Some home buyers don't want to sign a buyer's broker agreement with a buyer's agent until they get to know that agent. But many buyers agents refuse to show property unless the buyer has signed a buyer's broker agreement. This sounds like a Catch-22 situation, doesn't it?
Part of a buyer's reluctance stems from the fact that many buyers do not understand why agents want them to sign an employment agreement, because buyer's broker agreements have not always been considered standard in the real estate industry. For years, buyer's agents and buyers worked together on a verbal promise. But that ship has left the dock.
Growing numbers of buyer's agents today sign agreements with their clients. It protects the agent in case the buyer decides to switch agents, and it lays out the duties the agent is supposed to perform for the buyer. It also establishes representation, which is generally a wise move for a buyer who wants to avoid dual agency.
Here are workable solutions for buyers who may have concerns about being locked into hiring the first agent who comes along waiving a buyer's broker agreement . . .
Should Buyers Sign Exclusive Broker Agreements With a Buyer's Agent?
Ask any buyer's agent who has been practicing real estate for a while, and you'll hear sad stories from those buying agents who wished they had signed a buyer to a buyer's broker agreement. In defense of buyers, however, it's rarely the buyer's fault. It's the agent's fault for not explaining how the business works.
What often happens is an agent will work with a buyer for a few weeks to several months or longer. This effort includes:
- Introducing the buyer to lenders and obtaining loan preapproval letters
- E-mailing listings that fit the buyer's requirements
- Calling listing agents to determine availability
- Making appointments with sellers before showing homes
- Driving the buyer from one neighborhood to the next, sometimes touring up to 10 homes a day
Then one day the buyer calls, in breathless excitement, to announce that he and his wife had driven by a new neighborhood, stopped to look at an open house and because there was a lot of interest in the property, they signed a contract to buy a new home from directly from the listing agent.
Buyer's Agents Expect Compensation
Just as listing agents sign formal listing agreements with sellers, buying agents expect formal agreements, too. Like listing agreements, buyer's broker agreements are typically bilateral, which spell out the rights and duties of both parties. Because bilateral contracts are essentially a promise for a promise, if the agent doesn't perform, you may have the right to fire the agent. It is typical for the compensation to come from the cooperating fee offered by the Seller to pay the buyer's agent.
Finding a Buyer's Agent
Many buyers are referred by family, friends or co-workers to a buyer's agent. A referral is the best way to find an agent. However, buyers who are relocating to a new area rarely have the luxury of building contacts quickly enough to trust a referral source. Alternatives buyers can use to find an agent are:
Internet Searches
By finding online listings of homes for sale, a buyer can quickly figure out which agents in certain neighborhoods list most of the homes. But that would mean those agents are likely to specialize in seller representation and not buyer representation. Instead, run keyword searches such as "Chicago buyer’s agent" from a search engine. You can also search Web sites where agents maintain national profiles such as activerain.com or realtor.com, in addition to finding exclusive buyer brokerages that specialize solely in buyer representation and do not take listings at all.
Open Houses
An agent hosting an open house may or may not be the listing agent. You should ask. Open houses provide an excellent opportunity to interact with the agent and find out more about the agent. If a certain agent appears knowledgeable and your personalities mesh, ask for a business card. Then later, look up the agent's Web site for more information.
It's common for agents to expect a buyer to sign a buyer's broker agreement, but many buyers need to feel comfortable with an agent before signing. Sometimes buyer's who are referral clients feel less concerned, because they know the agent has performed well for their friend or family member.
Interviewing a real estate agent can help to ease a buyer's uncertainty. But many buyers are leery of signing agreements because they are concerned that the relationship might not work out. They don't want to be stuck with a crummy agent, and that's understandable. Here are a few precautions you can take to relieve that anxiety:
Ask For the Length of Agreement You Would Like
The term of a buyer's broker agreement is negotiable. Although many agents might request a 90-day commitment at minimum, you are free to ask for a seven-day, 30 day or a 45 day term; it's whatever you can negotiate.
Request a Non-Exclusive Agreement
These agreements provide compensation to the agent if you decide to switch agents midstream and buy a home introduced to you by the first agent. It protects the agent by establishing procuring cause. But you are free to pursue any other homes with another agent.
Compromise
You can tell the agent that you prefer to spend a little time getting to know the agent before signing an exclusive buyer's broker agreement. It's reasonable to say, "Let's spend an afternoon looking at homes, and if I think we can work together, I will sign an agreement with you before we go out again." I would caution against working with an agent who is too eager to work with you before she has interviewed you, as well.
Specify Areas and Terms
Most contracts contain a description of the property. If you are undecided about areas, you might want to specify the terms and area in the contract, which will allow you to work with other agents in other areas or at different terms. For example, you might specify a price range or a neighborhood. If you later decide you do not want to buy a home in that price range or in that neighborhood, you can choose a different agent to show you homes in another price range or new area.
Ask For a Guarantee
I give my clients a guarantee. Many agents will accommodate that request if you ask. That means it's a two-way street. I guarantee buyers that if either of us decides that the relationship is not working out, and we have made an effort to communicate the problems and correct them, or if our personalities clash, I will release them from the agreement, and they can do likewise. That way you're not cemented to a business arrangement if the agent is too pushy, argumentative or stubborn, and I'm not just talking about myself.
No comments:
Post a Comment