I was recently having a “conversation” with an investor from Illinois in an online forum about buyer agency agreements. He stated
” But, seriously, do realtors think people are dumb enough to sign these exclusivity contracts? I know I was dumb enough to sign one the first time I bought property, but never again.”
Me…I require that buyers that want to work with me sign a buyer agency agreement, AND yes…I will be the first to admit that buyer agency agreements benefit me as an agent. There I said it…THEY BENEFIT ME… no Realtor spin on this one…
First of all, I think all buyers should “shop around” for a real estate agent. The fact is, they are not all created equal and the one you met at an open house, may not be the best agent for you. I may not be the best agent for you, despite the fact that I am a good agent. Here’s why…
Buying a house is stressful and quite frankly you want an agent that has good knowledge, is competent, and you feel understands you. I can’t get along with everyone, and I don’t pretend that I can. You need to work well WITH your agent.
So why do I require buyer agency agreements?
I like to get paid. It is that simple.
When a real estate agent looks for a home for you, most agents tend to just look on the MLS. Most of the homes are there and the offer of compensation is there. Agents will know what they will get paid to find a buyer for that house. Sometimes the offer of compensation is fantastic (4%or more), and sometimes not so fantastic ($100).
Me, I can’t put in 80 hours of work for $100. So I have a minimum required fee that makes me profitable. My buyer agency agreement talks about these types of situations and how I will get paid. Some agents choose to just not show these homes. I like to give my clients a choice.
I also look at FSBO homes for my clients. There are some neighborhoods that have a high FSBO rate due to their locations, and I don’t want my buyers to miss out on these homes. There is no offer of compensation with many FSBO’s. Again…I need to know that I will be paid for my time.
My buyer agency agreement addresses these issues.
I think the problem with SOME buyer agency agreements is that some agents have created insane terms on them. There are terms on some of them that I would never agree to, and I am a big proponent of them. Here are things I thing consumers should be wary of…
1) Indefinite contract term. The biggest one I see is “until you buy a house.” Huh?? So if I decide to pass on buying after looking at a few houses, but want to buy 5 years from now, I have to use the same agent? Next agent, please…
2) No termination clause. You need to have a clause in the contract that lets you terminate your relationship with the agent.
3) Excessive time frames after termination. Often times, and yes I have this in my contract as well, we agents have clauses in our contracts that state if we show you a home you can’t buy that house for x days after our contracts ends without owing us our fee. I have seen some contracts that go out for a year. The point of this clause is to make sure we don’t do a lot of work and then have a client “go behind out backs.” It happens so the clause is there. I think anything over 6 months is too excessive.
4) Buyer agency agreements also address whether or not an agent can represent two buyers for the same house. Do you want your agent writing up a competing offer for your dream home?
I am not interested in wasting my time or the time of my buyers. As such, I give buyers “1 free day” of my time where we will head out together and look at homes. I strongly believe that clients and I have to work well together and this day give us a chance to see if we do. If we don’t they go find another agent, and if we do, they sign my buyer agency agreement.
If you are unsure of whether or not you should sign one, make sure to READ the terms carefully. If you don’t like the terms talk with the agent about them and see about modifying the contract. The contract should be reasonable.