The Empowered Buyer: Choose Your Agent … Then Lay Down the Law
By Eric Peter Hoffman
Prospective homebuyers often seek to work with real estate agents before they begin searching for homes. As the name suggests, a buyer’s agent speaks for the buyer and will arrange for the buyer to have their goals met at all stages of the transaction. Even though that sounds straightforward enough, buyers and dealers now and then are confounded by the relationships that exist between the land agent, the buyer and the seller. To help provide some clarity for homebuyers, some states have passed laws that mandate what agreement between the agent and the purchaser must contain in order to be considered valid.
One example is in Virginia where buyers are not required to work with agents and can negotiate the terms of agreements with their agents. A successful practice has been to agree to a one-day contract with an agent so that a buyer can “try out” the agent, who will disclose listings to the buyer in the hopes of winning a chance to sign another agreement for a longer term.
Kelly Normand, a copartner representative with Century 21, explained some of the challenges facing buyers in Virginia. Virginia is a caveat emptor state, so purchasers without representation are left to do research without any outside help.
John Lesniewski, with Re/Max United Real Estate, stated that Maryland agents must present an information packet called “Understanding Whom an Agent Represents” to potential customers, yet purchasers are not required to sign full agreements.
Confusion can also arise in instances of double agency, when one agent speaks for both the buyer and the seller. A double agency scenario can come up when an agent has a listing and then works with a purchaser who is interested in making an offer on that same listing.
“In Virginia and D.C., buyers can agree to double agency if they want to buy a home listed by their Realtor or they can opt for designated agency, which is when two different agents from the same brokerage represent the buyer and the seller,” Mr. Ford said.
To avoid the difficulties of double agency and designated agency, a buyer may choose to work with an exclusive agent. An exclusive agent works for buyers only without any influence from sellers.
Certain agents, regardless of the possibility that they work for a business that works with both purchasers and merchants, decline to do double agency and rather will utilize a designated agent to handle one side of the transaction. This can have many of the benefits of an exclusive agent and is one of the more popular choices for new buyers.
Certain purchasers are hesitant to sign a purchaser agent agreement, especially provided that they are simply investigating the thought of acquiring a home.
“Some people are just naturally commitment-phobic, but other people worry about paying a fee to the buyer agent regardless of whether they find a home or not,” Ms. Normand said. “The buyer-agent agreement must show what the Realtor’s fees are, but the Realtor is paid at settlement from the proceeds of the sale. Technically, the seller pays the Realtor’s fees, but in reality, that fee is built into the price so the buyer is really paying as part of the home purchase.”
Another consideration is retainer fees that might be come back to haunt the buyer at closing. These fees are set costs that may not be disclosed until the end of a transaction, leaving a buyer with little recourse.
The buyer should carefully read buyer-agent agreement before signing and pay particular attention to the issues of compensation and termination of the agreement. If the buyer wants to end the agreement early, there should be rules for how to do so in the contract. This typically requires a mutual written consent by the buyer and the agent.
If you have any questions about these agreements or anything else mentioned in this article, please feel free to email me at EHoffmanNJ@gmail.com.