Q: I went to a buyer’s agent who said that he can’t send me property listings until I sign a contract with him. Another agent worked with me all weekend and never asked for one. Which one is right?
A: All buyers agents should present a buyer’s agent agreement before they begin giving any real estate services. It is a professional business practice. It protects both parties by outlining what everyone is to expect.
Having a buyer’s agent contract before doing business with someone is treating the relationship in a professional manner. If you do not have a written buyer’s agent agreement, there is too much left unsaid. Licensing laws vary from state to state, some states require a buyer’s agent to always have a buyer’s agent agreement. Agents who are Realtors (members of the National Association of Realtors, which is a trade organization that has standards of practice) are require a signed contract before giving a buyer any real estate service. The agent who didn’t ask for a contract may not be required, but that would be unusual. As of August, 2024, the vast majority of real estate agents will be required to work with buyers using a buyer’s agent contract
Should you work with an agent who does not follow standards meant to protect consumers? You know the answer to that!
Q: I don’t want to be bound to an agent. How can I avoid signing a contract?
A: Buyer’s agent agreements are negotiable. You need to sign a contract with any agent that is a Realtor (that’s most of them). However, you can negotiate how long the contract will run and what services you will receive.
Time
You can sign a contract that is good for one week, one weekend, one house. Then, you are only bound to that agent for the properties you see with him. At the end of the contract period, you can choose to continue with that agent using a longer contract or find someone that matches your needs better.
Services
Fee for service or commission-based?
Fee for service agents will work by the hour. Their contracts will outline when they bill you for their services and at what rate.
Commission-based agents get paid only if you purchase a property. Therefore, many will want you to be working only with them while you are house hunting. Their contracts will outline the commission rate they will be paid at closing.
Some agents require that you pay a retainer when you sign a buyer’s representation agreement. Take note of whether that retainer is refundable and under what circumstances.
What does an agent do for a house hunter?
Most people buy no more than three houses in their lifetime. Because of this, there is value to having someone on your side.
Q: How do I know that my buyer’s agent is really on my side?
A: Real estate licensees can work as a buyer’s agent in companies that also list property for sale; some agents help sellers, some help buyers, some work with buyers and sellers.
Real estate licensees can also choose to be exclusive buyer’s agents – those who work in companies that only represent buyers. These agents spend all their effort learning the best way to get buyers their best deal. Agents in these companies are not distracted by paying attention to marketing a house to get its top dollar.
Some real estate agents act as non-fiduciary agents. These agents get you through the process, but don’t give you financial advice. Depending on your state, these agents are called facilitators or transaction agents.
Pay attention to the agency disclosure that is mandatory in most states. That form will explain what kind of loyalty is being offered by this agent.
Q: What services should I be looking for?
A: Here are the basics:
Provide a list of other professionals who have a track record of doing a good job. You will be getting a mortgage, you need a professional inspector, and you may need an attorney. Your agent can help you evaluate who is the right person to hire for these services.
Critically evaluate properties you see. A buyer’s agent who has no conflicts of interest can point our flaws in a property. Sometimes these are repair issues, sometimes location issues, sometimes the problem is something you told them you didn’t want, but then didn’t notice.
Provide a comparative market analysis. Every house or condo has a value based on sales nearby. A buyer’s agent can tell you about that value, so you can decide on a negotiation strategy.
Your buyer’s agent is the face of your negotiation. A buyer’s agent agreement should include the agent’s promise to use market knowledge to give you fiduciary advice about what you should offer. Your buyer’s agent will be preparing and negotiating your offer, with your instruction. This is a critical service.
Coordinating the home buying process. Your service doesn’t end with a signed offer. The buyer’s agent contract should state that the agent will help organize the tasks between accepted offer and closing.
Q: What does “exclusive” mean? The agent wants me to sign an exclusive buyer’s agency contract, but he works in a company where sellers are represented, too. What’s exclusive about that?
An exclusive buyer’s agent contract means that you intend to work only with that agent. They have exclusive right to help you buy your home. That agent, in turn, is responsible for being available to do the job for you. That exclusive buyer’s agent agreement may include a paragraph about how they may function as a dual or designated agent, if you want to buy a house listed by the agent’s company.
An exclusive buyer brokerage is a company the works exclusively for buyer-clients. These companies do not work for sellers. This business model lowers the potential for conflict of interest, since all agents are focused on getting lower prices and good terms for buyers. Because no sellers can hire these agents, there will never be a situation where one agent in the company represents you, the buyer, while another agent in the company is trying to get the highest price for the house you are trying to buy,
Q: How do I know if an agent is any good?
A: Three steps:
- Interview a prospective buyer’s agent.
- Look at reviews or ask for references.
- Review the contract. If you are not sure what it says, check with a lawyer.