Choose
a Form of Agency
Agency
is the term used to clarify for whom your realtor works. Years ago, all realtors
worked for the seller, no matter the relationship between the realtor and the
buyer. Now the buyer has the option of having their realtor represent their
own interests, even though the realtor is receiving a commission paid by the
seller. If you do not sign a buyer-broker agreement, your realtor does not work
for you. If you are unsure about signing a buyer-broker agreement, ask your
realtor if s/he is willing to cancel the agreement in writing if your first
(day/week/month) does not go as expected. Read on for the Pros and Cons of a
buyer broker agreement:
Pros of having a Buyer-Broker
Agreement
- Your realtor is loyal to you.
Information you share with your realtor will not be passed along to the seller.
- When purchasing a property
through the Bright Multiple Listing Service (MLS), the commission
paid to your realtor is set in advance. Although your realtor is being paid
by the seller, your best interest is represented. You may want to specify
in your buyer-broker agreement that the commission specified in the MRIS is
the commission your realtor will to accept. (Not all commissions are the same)
- Often, For Sale By Owner (FSBO)
properties are willing to honor your buyer-broker agreement and are happy
to have your realtor draw up the contract and facilitate the negotiations.
- You may protect yourself from
getting into a long term agreement with a realtor that is not compatible with
your needs by adding the clause "this Buyer Broker agreement may be terminated
in writing at any time by either party."
Cons of
having a Buyer-Broker Agreement
- You probably would not want
to work with multiple realtors at the same time, but if you do, this contract
protects the realtor from losing out on their commission.
- Some FSBOs may not accept
the terms of the buyer-broker agreement. In this case, you may still use your
realtor to purchase the FSBO, and the commision due to your realtor will be
paid by you. Often this works out if the sale price of the house has been
lowered by the expected savings on commissions.
Pros of
NOT having a Buyer-Broker Agreement
- You may stop working with your
realtor at any time. (A way to work around this is to request a clause in
the buyer-broker agreement specifying that it may be terminated in writing
at any time)
- You may find a FSBO who
is not willing to help with your realtor fees and you can legally purchase
the house without paying your agent for their time and effort.
Cons of
NOT having a Buyer-Broker Agreement
- Information you share with
your agent that is in the seller's best interest, may be disclosed to the
seller. For instance, if the seller asks, "Can your buyers qualify for
$5000 more?", the agent must answer truthfully if your realtor actually
works for the seller (i.e., does not have a buyer broker agreement).
- The realtor is not working
for you, all of the realtor's experience and insight is not available to you.
- When negotiations begin,
you will not have an agent representing you. Who typically pays for the termite
inspection? If there are findings in the home inspection, what is realistic
to expect to be fixed? What time frame will work best for you vs. the seller?...
