I Know I'm buying a House - But I Don't Want to Sign Anything

Real Estate Agent with Laffey Fine Homes

The seller pays the commission when you buy a house. Right? Wrong. The commission is paid out of the proceeds of the sale. And who is paying for the house? You, the buyer.

When the listing agent lists a house, the commission is decided between the agent and the seller. The agent usually agrees to split the commission with a cooperating agent. Most cooperating agents are sellers agents and they are sub-agents of the listing agent. In fact, all agents are sub-agents of all the listing agents where the agents are licensed. Confused yet? In states with agency laws, the listing agent owes fiduciary responsibility to the seller. And all of the agents who bring buyers (their customers) to look at the properties also owe their fiduciary responsibility to the seller.

But there is another type of cooperating agent, and their commission is also already decided between the listing agent and the seller. This other option is called a "buyer's agent." In this case, the agent decides that he or she is not going to owe their fiduciary responsibility to the seller. They are going to work for the buyer. As a buyer, you are ALREADY paying for one type of cooperating agent or the other. Or you can pay for the listing agent to get the whole pie.

Many buyers think that they can get a better deal if they work only with listing agents. This is wrong on so many levels, but not the subject of this post. Many buyers think that they need to be free to go to any agent at any time during their search for a home. They can only do that when they work with seller's agents. What can a seller's agent do for you? They can make appointments to show you homes. Basically that's it. They cannot advise you, they cannot search out properties for you, they cannot preview homes for you, including "for-sale-by-owner" homes, they cannot give you any information that would improve your bargaining position, they cannot keep confidential anything you tell them. They owe you only honesty and fair dealing. I'll tell you a secret though, many seller's agents will do these things for you anyway. That is a breach of their fiduciary responsibility to the seller. Do you want to work with agents that will breach their fiduciary duty?

Wouldn't it then make sense, because you are paying for an agent's commission anyway, to pay for the one that works for you? Well, that would mean that you would have to sign something, and you don't want to sign anything. I can't think of any activity that requires more signatures than buying a home. You will have a hand cramp by the time you get through with the closing. But you don't want to sign an agency agreement with a buyer's agent--for the most important purchase you will probably ever make. AND YOU ARE PAYING FOR IT ANYWAY!

What am I trying to say? As a passionate advocate of buyer agency, I would urge you to understand disclosure and agency laws before you begin your search for a home. Before you do anything, understand where commissions come from, who agents work for, and what the different types of agents can and should do for you in your state.

Comments (6)

Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

Very good I have just finished my class on agency for the renewal of my lic. so I am very up to date.

Feb 11, 2010 04:23 PM
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

Wonderful post. In NC we have a Working with Real Estate Agents brochure that we are required to give everyone, buyers and sellers at first substantial contact. It gives everyone an explanation of agency in NC. You did a much better job of explaining agency in your short post. Thanks

Feb 11, 2010 04:35 PM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Diane:  In Texas, on our listing agreements, there is a space where the choice is to either pay the agent who brings the buyer... as a "sub-agent" or as a "buyer's agent."  Almost all of the brokerages will NOT pay the other agent if he is a sub-agent, but they will pay him if he is a buyer's agent.

Right now in Texas... an agent cannot "represent" both the buyer and seller.  If an agent is "working" with both buyer and seller, and IF both buyer and seller agree, they can sign a form which allows an agent to act as an "intermediary"... which basically takes me back to how things were done in the seventies and eighties.  It worked fine, then... and if handled ethically... it can work well now.

Unfortunately, that current practice is also open to abuse... but, then again... what isn't ?

Nov 15, 2010 10:34 AM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

By the way... I have looked over several of your posts, Diane, and have noticed that you have not included any of them in the maximum of five Active Rain Groups.  This post has not been "included" in any of the AR Groups.

You write very well, and seem very knowledgeable.  I think your posts deserve more readers.

If I may make a suggestion... I think you could get much more exposure for your posts, and both increase your traffic and business, AND your ability to have other Active Rain agents from out-of-state... refer buyers and sellers to you.  BUT... they have to know about you, and have to have read your blog posts to do that.

Here is a tutorial post I wrote about Using the Active Rain "Groups Feature".  Many Active Rainers have found it helpful.  I hope you do, as well.  Have a great week.

Nov 15, 2010 10:41 AM
Diane Schubach
Laffey Fine Homes - Port Washington, NY

Thanks Karen: I didn't realize that I should be including them in 5 groups. I'll take your advice.

Nov 16, 2010 03:11 AM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Diane:  It is not a "should."  But... the more folks who see your posts, the more comments you will get, and the more people you will "meet..." people who could send you referrals once they got to know you and what a great agent you are.

The more sets of eyes that see you, the better your chance at building your business.

And... I hope I didn't sound too "pushy" in making those suggestions above.  I was just trying to help.  It is a "holdover" from my nine years of teaching experience.  <smile>

Nov 16, 2010 07:09 AM