Tuesday Mar 30 2010
The Real McCoy: Should I sign a buyer’s broker agreement?
By: Kari McCoy
Dear Kari, My wife and I have are finally going to buy a house. We have been going to lots of open houses on Sundays and this one Realtor asked us to sign a Buyer Broker Agreement. What is it and should we sign this? Answer: First, let’s understand how a listing agent’s fees are created. In return for the bringing a buyer to the offer table, the seller agrees to pay a commission to the real estate agents/brokers involved in the sale transaction. Typically, this commission fee is represented as a percentage of the sales price and is shared between the listing agent/broker and the agent/broker who brings the buyer. The most popular type of listing agreement is the exclusive right to sell with the Agent/Broker Agreement. This is executed in writing by a seller and an agent, giving that agent’s broker the right to exclusively market the home and spell out the terms and conditions of this representation. When the property sells, compensation is paid by the seller as agreed to in the listing agreement and everyone is happy. The new trend is real estate brokers promoting the use of another type of agreement, the Buyer Agency Agreement This is a contract stating the agent/broker will represent the buyer and that their job is to find a suitable property for the buyer. This agreement sets out the main conditions of the relationship between the buyer’s agent/broker and the buyer client including such things as the duration of the agreement, the commission to be earned/paid, and the rights, duties and obligations of all parties. Because these agreements are legally binding and give the agent/broker specific authority, buyers should fully understand their rights and responsibilities before signing on the dotted line. There are three types of Buyer Broker agreements: 1. Exclusive Buyer Agency Agreement 2. Exclusive-Agency Buyer Agency Agreement 3. Open Buyer Agency Agreement The one most commonly used is the Exclusive Buyer Agency Agreement, sometimes referred to as “exclusive right to represent”. This is an exclusive agency agreement in writing stating that the Buyer is legally bound to compensate the agent when the buyer purchases any property of the same type as described in the Agreement. Please note this compensation is owed regardless of whether or not the buyer’s agent/broker located the property. Even if the buyers find the property by themselves, the payment is still owed. However, remember the owner of the property is the party that almost always pays the commission, so the buyers’ agent/broker receives pay, technically from the seller. The Buyer Agent has fiduciary duties to the buyer under this agreement including fidelity, honesty and dedication to purpose with the buyer’s best interests. Simply put, the Buyer Agency allows your agent to work contractually in the buyer’s best interest, not the seller. Don’t forget that having your own buyer representation doesn’t have to cost you a penny more. Some of the buyer agent’s job may include: Your best interest can never be compromised. • Represent you as a true client, not just as a customer. • E-mail listings that fit the buyer’s guidelines as soon as properties hit the market. • Call the listing agents to determine the availability, reason for selling and so on. • Making appointments with the sellers ahead of time to fit the buyer’s schedule. • Show you all the homes on the market that meet your needs, including any For Sale By Owner properties. • Keep your negotiation and financial position confidential. • Offer market analysis of comparable sold and pending sales of market conditions, to help keep you informed to make a correct offering price. • Write an offer with only your best interest in mind, not the seller’s. • Call attention to potential negative aspects of each property so you can make a fully informed decision. • Provide research on properties and create strategic plans. • Offer good sources of lenders, inspectors, Pest/termite companies and others. • Get you the lowest price with only the buyer’s interest in mind. • Buyers Agent can glide you through each step of the way to help prevent costly errors. Clients avoid the possible conflict of interest in dual agency, which occurs when one agent represents both the Buyer and Seller. This is legal in the state of California and may have the chance to be completed. Additionally the buyer does not have to hop from agent to agent looking for properties; the buyers may rest assured their exclusive agent is already hopping for them! Before signing (hiring) a Buyers Agent you should consider spending some time with she or he, perhaps an afternoon, looking at some homes and getting to know more about the agent and their qualifications. See if their personality is a good match with yours. It’s very important when you have that personal Buyer’s agent that you not look at property with any other agent and do not contact any seller directly. This is your agent’s job and if you happen to make an offer on that property, your agent will have already established a professional protocol. Just like the listing agents sign a formal Listing Agreement with the sellers, the Buying Agents expect formal agreements, too. These types of contract agreements are usually bilateral, and spell out the rights and duties of both parties. Therefore bilateral contracts are essentially a promise for a promise. In the event the agent does not perform, you may have the right to fire the agent. Kari McCoy has been a Realtor for 25 years and owns the Kari McCoy Group, Residential Real Estate, at Coldwell Banker. She can be reached at (916) 941-9540 or at firstname.lastname@example.org.