In California, it’s legal in real estate for an agent to practice Dual Agency. That means that someone who lists a property for sale can also assist a buyer to purchase that property. Many buyers assume that’s the best way to purchase, thinking they will get a better deal by going directly to the person selling the property.

Here’s the rub. With whom does that agent have a contract with? The seller. Who is his client? The seller. He can assist the buyer, but he cannot represent  the buyer. In other words, the seller is his client and the buyer is a customer. Big difference. He is obligated by contract to get the most for the seller.

Many buyers assume that if they use an agent other then the listing agent, they are being "represented" in a client relationship. Wrong! Without an agency agreement, the buyer is considered to be a customer! According to California real estate law, the agent is assisting the buyer and is technically called a sub-agent for the seller. Yes, that’s right. His duty is to help the seller’s agent sell the property, not help the buyer get the best deal.

So what should a buyer do to make sure he is represented properly? Find a buyer’s agent and put that agent under contract with a Buyer-Broker Agreement. Explain what you expect that agent to do and hold them accountable to protect your fiduciary interests. Now you are in a client relationship by contract, not just implied.

You should ask the agent how they will be compensated if you should buy a property. They will point out in the contract that they will be compensated by the selling agent through the Multiple Listing Service. Unless you plan on purchasing a "For-Sale-By-Owner", it which case the agent will likely try to negotiate a fair commission from the seller. If the seller refuses, the buyer may have to compensate the agent in that instance. That’s ok, because now the shoe is on the other foot. In this instance, the buyer is the client and the seller is the customer. The agent will be working for the buyer’s best interest. He will likely have to do much of the paperwork for the seller and make sure the sale is done legally and properly according to real estate law. Because he is under contract to the buyer, he will be obligated to make sure the transaction favors the buyer and not the other way around.

What’s the first step? Find out if you can qualify for a mortgage of course. Unless you can pay with all cash, you will need someone to lend you the money to buy your property. If you are serious about buying a property , you’ll need to go beyond pre-qualification to pre-approval. How does that work?

When the market was red hot for sellers back in the early part of the decade, buyers only needed to get  "pre-qualified" in order to submit offers. This could be accomplished by a simply telephone call or internet webpage being filled out. You simply stated your income and your debt obligations and then they ran a simple credit report. If things looked good on your credit report, you were issued a "pre-qual" letter and your Realtor could make offers and submit that with the offer.

Since funding was pretty easy, most sellers accepted that and the buyers would go through the process of actually getting loan approval during the escrow period. Nowadays, it’s a total different story. Sellers (especially banks) won’t accept offers without a "pre-approval" letter. This means tax returns, W-2 forms and actually paper documents of income and debt. Sellers don’t want to enter escrow with anyone who still has to get approved, they want assurance that the loan is all ready to go.

The mistake that agents make is taking out buyers who have not been pre-approved. Many times a buyer will see something he likes, but will find out he can’t purchase that home when he tries to get a loan for it. It’s a waste of their time, the agent’s time and the seller’s time. It’s important to know just how much a buyer can pay. It’s important to know just how much a buyer will have to bring to the escrow for a down payment. It’s also important to know if a buyer will accept the market interest rate and mortgage payments he will have to make.