The Difference Between Exclusive Buyer Agency and Designated Buyer Agency

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Real Estate Agent with Buyer Broker Chicagoland - CHICAGO IL AND SUBURBS

I don't know one consumer who understands the different types of representation available to them when purchasing Real Estate.   And the vast majority of real estate agents and brokers really understand the different between true buyer agency and designated buyer agency. 

Hopefully - these diagrams will make it much easier for you to understand.

You need to understand that a consumer's legal relationship is always with the broker or brokerage, never with the agent they are working with.  In fact, it is illegal for an agent to take compensation directly from a client.  Compensation must be paid to the brokerage - and the broker distributes the commission to the agent.  The relationship is with the brokerage and any compensation must be paid to the brokerage.

 

Here is a diagram of Exclusive Buyer Agency:

Buyer Agency Chart

Note the buyer is blue, and everybody in the real estate office is also blue. They all represent the buyers and have requirements of loyalty and full disclosure to the buyers.  This is what you get when you go with an Exclusive Buyer Agent who is part of an Exclusive Buyer Agency.   Exclusive Buyer Agencies and their agents never represent sellers.

 

Here is Designated Buyer Agency (When a Traditional Agent calls themselves a "buyer agent":

Designated Buyer Agency

Designated Buyer Agency is what a typical so called  "Buyer Agent' would be.  The "buyer agent" works at a company that lists property for sale.  The so called "Buyer Agent" also lists property for sale (represents their listed sellers.)  

Note how most of the people in the office are no longer agents of the buyer? In fact they may know something that would be very important to the buyer to learn, but they have no obligation to tell the buyer since they are not agents of the buyer.

But note that this is only one of five different forms that designated agency can take. The other four forms are often much worse for the buyer than this one.

Here is a real life example:

A home seller had their home listed with a brokerage and had a purchase contract but after the home inspection showed major problems with the construction that buyer backed out.

That company lost the listing and a different company listed it. The seller didn't tell the new listing agent about the defects. Now a different agent from the first company brought in a buyer. Should the buyer be told about this major defect? Yes if the company is a buyer's agent, no if it is a designated agency.

The second buyer's inspection was not thorough and they missed these defects. These defects cost a lot of money to repair.   So much that the buyer had to move out of the home and it eventually went into foreclosure.

In court, the first real estate company was not found liable.  This is the company where some agents knew about the major defects when they helped the buyer buy the home. The buyer signed a Designated Buyer Agency contract with them (which is 100% of the "buyer agency" contracts that traditional agents use in the State of Illinois)  which protects the traditional conflict of interest ridden brokerage - who represents both sellers and buyers.   It protects their business model of double dip commissions, and horrible conflicts of interest that can screw over home buyers. 

If that company had been an Exclusive Buyer Agency - they would have been told about the defects.

The law requires tat Designated Buyer Agency agreements to be in writing - but most consumers don't read them or really understand them.

Exclusive Buyer Agency contracts are simple and intuitive.   You have someone who is fully on your side - and the other agents in the company don't have interests that are adverse to yours - nor does the broker - because no one has seller clients.

You can use our map based property search by clicking here.

Call 847-566-7558 or e-mail to schedule a no cost initial consultation – to determine if we would be a good fit.

Certified Negotiation Expert – Buyer Broker Chicago / ChicagolandAccredited Buyer Representative – Buyer Broker Chicago / ChicagolandGraduate Realtor Institute – Buyer Broker Chicago / ChicagolandNAEBA

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Rainmaker
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Excellent pictorial and explanation of these often misunderstood terms, Rick.  The way you lay it out here makes it much more clearly understood and should make much more sense to a potential home buyer.  Great job!  Consider it suggested ...

Gene

Mar 05, 2012 06:50 AM #1
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Rainmaker
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Rick Hauser

ABR, CNC, CNE, GRI, SFR, Exclusive Buyer Agent-Cov
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