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Why not more buyers agency agreements?

By Howard Goff

Real Estate Agent with Keller Williams Realty

May 23, 2008 01:28 PM

Disclaimer, I only work with sellers so you are free to file what I say in the appropriate receptacle (aka. the bit bucket) if you disagree. Still, I am interested in your comments because my wife is the one who works only with buyers.

I just did a Active Rain search for "buyer ethics" and got a bunch of posts by agents asking this-and-that about the ethics of soliciting a client if the client was "working with another agent". Generally there seems to be a lot of confusion by agents because buyers are generally not educated about the benefits to both the client and the agent of working with one buyer's agent. Also "working with" seems to be pretty loosely defined. One client looking at homes in one city was "working" with an agent who turned out to be the agent who was listing their current home in a city over 75 miles away. By "working" did the client mean they had an exclusive agreement to have the listing agent show and sell them a home in the city they were being relocated to? What would the listing agent think?

Some buyers seem to be on a mission to get lots of agents to do lots of work without any regard to if any of the agents get compensated. That to me is also an ethical issue but buyers are under no obligation to be ethical I suppose. (but see http://activerain.com/blogsview/88251/Real-Estate-Code-of for an interesting post about that)

Not on Active Rain but in person I have heard a fair number of agents gripe about the disloyalty of buyers. The comments I have seen on Active Rain indicate a good deal of confusion by agents wanting to do the right thing but not knowing who is and who is not being represented by another agent.

Standard of Practice 16-9 states

REALTORS®, prior to entering into a representation agreement, have an affirmative obligation to make reasonable efforts to determine whether the prospect is subject to a current, valid exclusive agreement to provide the same type of real estate service. (Amended 1/04)

Does a buyer asking an agent to show them a house or two, or asking them to send a hot-sheet to them constitute an exclusive agreement? So far as a disciplinary action is concerned, I would be surprised if an agent could prosecute a successful complaint against another agent unless they first had a WRITTEN exclusive agreement to represent that buyer. Would such buyer behavior create problems determining procuring cause, I should think. Asking a potential client to sign a buyer's agency agreement is a perfect opportunity to educate them about their responsibilities and how agents working for buyers get compensated.

My question is why isn't everyone asking buyers to sign an agency agreement before showing them a property not listed by one of their clients? Seems like having buyers sign an agreement, even if it were only for two weeks at a time, would be a win-win for everyone.

I get the feeling that if most people looking for a house were asked if they were under a buyer's agency agreement (rather than "are you working with an agent") that they would reply "a what?" If so, this is a sad indication that REALTORS (ie. us) are not doing a very good job of educating buyers.

I cannot imagine even starting to market a house that was for sale without having a listing agreement. Why would a buyer agent settle for less. In addition, just as I would expect a listing client to break ties with a former agent before asking me to provide services I would think a buyer's agent would want a new client to unsubscribe to any hot-sheets and property alerts other agents are sending them to avoid a potential confusion about procuring cause in the event the former agent sent information about a property to one of my clients which they ultimately bought.

Maybe this is a problem which is local to my area?

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Ernie & Barb Suto

Century 21 Preferred Realty - Pompton Lakes, NJ

Well, in NJ we have the same problem --- procuring cause is the biggest complaint, especially in this market. The former agent also should show continuity ....... No one owns a buyer, and yes we should get these people to sign a buyer agency agreement.....do we? NO ......... there is little loyalty with buyers, and the mentality is still to call the listing agent. They don't know what ABR is .... we do try to let them know what the difference is between a buyers agent and a sellers agent.

May 23, 2008 01:39 PM

Bart Whitmore

Keller Williams- Louisville - Louisville, KY

Real Estate Agent

You bring up a good question, I think most agents are afraid to ask for a buyers agreement, because they are afraid the potential client wont.

May 23, 2008 01:39 PM

Howard Goff

Keller Williams Realty - Vancouver, WA

I would hope to not have to work for a client who was not willing to pay. Of course to do that you have to have clients to choose from and this market is a bit challenging. I suppose if agents are afraid of turning down a buyer just because the buyer won't commit to letting the agent get paid for their work the agent needs to do more prospecting.

May 23, 2008 01:44 PM

Cristal Drake

Prudential California Realty - Fullerton, CA

Realtor - Fullerton Real Estate

This is a great post. I don't ask them to sign it because I don't feel like it really means anything. If they want out, they can get out plus, I wouldn't want to force them.

On the same note, I do ask if they are working with anyone else and if they say that they are then I will not. I do a very thourough buyer consult and ask that they only work with me. So far it has been ok but you never know. I just hope my buyers have enough integrity to stay with me.

I just know that I wouldn't want to sign one. What if you end up with a "dud" and are stuck!

May 23, 2008 02:12 PM

Howard Goff

Keller Williams Realty - Vancouver, WA

Even if you have absolutely zero intent of attempting to legally enforce the buyers agency contract (and probably most agents wouldn't bother) the contract still serves what I see as a vital purpose.

1) it helps define the expectations of the client
2) it will weed out some of the buyers who have no care if you get paid
3) by defining what services you do perform you also are defining what services are not included
4) most importantly it provides an opportunity to educate the client

One note, I'd be careful of making the agreement too long. The contract commits you to work for the client and if the client hasn't found a home in 2 to 4 weeks you might be better to be working for more motivated clients in many cases.

May 23, 2008 03:42 PM

Anonymous

James

In my opinion i dont think that a buyer should be locked exclusively to a Realtor. Forget signing an adhesion contract, negotiate the terms of the agreement. As the buyer you have to protect yourself. Offer to agree to loyalty on only the houses that were shown by the realtor for 30 day limit. If they refuse, walk away. If the Realtor is not what you expected ask for a mutual agreement to withdraw. Whatever you do, READ the agreement before signing.

Jun 13, 2008 05:10 PM

Howard Goff

Keller Williams Realty - Vancouver, WA

James,

It sounds like you had a bad experience with an agent, I am sorry if that happened. Although agents can represent buyers without charge to the buyer, the agent only gets paid for their service if the client buys through that agent. If you are not willing to allow the agents you are working with to get paid for their services, agents won't be very excited to represent you.

That is not to say if an agent is not performing to suit the desires of a buyer that the buyer should be held to that agent.

I would certainly urge buyers and sellers alike to actually read the agreements they are signing. The agreement should help define expectations not place the client in a situation where they are surprised by something that was in the contract unbeknownst to them.

As a buyer, you do want to protect yourself and the best way to do that is to contract with a good agent to represent your interests. If you want a good agent to commit to you be prepared to make a commitment to the agent that you will allow them to get paid for their services by buying through them. I would be surprised if the arrangement you suggested above didn't limit the agents who were willing to spend time with you to ones who were hurting for business. In short, I suspect you may limit the quality of representation you would receive by letting agents know that you don't care if they get paid.

Let me warn however, if (as buyer or seller) contract with an agent to represent you and you decide that the agent isn't working out for you, you need to give notice according to the terms of the agency agreement that you are terminating it. If you do not do this and simply wander off and start working with another agent, you may end up owing a commission to one and maybe both of the agents.

Read the agreements before you sign them.

Jun 13, 2008 05:58 PM

Anonymous

James

I understand that there are buyers out there that do not care whether an agent get paid or not. The agreement is a condition to employ the services of the agent. If the buyer is to breach the agreement the agent is entitled to the penalty stated, however there is no consideration for the buyer when the agent breaches the contract. What penalty can the buyer pursue if the agent was to break the promise? If the agent refuses to withdraw the agreement it will force the buyer to halt the process of purchasing a house other than their agent, but can buyer still contact agent for services under the agreement? If so do you think that agent will be excited to represent buyer? I don't think so. Keeping a buyer binding on an agreement with an agent, with the agent not willing to release the buyer nor to work for buyer causes the agreement to be dead.

Jun 14, 2008 02:42 AM

Howard Goff

Keller Williams Realty - Vancouver, WA

James,

We do not use such agreements that the client cannot terminate the contract if they feel the agent is not performing adequately for them but we do expect that while we are working with a buyer that the buyer not be working with other agents (at the same time). We also expect that if we assist a client with a property that we get compensated for our work. I cannot speak for other agents who may do things differently.

Your name in my my blog does not link to your activerain profile for some reason so I cannot email you directly. Again, it appears you either are having or have had had a bad experience with a particular agent. If this is the case, I would suggest you email me or contact the agent's broker.

Yes, read the agreements, even if the agent is your best buddy and has been recommended by a trusted friend; I cannot stress this enough. Agreements are contracts and you need to understand your obligations under them. If an agreement does not allow a buyer to terminate the agreement that may be reason for concern.

We currently use WREF-060R as our buyer agency agreement. Under this agreement, buyer or agent may terminate the agreement at any time by giving written notice.

If the agent terminates the agreement then Buyer is relieved of all duties of the contract.

If buyer terminates the agreement then Buyer would owe a commission if they purchase a property presented by the agent or that the agent assisted them with within 90 days of termination. I see this as being fair but if a potential client does not, I can respect their opinion even though I would choose not to represent them.

Please note: Under our buyer agreement the contract is created in writing and the termination must be in writing. I have only heard of this happening once (with any transaction and it was not with a buyer represented by one of the agents in our office) but if the buyer switches to another agent without providing written notice to the original agent they are in danger of owing two commissions (only one of which would be paid by the seller).

It is a simple matter to draft a letter to your original agent in writing letting them know you have decided to use the services of another agent; under our agreement you would be under contract with the original agent until you have done this.

I would encourage you to email me with the specifics of your situation. There is an "Email Me" link under my picture at the top of this page.

Jun 14, 2008 03:59 AM