Being involved in real estate for almost 20 years, I have learned a LOT of valuable lessons. I have also come to realize that the average homebuyer (and home seller for that matter) doesn’t know the basics of how it works in the world of real estate brokerage and working with an agent. It’s not their fault. Nobody ever explains it to them and most arrogant agents just assume that everyone knows how it works. They don’t, and we didn’t either until we took our classes and someone took the time to explain to us! One of the misconceptions is how a Realtor gets paid, but that’s for a whole other conversation and blog post. For now, just know that the commission is split between FOUR people…it doesn’t all just go to the one agent. There are also lots of expenses that go into maintaining a license, an office and advertising as well. But, again, that’s all for another post.
Today I’d like to share some of the top things to know about how “agency” works. When you have a contract with an agent (through their broker), they have what is called “agency” with you. You then move from being a customer to being a client and have a lot more intimate of a relationship and an actual advocate for your interests! Most people think that if they are “working” with an agent then that agent is working on their behalf. Legally, that is not true. Not, of course, unless you have a contract with them. It’s always obvious that to sell a home through a Realtor, you need to sign a listing contract so that they can legally represent you, market and sell your home, and negotiate on your behalf to get the most you can for your property. It’s not as obvious, however, that when you are the BUYER, you also should have a contract to have someone actually working for YOU!
This begins our reason number ONE. Without a contract, the agent cannot and is not legally working for you. They are representing the seller through the contract the listing broker has with that seller. They are exclusively paid through the agreement the listing broker has with that seller as a cooperating broker. Your interests are still important, but you’re not represented like you might think you are. With a buyer agency agreement, that agent must share not only material adverse facts with you, but also all material facts that they find or know that will help you choose the right home for you. They are also specifically there as a professional to help you find the very best home to fit your needs and wants at the very best price and terms.
The second reason you want to have a buyer’s agency with your representing Realtor is to be able to have them give you advice on price when making your offer. Without a contract, your agent can only legally fill out the offer for you. He/She cannot offer you any advice on what to offer. They can’t pull comps to give you a good price for the property. Remember, they are actually working for the sellers in this situation, so they are just showing you homes and filling out your paperwork for you. This is no different than working with the exact same agent that listed the home. Many buyers seem to think that if they are working with a different agent from a different office, then they have someone who is working FOR THEM, but that is not the legal definition here. You are a customer and your showing agent is simply a sub-agent of that listing office UNLESS that agent is in a contract with you creating a buyer’s agency agreement.
This brings us to the third reason you want to have an agent working for you…NEGOTIATION. When you are the CLIENT, that agent will be negotiating FOR you. They will always have your interests in mind and be able to fight for you and your needs. Not just in pulling comps and proving offer price, but also in finding seller motivation and doing all they can to get the best deal for you! Your personal agent will ask you questions and know what your goals are, what you can afford, what you want and need, and will fight to get that list for you. He/She will work to keep you on track and squeeze the best deal out of the sale they can for you.
Reason number four is a very little known fact about working with a Realtor when dealing with a FSBO or For Sale By Owner property. Did you know that when you take an agent to a FSBO, they have no legal right to draft the offer to purchase or do anything at all with that property for you? Nope! By law, they MUST have a contract with either the seller or the buyer. Without a contract with one of the sides, they would be acting as an attorney without a license if they write up the offer. It’s the contract with a client that allows licensed agents to write these offer contracts and negotiate amendments. Since most agents are too weak to ask the buyer to officially work with them, most go straight to the seller (who likely already advertised that they are willing to work with agents) and get a contract called a “one party listing”. What is that? That’s a contract to represent the seller in a listing contract ONLY if the buyer (one party) that they bring through ends up buying it. Huh? You mean they are working with me and go and get a contract to represent the seller in my offer? Yep! That’s what I mean! Now, there are a few agents out there who would come to you, their buyer, at this point and ask for a buyer’s agency agreement, but most just go to the seller and get the one party listing agreement instead….doing nothing to help you as a buyer in your negotiations. You’d probably be better off just negotiating this on your own and pay an attorney to do the paperwork for you if that’s the case! Ask for a buyer’s agency agreement if you plan to work with an agent on a FSBO. As a matter of fact, ask for a buyer’s agency agreement no matter what! Get an agent to work for you as a client, not a customer. Set them to work to really know you and your needs and find that perfect home!
What about the costs? Is it expensive to be a client instead of a customer? Nope! The listing broker still offers a co-broke to pay your broker in the transaction. Ask about it. Commissions are always negotiable. Different brokerages have different rules for their agents as well, so it pays to get a couple of agent referrals and check into all of them to find your best fit before signing. Ask them to explain how it works and what is expected, and you’ll find that most often it won’t cost you anything, and you’ll get a better price for the home having that agent in your corner negotiating on your behalf! Happy House Hunting!