Home buyers begin their journey to a lifestyle upgrade filled with enthusiasm and a little apprehension, and that is as it should be. Your home purchase is usually the greatest financial commitment in your life, and it's hard to not worry that you're doing everything right. Today we'll address the reason why you probably need to formally engage a buyer representative sooner, rather than later.
You have gotten together with a loan officer and provided the needed information and documentation that is needed for you're prequalification for a home loan. You have found an agent who seems like a good fit for you. He/she is intimately familiar with the general area that you have decided to target for your new home, and you seem to get along with each other fairly well. The agent is an Accredited Buyer Representative, and has helped other folks like you find homes similar to the one you're looking for. The agent took the time to go over the several possible agency relationships that exist in the state of Minnesota, and it really wasn't even boring. Now it's time to start looking at houses. Well, almost time.
The state of Minnesota also has a law that requires licensees to enter into a buyer's broker agreement before performing any acts as a buyer's representative. One reason for that requirement is that the agreement binds the agent to certain responsibilities that do not exist until there is a formal agreement. Without a buyer's broker agreement the agent is considered a facilitator, a neutral party whose ability to assist you is limited to actions that do not favor one party over another. A neutral party should not advise a buyer as to the merit of one property over another, should not assist a buyer in determining the market value of a property, and should not do anything that could influence a buyer to choose one property over another. The neutral real estate agent is able to do little beyond unlocking doors to a listed property and follow your instructions in completing the standard purchase agreement if you choose to make an offer.
The buyer's broker agreement binds the licensee to advocate on your exclusive behalf to find the best property, to determine its market value, and to do all possible to negotiate the best price and terms for you. By law, and according to the written agreement, your buyer agent must put your interests ahead of his/hers, must follow all your lawful instructions pertaining to your purchase of a home, and do all possible to protect you from foreseeable risks and harm.
Without a buyer's broker agreement in place, a licensee is free to do just about anything within the scope of legality, without regard for its effect on you. For example, you ask a neutral agent to show you a home. He agrees, shows the home, a great home offered at a great price. You tell him you're thinking about making an offer. However, he buys the home for his own investment purposes. That would not be allowed if you had previously engaged the agent as your buyer representative.
Some buyers are hesitant to enter into an agreement with an agent for exclusive representation. If you don't think you want to engage a particular agent, you probably should keep looking for an agent who seems like a better fit for you. It may be surprising to some buyers that there are agents who prefer not to have a buyer's broker agreement with home buyers. No contract, no responsibility other than to not lie to the buyer. When you encounter an agent who does not offer to enter into a buyer agreement, or who tries to convince you that it is not necessary, you have to ask whose interest that agent is choosing to serve.
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