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 to the buyer that parallel the buyer’s 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
If the buyer communicates to this agent that they have found their perfect home walking past it one day and signed a contract with someone else, the buyer’s agent may be crushed that they worked so hard and will receive no compensation.
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. The contracts explicitly state who is providing the buyer representation as well as rights and duties of the buyer and the agent. Many varied agreements are available, but they are all meant as protection for the buyer and the agent.
Sellers have formal listing agreements with the seller’s agent. The buyer’s agent expect to have formal agreements as well. Buyer’s agents are justified as much as seller’s agents to be paid what they rightfully earn.
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. In the U.S., many different types of agreements are used.
The Exclusive Right to Represent buyer broker agreement says the buyer has the right to demand single agency. The buyer agrees to select one broker or agent to work with. In this agreement, the buyer is not responsible for the commission if another party pays it, and the commission is negotiable. If the buyer is informed, the broker or agent has the right to receive a bigger commission from the seller if the seller chooses to pay more.
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. When the buyer gets an unheard of price due to the buyer’s agent’s amazing negotiating skills, then the buyer’s agent deserves their wages.
Buyer’s should be on the lookout for a couple of specific items in an agreement. Having a right to terminate for both parties is important. 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.