Buyer-Broker Agreements.....Why They Are Not Good For Agents

Karen wrote:  "There is always a lot of talk about Buyer-Broker Agreements. I have used them on very rare occasions and for very specific reasons...but in general I do not. In fact, I think they are detrimental to agents (this is me bracing myself for the response:))."

Lenn writes:  Buyer Agency Agreements were developed to prevent the prevailing and mistaken impression by buyers who believed that the agent with whom they were working was THEIR AGENT.   At that time, prior to agent who worked WITH buyers were still sub-agents of the seller.  Buyers did not understand.

Back in 1986, the NAR published a pamphlet for agents to use titled "Dual Agency is a Totally Inappropriate Agency Relationship"  Of course that was "BEFORE EDINA" the lawsuit that cost a Minn. brokerage about $40,000,000 when a home buyer discovered that the agent with whom they had worked when they purchased a property, in reality, and completely undisclosed, represented the seller.  Due to problem following the settlement, the buyer sued and won and won BIG.

There was genuine panic throughout the real estate community.  Then, the NAR, through state legislatures, got busy promulgating laws making DUAL AGENCY perfect legal.  Once it was discovered by the consumer that the agent with whom they were working was a sub-agent of the sellers, agents were at risk of "Undisclosed Dual Agency" which is, of course FRAUD!   Eeekkk.  Can't put licensees in jeopardy.  So, they made DUAL AGENCY legal with various permutations from state to state whereby the agents/brokers could still give the appearance of representing the interest of a buyer, while still maintaining the power of the listing. 

Karen wrote:  "Hear me out!  I believe they deter potential clients. Have you seen the ads which offer a 30 day free trial? or 60 day? or 90 day? Sure you have! Have you even taken advantage of it? I bet you have....do you know why? Because people have a desire to know what they are buying....Before They Buy."

"I believe that real estate agents are no different. There is a lot of misinformation in the media about agents. I think when an agent waves a binding agreement before even walking through the door of a listing, they are contributing to this."

"There is a reason people like to try before they buy....so I think we should let them."

Lenn writes:  I agree.  The industry constantly tries to equate representing a buyer with representing a seller.  They are apples and oranges.  Sure a contract is a contract.  But, that's about as far as the comparison goes.   A home owner seller is free to interview as many listing agents as they wish.   Those agents provide a wealth of material to the seller before the seller hires them, CMA, market reports, personal bio, blah, blah, blah.  The seller says "Thank you and I'll be in touch".  HA!  That seller has had the privilege of "touring that listing agent without any contract, representation agreement or anything else". 

I ask, why shouldn't a prospective home buyer have the same privilege???  Why is a consumer/buyer asked to make a commitment to a buyer broker prior to touring a home for sale???   Why can't a buyer consumer contact an agent who is not the listing agent or in the listing brokerage and ask an agent to simply - - -

"Show me a homes I found on the Internet".  Or,
"I like your web site and would like for you to take me on a tour of some homes I found on the Internet." 

Isn't that consumer really interviewing that showing agent while on a tour of homes for sale???  Why is that different from the home seller who interviews many listing agents before hiring one???

Yet, the agent, while fully capable and equipped with key access to show a home for sale, can't help that prospective buyer/consumer before the buyer SIGNS SOMETHING, even though the showing agent is not employed by the listing broker.  That would trigger a requirement, disclosure of agency relationship with the seller to circumvent the fact that they represent that seller.  Compliance by listing broker/agent's disclosure requirement, last figure I saw was about 20%.  HA!  Consumers know that if they call on a yard sign, someone in the listing brokerage's office will be more than glad to show them that home for sale.  Yard signs sell homes. 

Karen wrote:  "I also think that when they go bad, they turn out to make things far worse for the agent. Why? Because as a real estate agent, would you ever hold a buyer to the contract? Assuming that you are not in an escrow, of course. Probably not....I doubt there are many, if any, agents who would actually tell a buyer that they are bound by this agreement, even if they don't wish to use the agent any longer. Perhaps a broker would step in and reassign the buyer to another agent....but again, the agent does not benefit."

Lenn writes:  A Buyer Representation Agreement, if the consumer agrees to work exclusively with an agent for a period of time and buys a home gives that agent/broker one thing - the right to use legal means to enforce the fee agreement in the BA representation agreement.  Even if the agent wants to sue to collect the fee, is the broker going to want to commit the time??  The broker is probably a corporation and would have to be represented by an attorney.  The buyer can defend themselves.  Of course, the buyer is quite likely to defend on the grounds of abandonment or negligence, etc. on the part of the agent/broker.  Judges are notoriously pro-consumer.  Attorney retainers are also notoriously expensive.  If a broker is with a large corporation, there may be company counsel.  What would their advice be.  Take a guess.

Agents believe that with an agreement, the buyer will be loyal.  HA!  Just take a couple of hours before returning a message and they'll find out differently.   I do get buyer loyalty!  HOW, you ask???  WITH SUPERIOR SERVICES, COMMUNITY KNOWLEDGE AND HARD WORK. 

Karent wrote:  Along with the lack of enforcement aspect, in the event that the relationship does sour, it only makes the parting more bitter. Typically, if a buyer wants to change agents...they simply move on with some form of excuse. They might even regret this later on if the new agent does not live up to expectations. Either way....they are most likely not going to be negative about the original agent. When the Buyer-Broker Agreement comes into play...they usually feel they need to justify why they want out. A simple case of different styles can then become a contentious or angry confrontation. This naturally leaves a negative taste in the buyer...this is a negative feeling that lingers. Not something we want in our community.

Lenn writes:  Right and right.  Also, don't forget the primary reason why Exclusive Buyer Representation Agreements rarely work.  Unlike a piece of land for sale, improved or unimproved, that buyer can walk/drive/tour by themselves/call for info on yard signs/attend open houses, etc., ALL WITHOUT THE BUYER'S AGENT. 

What can a buyer's agent NOT able to do in MD without a signed agency agreement with a buyer - write a contract.  Prior to that, disclosure of the agency relationship is required, "Understanding Whom the Real Estate Agents Represent", is disclosure.  Buyer representation is presumed.  It's not a contract.  Virginia is in the process of requiring more disclosure and less presumed agency than in the past.  Presumed buyer's agent in Virginia was the normal relationship.  I heard counsel for the Virginia Real Estate Board once way, "If you're working with a buyer, you're a buyer's agent". 

Would that it was that simple. 

"I don't want to sign anything."
"My father told me not to sign anything."

So, the real estate industry, with rinky-dink disclosure/contract requirements succeeded in one thing - driving prospective home buyers to the listing agent where they know they'll be able to see a home for sale without having to sign something.