What is the reasoning behind the buyer’s agency agreements?
When a buyer has been working with an agent for a period of time, short term or long term, the agent will typically assist the buyer with the following:
- Email listings that concur with the buyer’s list of requirements
- Contact listing agents of properties the buyer would like to know more about
- Counsel the buyers in lenders and assist in obtaining preapproval letters for loans
- Make appointments with the sellers to show homes
- Taxi the buyers around viewing homes, sometimes this accounts for many miles
So when the agent gets a phone call or email stating that the buyer has found the home of their dreams through someone else and signed a contract, the agent can be devastated that they did all that legwork and will receive nothing in return.
Normally before a purchase agreement is written, a buyer will sign a buyer’s broker agreement. A buyer broker agreement is an often overlooked aspect to home buying. These agreements detail specifically who will represent the buyer and the rights and duties of both parties. Although these agreements may differ in many ways, they are all designed to protect the buyer as well as the agent.
A seller and a seller’s agent have a legal listing contract. The buyer’s agent expect to have formal agreements as well. Buyer’s agents are entitled to payment for their work just as seller’s agents are.
The Exclusive Right to Represent is the most commonly used form in California according to Elizabeth Weintraub in her Buyer’s Broker Agreements and Buyer’s Broker Contracts article in About.com. Many agreements are used throughout the United States and this is just one version.
The Exclusive Right to Represent buyer broker agreement says the buyer has the right to demand single agency. The buyer will agree to only work with one broker or agent. In this agreement, the buyer is not responsible for the commission if another party pays it, and the commission is negotiable. The broker or agent is able to get a larger commission if the seller chooses to pay more and it is disclosed to the buyer.
Exclusive buyer representation means the buyer has hired the broker or agent and they will vigorously in the name of the buyer. Only through exclusive buyer representation can the broker or agent negotiate with unrepresented sellers, like FSBO (for sale by owner), for the buyer. If the buyer obtains an extremely low price due to the negotiation skills of the buyer’s agent, then the buyer’s agent has earned their commission.
Buyer’s should be on the lookout for a couple of specific items in an agreement. A right to terminate on both sides is one for instance. It is not unheard of for 2 people to not be able to connect when working together. Meeting with an agent for a trial period may determine if it will be a good working relationship. Detailed duties and responsibilities are a good item to have in the contract. This contract should be designed to protect the buyer and the buyer’s agent.
Finding a buyer’s agent to work with is an important and crucial detail to home buying.