Many real estate brokers, including Hawthorn Properties, market themselves as "Full Service Real Estate Brokers." What does that mean exactly? Technically, it means that the broker offers services in all the major facets of the real estate buying and selling industry - including: listing agency, buyer's agency and leasing [1]. Full Service can also mean that the broker offers both commercial and residential agency representation. More important than what falls under the web of Full Service is what is not included - legal services, home inspections, lending services, general contracting, appraisals...etc. Many consumers, especially first time buyers or sellers, come to depend on their broker for advice and guidance throughout all aspects of the process. A strong broker is one that can provide this guidance and effectively navigate his/her client through the transaction while remaining within the scope of his/her expertise. The danger - for both the consumer and the client - is when the broker wanders into areas where he/she is not qualified (or worse, licensed) to provide certain information or assurances. Consumers need to be aware of the limitations on their broker's sphere of influence.
Unfortunately, as in the case with many aspects of the real estate industry, there are fine lines between what a broker can and cannot do or say with regard to the offshoot industries that are inter-related with buying and selling properties. A seasoned real estate broker or sales agent will undoubtedly have experience dealing with lawyers, contractors, appraisers, mortgage brokers and home inspectors. Often, a broker may carry licenses in one or more of these fields, which obviously changes the landscape of this discussion, but not completely (more on this later on). As such, brokers may be able to answer surface level questions or provide limited guidance to consumers in these areas. In fact, one of the first things that a broker will do for a potential seller is to provide him/her with a Comparative Market Analysis ("CMA"). A CMA is basically an appraisal. The template provided on MLS is in the format of the sales comparison appraisal approach used by most appraisers of residential property. Does this mean that the eventual appraisal performed by the prospective buyer's lender will be a mirror image of what the broker provided when the property was listed? Maybe, but more likely there will be some differences and the consumer needs to understand that the broker is not a licensed appraiser (in most cases) and is providing no such guarantees.
So what constitutes a true Full Service broker? A broker who is the resident expert on all phases of the real estate market as well as a licensed contractor, home inspector and mortgage broker? Well, sure. Why not? So long as the broker is maintaining his fiduciary duties to his client. For example, Broker A is a licensed home inspector and general contractor. If Broker A is representing a buyer and he performs the home inspection, he cannot then perform any renovations to the property as it is a conflict of interest and a violation of his home inspectors' license. It is also, potentially, a challenge to his fiduciary duties as the buyer's agent.
The most effective broker is not only one who is knowledgeable in all aspects of the market and the complementary industries, but also one who knows his/her limitations. First and foremost, brokers are not attorneys. In Massachusetts, an attorney is qualified to become a licensed broker, but it does not work both ways. Your broker should leave the legal aspects of the process to an attorney and should always encourage consumers to consult with an attorney whenever questions of legal ilk arise during the transaction. Many brokers have contacts of integrity and character in the fields of the law, as well as in the areas of lending and home renovation and or inspections[2]. Brokers should understand as much as anyone the value of a referral. Referrals not only benefit the one receiving the business, but more importantly, they should benefit the consumer who is going to pay for the work. Referrals are also a reflection upon the individual making the referral and should not be made unless the one referring has confidence beyond a reasonable level of assurance that the needs of the person or persons engaging the referred party will be met. This is especially true when real estate brokers refer their clients to mortgage brokers, attorneys, home inspectors...etc. Remember, a broker's primary responsibility is to protect the interests of his principal. A buyer's broker, by referring his principal to a home inspector whom he knows will give a property a clean bill of health and thus, facilitate the sale of the property, is not protecting the principal's best interests and is in violation of his fiduciary duties to that principal.
As for the consumer, the best advice is to use your broker to the extent that he/she can be effective. Do not expect your broker to negotiate terms of a purchase and sale agreement with the other party's attorney. Do not rely on your broker to estimate renovation costs or to comment on whether a property meets certain building or zoning code standards. In many cases, your broker is right or has the experience to make certain statements, but ultimately, the consumer is responsible for making decisions related to the transaction and these decisions should be made based on the best possible information from the most qualified sources. With regard to referrals, in many cases, your broker is an excellent source for referrals into the other fields necessary along the path to closing. Still, it is a good idea to consider other references or at least push back on the broker for information on the referral or the nature of the referral's relationship to the broker. At the end of the day, as the consumer, it is your investment, your money and your time. You are in charge, and you make the decisions.
For more information or if you have general questions or comments about this article, email the author - Ryan McDonnell at rmcdonnell@p-properties.com or call him at 617-212-2488
[1] Full Service brokers, such as Hawthorn Properties, may also include limited service offerings such as Entry Only Listings among their services.
[2] Note that listing agents are prohibited from referring potential buyers to a specific home inspector or even a selection of specific home inspectors. All listing agents can do is refer a prospective buyer to a complete list of licensed home inspectors. Buyer agents, who are acting with fiduciary responsibility to their principal, may refer specific home inspectors.