Buyer agency agreements have a bad rap. We can all picture the overly pushy salesman type pressuring the first time home buyer into signing an agreement on the very first meeting. Unfortunately, it happens far too often. As a result, real estate agents as a whole have earned an unpleasant reputation, and many of the good ones have a hard time bringing up the subject of buyer agency agreements with their prospects out of fear that they will come across as pushy and drive the prospect away. Chances are, if an agent does bring it up or even gets the agreement signed, the buyer doesn’t fully understand what it means. Buying real estate is a big deal – it’s a huge investment. Even experienced buyers should have someone working in their best interests. One misconception is that buyer agency agreements are one-sided, with the buyer being the only one who is held accountable. That simply isn’t true! Once you enter into a formal agreement and become a client, your Realtor® owes you certain responsibilities to which a customer is not entitled.
As a client, you can expect:
- A higher level of service during your search than you would receive without a formal agreement. Some examples include: the agent previewing properties on your behalf to let you know if they are worth visiting to see; the agent mentioning your criteria to listing agents to give you a shot at properties before they formally hit the market; instant notifications of new properties that may interest you; requesting information not provided in the MLS from the listing agent for properties that interest you; availability to answer questions regarding different areas. If your agent is unavailable to show properties when you would like to see them, your agent will arrange for you to see them without him or her, and let the listing agents know that you have representation. Overall, your agent will be available to spend more time on assisting you than they would be able to devote if you were not his or her client.
- Loyalty: Your agent is obligated to be loyal to you, above all others. If you are interested in the same property as another buyer he does not have a signed agreement with, he is obligated to disclose that information to you but NOT to the other buyer.
- Advice: Without representation, a Realtor® cannot advise you on how much to offer initially OR how much to counter-offer. He or she will not advise you on other terms to write into your contract either. If you do not have a formal agreement, your Realtor® is either acting in the seller’s best interests or as a neutral facilitator to the transaction. This can be particularly important with lake property, when additional information and/or inspections may be needed to ensure that you will be allowed to use the property the way you want.
- Disclosure: Having a signed buyer agency agreement in place means that the agent is obligated to work in your interests, above his or her own. The agent will inform you of any information that may help to promote your interests during a transaction. For example, if he heard that the seller’s have already purchased another house and may be willing to come down on price, your agent will tell you. However, if you are working with the listing agent, telling you this information would be detrimental to the seller whose interests he is looking after.
- Recommending Service Providers: Your agent will connect you with providers with whom he or she has a positive history, and often mentioning that the agent referred you will help you get work done faster!
- Negotiations & Getting to the Closing Table: Buying a house or land is stressful, and it’s easy to allow stress and emotions to cloud your judgement. Luckily, your agent will guide you through the hiccups and ensure that you aren’t taken advantage of. Your agent’s goal is not to sell a house, but to fulfill your needs and make sure that you are satisfied when the transaction is complete. Sometimes that means getting out of a contract and starting over.
And what is expected of the client once a Buyer Agency Agreement is Signed?
- Exclusivity: It is expected that you will work exclusively with your agent. If your agent is unavailable for showings, it is his duty to arrange showings on your behalf. If you have hired an agent who is not fulfilling their duties to you, then you have grounds to be released from your agreement so that you may find someone else who will provide the service you expect. Your agent will expect that you will not provide any personal information to other real estate agents.
- Honesty: Buyers often don’t realize this, but you should not attempt to negotiate a contract on a property listed as For Sale by Owner without involving your agent. Your agent is still entitled to request payment from the seller of the property. Additionally, if a buyer finds a property on his own that is listed with another brokerage, his own agent should still represent him in the transaction.
- Clear Definition of Search Criteria: Give your agent a fair shot at finding you a property to meet your needs. List your must-have’s, deal-breakers, and your budget. That way your agent won’t send you properties that are outside your criteria, so that you won’t waste time viewing properties that are not what you’re looking for.
Are Buyer Agency Agreements a kind of compensation agreement? Do I have to pay?
As a buyer, there are very few cases in which you would have to pay the Realtor®. An agent typically will not encounter a case of buyer paid commission in their entire career. The most common instance is when a buyer purchases a property that is For Sale by Owner, and that seller refuses to pay commission to the agent bringing the buyer. Put your mind at ease in knowing that the majority of FSBO’s will agree to pay that commission!
If I sign something, am I obligated to buy a property?
Not at all! Buyer Agency Agreements do expire, and a buyer can be released in the event that they decide not to purchase, or the buyer decides to buy in a different area not covered by his or her Realtor®.
So, who benefits the most from Buyer Agency Agreements?
Both the buyer AND the buyer’s agent benefit equally. Considering the magnitude of the purchase of real property, the buyer may actually have more to lose by failing to have an agent acting in his or her interests. Something worth keeping in mind is that Realtors® don’t get paid until a transaction closes. For this reason, it is difficult to invest a tremendous amount of time on a buyer who is not obligated to be loyal. Often, inexperienced agents will provide extra services in hopes of getting a signed buyer agency agreement as a thanks for their hard work, only to find out that two other agents were doing the same hard work for that buyer.