Buyer Brokerage Agreements

The important thing is that the client understands the committment. That can be done verbally or on paper. Nothing wrong either way in my opinion, although if I make a presentation I almost always ask for the agreement in writing and I always write an easy out clause because if the client wants out or feels uncomfortable why fight it? There are too many fish in the sea. 

Evelyn...Good question.  Every once in a blue moon I think I'm going to ask my buyers to sign an agreement but I don't.  I sell most of my property at Lake Anna.  Buyers are generally looking for second homes or retiring here.  Some find their homes or land quickly, others take months and even years (that's right 1, 2, 3 years, or even longer).  They also are not sure that they want to buy here and often want to look around at other retirement/resort areas.   I just rely on doing the best job I can for them and knowing that if they are satisfied they will continue to work with me.

I use buyer broker agreements.  I also have a drop clause.  Either of us can drop the other for any reason... with notice.  It covers either of us in case we "don't mesh."  But, since it requires advanced notice, it discourages people writing a contract and then firing me...

I agree with Lane. You are representing the buyer and it is your time. Not everyone will want to sign them, but then you need to be the judge if you want to work with them or not. Having an easy exit policy works to encourage most people. Without a buyers rep agreement they have no representation as a buyer.

Hi Evelyn,

What you said here:

"I still don't want a Buyer tied to me because of a piece of paper."

With some sort of release clause in place, neither buyer nor agent/broker will be stuck if the association is not good. I have found that it is important to determine personalities upfront via the buyer counseling session. If personalities do not click during the counseling session, then it should be very obvious that the buyer may be better off working with someone else. At this point, wish them well, and let it go.

I will not work without an exclusive buyer agency agreement, because I need to know that my time will not be wasted. I approach my business as a loyal advocate, a valuable consultant, and a trusted advisor. The only time I will consider a non-exclusive buyer agency agreement is with an experienced real estate investor, who has many years of experience. Either way, there is some form of an agreement in place before I start working.

There are still many buyers out there who will equate real estate agents and brokers to car salesmen, and while there is nothing wrong with a career in sales, this is not an accurate perception of our profession. There is so much more to being a good real estate agent or broker. A good real estate agent or broker is a professional who knows how to study the market, synthesize market information to compile valuable reports, and understand how to use this information to benefit their clients. A professional agent or broker needs to understand what their client's goals are, they need to take the time to become familiar with each clients' unique situation, and they need to use their experience and knowledge to assist clients in assembling the research needed to help them create an effective plan--a plan that reflects their unique situation, including the negotiating strategy. It takes an investment of time and energy to accomplish this, and it requires a comittment from both buyer and agent/broker. If a buyer is going from agent to agent without a buyer agency agreement, then how can an agent or broker invest the necessary time and energy to do their job effectively? 

It is true that there are many buyer's who will not sign a buyer agency agreement, but I know for a fact that there are many buyers who will, and I recognize the value of my services enough to reserve them for those who will. There's an old saying, "If you can't respect yourself, then no one else will." This surely applies to the way that real estate professionals work with consumers in the industry. Would a listing agent work without an exclusive listing agreement? Most will not, and for good reason. The same theory applies to buyer agency agreements. Just make sure that there is a release clause, and no one will be stuck, unless there is a property already under contract.

 

What I do is simple. I explain it up front. First time we go out, they don't have to sign one. We spend time together; we get to know each other and if at the end of that we didn't find the right home and they want to go out again, then they have to sign.

Suzette, you make some valid points.  I wish the buyer agreement that we have was less wordy although I know everything should be spelled out. 

Oops.  I should have used the word must instead of should.

Kathleen, I know what you mean, but you are right. We really need to spell everything out, or else we risk leaving things up to chance. It helps to provide a general overview of each clause, without interpreting the language, so that it establishes familiarity with the buyer.

However, buyers need to review the agreement with their attorney, so that they can receive legal interpretation, as well as have the opportunity to add or subtract provisions if necessary. This is actually very good for buyers, because it enables them to engage the process of negotiating the agreement. Many buyers are unaware that they can do this, and so they are scared off by agreements. If they know they have some say, this tension can change to flexibility if they feel comfortable. 

The tone is not, "here is the agreement, sign it."  Rather, the tone changes to "Here is our standard agreement. Please review it with your attorney, and if there are any concerns, let's negotiate until the terms are mutually acceptable." In my honest opinion, this sounds less intimidating and it conveys concern, honesty, and professionalism; which builds trust and raises the bar for our profession.

I think it is important for agents and brokers to encourage buyers to consult with their attorney about all agreements before signing them, verbally and in writing, so that it reinforces clear communication and provides a record that such encouragement took place.

 

 

I do it at the signing of the contract offer.  Explain that it is something I have to have and haven't had any problems with it.

In Washington State, brokers and agents have to discuss agency issues well before making an offer. We are required to make agency disclosures during the first meaningful contact; for example, the buyer counseling session. This is an ideal time to discuss the buyer agency agreement.

Suzette...it is similar in Virginia although we are required disclose agency relationships as soon as a buyer expresses interest in a particular property.  That is why i discuss it the first time we meet.  For some reason our buyers seem to be in a rush to get on the road and start looking.  I would be hard pressed to take the time fully explaining the buyer's agreement.  We have to spend a great deal of time discribing the lake, etc.  I believe that from now on I will just give them a copy of the buyer's agreement and let them take it home to review alone or with their lawyer whichever they prefer.

Kathleen,

What you say makes sense. You are right. Buyers are usually in a rush to get out the door to look at properties. I think your new approach with the buyer's agreement sounds reasonable, and it gives buyers the opportunity to review it with their attorney. Do you usually pre-qualify buyers at your first meeting?

When I first started out in real estate, I would put any interested "buyer" in my car until I learned how expensive this practice can become. Then I discovered how important it is to uncover motivations upfront, and to determine whether or not a buyer is serious, or whether they are just looking for a free tour of the city or county. Since I only deal with buyers, the process of uncovering motivations upfront is even more acute, and the need for a buyer agency agreement is more pronounced. However, I find that when I explain things to a serious buyer they are pretty understanding. Conversely, when I try to explain this to a buyer who is not serious, they soon reveal themselves.

Evelyn,

I find it very interesting how real estate laws vary from state-to-state, although there are also many similarities. It is exciting to exchange ideas and experiences with peers. We really can learn a lot from each other. :)

 

Evelyn - if you feel comfortable working without a signed BBA, then by all means don't fix what isn't broken. However, at the very minimum, you should get one signed before writing an offer to purchase; your state law may even require it. By doing that, you will have given your clients full disclosure about agency relationships and how they may, or may not, affect the purchasers' interests.

Evelyn,

   In New York State it is in the best interest of the buyer to have a Realtor working in their best interest.  The Buyer's Brokerage agreement lets us disclose information about a property to a seller that a sellers (listing) agent could not.    I recently made a post on this topic I have pasted it below to help bring my point across.

Best of luck

Mark Schreier

Century 21 Prevete,

Long Island, New York

Attention Home Buyer's

Why Are You Paying For A Service You Are Not Getting??

  

What are the benefits of the buyer broker agreement?

 

As Realtors our first responsibility is to represent the best interest of our client.  With this in mind it is very important that all home buyers understand who the agent is contracted with.  When an agent has a contract with the seller of a house they are considered to be a listing agent.   That agent has a legal obligation to market and sell that house for the best terms and (highest) price possible. 

 

When this listing agent sets his commission with the seller he figures in a certain percentage to offer any agent who brings a buyer for that property.

 

When a potential buyer makes an offer directly to the listing agent or any other agent that he doesn't have a buyer brokerage agreement with.   They end up paying a commission for a service they are not receiving.   

 

 

The service is already paid for by the commission the seller agreed to pay at the time of the listing.

 

Why not even the playing field by having a Realtor look out for your best interest!

 

 

When you contract with a Realtor to be your buyer broker you have just hired a professional to help you with all phases of the transaction.  For example:  dealing with attorneys, appraisers, home inspectors, mortgage bankers, and other agents. They will aid in negotiation, do research and analyze market data.  

 

If only I new this when I purchased my home.

 

 

For more information on this topic click the following link:

 

http://www.markschreier.com/video.html

  

  

In my opinion they should be mandatory.  That would eliminate Buyer Agents crying the blues about how the Listing Agent divides the total compensation.

Evelyn, if this works for you, great! For me, I agree with the one commenter who said the Buyers Agency Agreement should be...a normal, standard, business procedure - expressed in his words, MANDATORY! :-)  We serve the greater metro Orlando area near DISNEY. You probably can imagine the vacationers and tourists that visit from all over the United States and the World. They love touring all the communities and viewing the homes - "for that day in the future when they may buy." They - and many buyers - just do not realize the work, time, calls, expenses, education, and years that goes into the life of an experienced real estate agent. The Buyer's Agency Agreement brings these issue to the forefront where both parties have an understanding of one another. Now they can establish a relationship of openness, trust, loyalty and commitment with a partiicular goal in mind...they are in sync. There is a saying I heard years ago that I really like: IF IT WORKS FOR BOTH PARTIES, IT IS A GOOD DEAL. The Buyer's Agency Agreement - in my mind - does that. But Evelyn, there is another saying we have heard often enough: HOW'S THAT WORKIN' FOR YOU? If your way is working for YOU, why stop. :)