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Do Buyers know the difference in a Listing Agreement and a Sales Contract?

Recently there have been many instances of blog posts relating a concern about Buyers not having or understanding Representation. I myself encountered a nice young couple who declined Buyers Representation and during the previewing tour the Mr of the couple told me he would rather work only with listing agents to save the buyers agent commission.

This attitude is not only wrong it is completely goofy. OK, maybe not Goofy but delusional. A listing contract with a seller and a brokerage spells out the amount of commission to be paid on the sale of the property. It is a contract between the parties of Seller and the Listing Agency.

In that Listing Agreement (at least here in Texas) there are specific terms of what constitues a sale. AND there are specific terms of how much percentage of the sale will be paid to the Listing Agency and the Selling Agency (the buyers agent).

Some agreements can say if the Listing Agent is the Selling Agent the commission can be some less. Many agreements do not say that. The agreement is between the Seller and the Agency of Brokerage, it is not a public document.

On the MLS sheet there is a Buyers Agent percentage listed that will be the buyers agent fee. Often it is 50%. Again, this amount is specified in the ORIGINAL LISTING AGREEMENT.

A sales contract is a contract with a BUYER to a Seller. In Texas, the Sales contract does not Address the commission between agents. The ratification page discusses that and it is not a part of the Sales Contract.

In essence a buyer who thinks he may save money by-passing a Buyers Representative is sadly mistaken. Somewhere there is a person getting paid that portion of the LISTING AGREEMENT. IF you are being offered representation and you decline it that is certainly your choice and it is totally legal, but do you really know that you are giving up the most powerful part of your negotiations? You are in essence showing a full hand to the Sellers Agent.

If you would like help with your Austin homebuying process give me a call.. I CAN HELP YOU.

Gail Tassey, Realtor® 512-217-9482.. http://austincomeshome.com

Posted by South Austin Real Estate Blog, on 07/09/2009 10:19 AM

Comments (13)

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Originally posted at: South Austin Texas Real Estate blog: Do Buyers know the difference in a Listing Agreement and a Sales Contract?

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13 Comments on Do Buyers know the difference in a Listing Agreement and a Sales Contract?

JUL

Most buyers have no clue what they are doing to themselves. Hey Gail, they could be in government.

I once had prospects say "I am using the listing agent so I can get the 3%." Even after I explained how it really worked, they chose to go it alone.

I then watched them move into my neighborhood, having eschewed representation and using the listing agent, even to the point of using "her" contractor for home inspection repairs. Now I watch a weekly procession of HVAC and repair trucks come to their driveway. Oh, well!

Terry, it really is a tragedy often though... just read the comment below yours.

Susan, like the old adage, you can lead a horse to water but you can't make him drink. Just shooting themselves in the foot.

The ratification page is an acknowledgment between brokers and the agent are to sign where there name is; yet most agents are not aware to sign that page.....I would guess 90% do not know to sign that page. Moreover, all of our buyer's HAVE to have a buyer's representation agreement or we will not submit the contract, as the buyer's rep is then legally considered a sub-agent for the seller; and in many cases the listing agent puts down 0% for a sub agent, as they probably should. Thus, getting every disclosure form signed and a buyer's rep signed is soooo critical to protect one's back from a buyer or seller that decides to come back for misrepresentation.

I just had to stop one of our agents working with a buyer until he signed the buyer's represtation agreement. He was an attorney and knew very well what he was doing. When he realized he had gotten caught, he signed the agreement. We all know how to spell the word assume very slowly. Great post..........

Tim, thanks for stopping in and clarifying some of it. Our office demands a Buyers Rep signed before writing a contract also. It protects everyone .... usually I do not preview any homes until I have a signed buyers rep. ... I had explained we would only preview once without a signed agreement. Ask alot of questions on the tour and you get alot of answers., :)

Gail you are SO RIGHT IT HURTS! We had a buyer save or thought he was saving 3 percent on a 150 house and in the end it cost him 11,000 as he worked with the listing agent and did not take advantage of available programs. Oh and PS it cost him the 3 % too

Charlie, maybe its the old story of penny wise and pound foolish?

Gail

It is up to us to try to educate the public better. Perhaps NAR needs to do a campaign to help explain this confusing ( not really) issue.

JUL

Tim,

If you do not have a signed buyers rep agreement you are not "legally considered a sub-agent".

Please show me which law says that.

JUL

If you don't have a buyer's rep then you ARE a sub agent - they are your customer not your client - big difference.

I have run into this time and time again and it's both frustrating and painful. Its like seeing the train barreling down the track about to hit them as you try to scream "MOVE" before it hits them.

I usually throw a few questions at them and ask them to think strongly about their decision. (after explaining the falicy in their thinking) Things like "who is going to pay for the title commitment", do you know what a home warranty is and who is going to pick the company, and how many days should you ask to review the title commitment? I then also ask them how do they know their buyer's rights are being protected and that someone is looking out for them.

JUL

Richard, I know the IABS states it is USUALLY a buyers rep via a written contract and a verbal agreement will work but many brokerage houses require a written form around here.

Malita, thanks for stopping by and your comments, most have no idea what they are giving away but think they are saving.

JUL

Gail,

I completely understand. My problem is when people say if you do not sign the buyers rep agreement then by law I work for the seller. That is not a true statement. It might be a business decission but it is not the law..

So here is my question for you. House is listed at $1,000,000 so commission is $30,000. Buyer says I will not sign a buyers rep but I want you to represent me. Are you telling me you or your broker will turn down that arrangement?

Malita,

Your statement

"If you don't have a buyer's rep then you ARE a sub agent - they are your customer not your client" is not true. That is a choice. What is the listing broker does not approve sub agency. Also show me where TRELA, TAC, Code of Ethics, or MLS rules confirms your statement. - big difference.

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