It is not uncommon for Realtors to ask prospective buyers to sign an exclusive buyer’s agency agreement (note: this term may vary from state to state). It is also no secret that real estate agents rank high among the list of least trusted professions. So, when searching for a home, should you sign one? Let’s look at the pros and cons.
By signing this agreement, the agent will owe you fiduciary duties. What are fiduciary duties? It is a legal obligation to act in the best interest of the client. The agent will be required by law to keep anything that can hurt your negotiating power confidential. In most states, without this agreement the agent is required to work for the seller as a subagent of the listing agent of the house you are interested in. This means they will act in the seller’s best interest disclosing material facts about your position to listing agent. Without one, you could be compromising your position.
You could choose to not sign an agreement, represent yourself and not disclose anything to the agent showing you the property. However, unless you know real estate law, I don’t recommend it.
While this agreement will bind you to that agent, you will receive more service and hard work from him or her. The agreement does not require you to make a purchase. It simply states that should you make a purchase, you will use that particular agent to represent you. You do not have to pay commissions. The seller’s agent will split the commission with your agent.
What about For Sale By Owners? Typically, you would tell your agent you are interested in this particular house. They may even find it for you. The agent will contact the seller’s and set up a meeting and negotiate their commissions with the owner’s. Your buyer’s agency agreement will outline the terms involved with purchasing a For Sale By Owner. Make sure you understand this should you choose to purchase a FSBO because some state that if commissions are not collected from the seller, the buyer will have to pay. You can negotiate this with your agent as well.
Most of the good Realtors won’t show property to buyers who do not sign an agreement with them as they feel they only want to be loyal to the people who are loyal to them. It’s common for a real estate agent to show many properties to a buyer only for the buyer to turn around and use another agent thinking they can negotiate a better deal if they use the seller’s agent. This leaves the agent who put all that time, effort and money into finding you a home with nothing as they work solely on commissions. In essence, you will get better service from an agent with whom you have an agreement with.
A downside to signing a buyer’s agency agreement is not getting to know the Realtor before working with them. Not knowing what you’re getting into can be a little scary. You want an agent who will look out for your best interest and be available to you when you have a question about a property returning calls within 24 hours.
When you sign an agreement, you are signing it with the company with the Realtor representing you. So, if the agent should go on vacation they will usually designate somebody else in their office to take care of their clients while they are out of town.
If you are unhappy with your agent during the time of the agreement, you can ask to be released. They can also release you. I don’t know why any agent would want to work with clients that don’t want them as an agent, but if you want to be released and the agent won’t allow it you can contact their broker (their “boss”) and ask to be released.
Keep in mind the terms of this agreement are negotiable! Generally, the agent will ask you for a 90 day commitment. You can negotiate this down to 30 days, one week, or even 24 hours. This way, you can spend the day with the agent knowing you are protected and they are working for you, but not be bound to them. If you like and trust your agent, you can always extend it after the day is done.
So, should you sign a buyer’s agency agreement? It depends on the level of service you are expecting to receive. Realtor’s work diligently to provide their clients with the most current information on homes in their price range, informing them of price reductions, when something they like has gone under contract and when something they may like comes on the market. When I say “client”, I am referring to people who have hired an agent through an agreement. Realtors won’t necessarily work that hard for people who are not their clients. You may find somebody who is willing to give you this level of service on a non-client level, but keep this in mind: Do you want someone working for you who is able to negotiate a contract or not?
