori steps in, looks around, and says, “Ooh, I love this sun-drenched, full-floor apartment! It’s practically curated for my taste!”

If that sounds familiar, it should, as we’ve picked up where we left off in Part 1. Lyle adds: “This is exactly what we've been looking for, and we've been outbid on three apartments already. We could probably stretch to $5 million if it’s the right fit.”

The listing agent is friendly, knowledgeable, and helpful. They show the Lowereasts the terrace, answer questions about the building, and explain the process for making an offer.

But they're not Lyle and Lori’s agent.

A Customer, Not a Client

The Suburbskys are the listing agent's clients. Lyle and Lori, absent a separate agency relationship, are customers.

The listing agent still owes the Lowereasts certain responsibilities. An agent can't knowingly misrepresent material facts or engage in dishonest dealing simply because a buyer isn't the client. But the agent's fiduciary responsibilities run to Herb and Reba.

That becomes important when buyers ask perfectly reasonable questions: How motivated are the sellers? Have they bought something else? Would they take $4.5 million? What's the lowest number that gets this done?

Remember, the listing agent already knows that Herb and Reba would like to move before the next school year and may be flexible on price or timing. Lyle and Lori would probably love to know that. But protecting the Suburbskys' confidential negotiating information is part of the listing agent's job.

The reverse is equally important. Lyle has just told the Suburbskys' agent that he and Lori have already lost three apartments and might stretch to $5 million. That's potentially valuable information — just not necessarily to Lyle and Lori.

Buyers need to understand that information they volunteer about their motivation, financial capacity, urgency, or negotiating position may not be confidential when shared with an agent representing the other side.

This is one of many reasons why having representation is important, as an agent can and should protect your interests.

Enter the Buyer's Agent

To have someone representing their interests, Lyle and Lori engage an agent. Now, the Lowereasts become the principals, or clients, and their buyer's agent assumes fiduciary responsibilities to them.

Their agent can help evaluate comparable sales, assess value, structure an offer, develop negotiating strategy, communicate with the listing agent, and advise them throughout the transaction. More importantly, Lyle and Lori can say (privately, to their agent): “We'd like to offer $4.5 million, but we'd go to $5 million if we absolutely had to,” knowing their agent has a duty to protect their confidential negotiating information.

Now the transaction has two sides and two sets of interests. The Suburbskys want to maximize their price and secure favorable terms. The Lowereasts want to buy the apartment for as little as reasonably possible on terms that work for them. The parties may ultimately want the same outcome — a successful transaction — but they don't necessarily want the same deal.

New Agency. Who dis?

New York's agency disclosure requirements are intended to make these relationships clear. For covered residential transactions, disclosure is tied to what's known as the first substantive contact between an agent and a prospective buyer or seller.

That's significant because substantive contact can happen well before anyone makes an offer. A conversation about a buyer's needs, finances, or interest in a particular property can move beyond casual conversation quickly. The disclosure explains the nature of the agency relationship so the consumer understands whether the agent represents the seller, the buyer, or potentially both.

The disclosure itself isn't an agreement to hire the agent. It's there to tell you who the agent represents — something worth knowing before discussing how badly you want the apartment or how much you're prepared to pay for it.

A listing agent can be knowledgeable, responsive, fair, and extremely helpful to a buyer. But helpful and represented aren't the same thing.

At this point, the arrangement is relatively straightforward: the Suburbskys have their representative and the Lowereasts have theirs. Two clients, two agents, two sets of confidential information, and two fiduciary relationships.

But what happens if Lyle and Lori turn to the listing agent, also a fan of stuffed animals and creative ways to house them in New York City, and ask:

“Can you represent us, too?”

Now the agent who knows the Suburbskys want to move before school starts may also know that the Lowereasts would stretch to $5 million.

One agent. Two clients. Competing interests. Woah!

That's where we'll pick up in Part 3: dual agency. (And, if you missed Part 1 and wanted to know about $5 million apartments on the LES, here’s one.)