It’s Your Money – You are Responsible.

Homebuyer Associates August 2009 E-Note        

It’s Your Money.  You are Responsible.

Homebuyer Associates             www.homebuyerassociates.com

414.254.4129-                         homebuyeba@gmail.com

Michael D. Holloway/Seamus Holloway

Lynn Sarver/Paul Wollersheim

Former clients called last month and asked, “We know the way you work and think about buying homes so we thought you probably invest your money the same way.  Is there anyone you would suggest for us to talk to regarding investments?”  I was flattered to be asked. 

The short answer to their question is, anytime I invest money I ask, “How does the person I’m talking to get paid and who does the person work for?” 

I use a Registered Investment Advisor for my investments.  The advisor is fee-based and paid based on the amount of money managed, not based on the number of trades that are made or on a commission model.  Similarly, to buy a home I’d use an Exclusive Buyer Agent who didn’t make more if I spent more.

The two largest investments people make are buying a home and investing their excess earnings, yet people don’t bother to ask my question – how are you paid?  People also don’t take the time to understand conflicts of interest which means they may put their money at risk. 

The real estate and financial industries don’t make it easy to understand who works for whom because they know consumers suffer from inertia bias (http://www.nudges.org/)  and won’t take the time to get answers to their questions.   It’s why people buy a home they shouldn’t or pay more for a home than they should and why we have people like Bernie Madoff.    

If you want to buy a home your agency options are:

Pre -Agency                            

Sub-Agency    

Multiple Representation           

Multiple Representation with Designated Agency

Designated Agency

Exclusive Buyer Agency (that’s Homebuyer Assc.)

By the way, agents may switch among these at anytime with your consent.  That means that you may not end with the type of agency you begin with.  “Agency” is a fancy way of saying delineating to what degree a person works for you and has your interests at heart.

Let’s keep it simple.  I think the choice should be, “Do you work for me or against me?”  At Homebuyer Associates there is no confusion – we work for you at the start, middle and end of the home buying process.

On the investment side your options for the type of representation you select are among:

Investment Advisors

Financial Advisors

Financial Planners

Broker Dealers

According to a RAND report from 2008, Investor and Industry Perspectives on Investment Advisors and Broker Dealers, the public does not understand the difference among these investment representatives.   Oh, really?

Similar to what I’ve believed for 24 years in the real estate business – that real estate agents should be held to a high fiduciary standard putting client interests first – that standard is now being pushed for investment professionals.

I hold out little hope changes will be made to protect consumers and I’m not sure how much I want to be “protected.”  It would be better and more effective for each of us to begin to hold ourselves accountable for our home purchase and investment decisions. 

If you don’t ask the questions and question the answers then you suffer the consequences.  If you suffer from inertia bias then, as we used to say in basketball, “your bad”. 

Protect your assets.  Ask questions and understand who works for whom whether buying a home or investing.  Pass it on.

Thanks for reading.

Michael D. Holloway