Should I sign a buyer’s agent agreement?

by Kevin Lisota on 29. Sep, 2008 in Buying a Home

When you are buying real estate, there are times when your agent will ask you to sign a “buyer’s agent agreement”. What is that agreement and should you sign it?

The relationship that sellers have with their real estate agent is clearly defined when they place their home for sale. It defines the relationship with the agent and clearly spells out the commission that the seller will pay to both the listing broker and the selling broker when the sale of the home closes.

In contrast, buyers will often work with a real estate agent without any formal written agreement in place. A buyer’s agent may spend weeks or months helping a buyer to find a home. Sometimes a buyer will switch to a different agent at the moment of signing a contract for a home. It can be an inadvertent change, such as writing an offer directly with a sales office of a new subdivision. It can also be an intentional change, maybe to give a friend the real estate commission or simply to change to a discount broker at the last moment to save money. Obviously the original agent expects to be compensated for their work, so they will ask for a buyer’s agent agreement up front to avoid these situations. A buyer’s agent agreement will specify rights and duties of the buyer and the agent and will also specify how and when the agent will be compensated. In some states (though NOT in Washington), if you don’t specify and sign a buyer’s agent agreement, the agent may by default represent the seller.

Real estate agents are taught to sign these contracts to protect their interests and ensure that they get compensated for their work. In our opinion, asking for a commitment like this is the quickest way to turn off a buyer that we haven’t worked with before. We do sign a contract that outlines our rebate when we work with buyers, but do not require a buyer’s agent agreement. One of our competitors, in contrast, requires their buyers to sign a buyer’s agent agreement when they make their first offer. That agreement locks them in for 180-365 days for any future offers. This seems a bit excessive to us.

Buyer’s agents do deserve to be compensated, and our hope is that customers recognize the value we provide. We simply don’t believe that the formal agreement is needed to “lock in” our customers. Besides, the negative consequences of trying to enforce such a contract can far outweigh the benefits it provides to us.

If you are considering signing a buyer’s agent agreement, make sure that it covers the following points:

  1. Shorten the term – If you are unsure about the agent you have chosen, shorten the term so that you are able to switch agents if it doesn’t work out.
  2. Try out the agent – Offer to sign the agreement after a “trial run” of seeing homes with the agent for an afternoon or two.
  3. Make sure you both can terminate – If the relationship isn’t working, give both yourself and the agent the opportunity to terminate and move on. In Washington this happens one of three ways. The agreement terminates at its expiration date, the agreement terminates when the transaction is complete (i.e. house purchase is closed), or the agreement terminates when one party gives written notice to the other.
  • Well I think that without an agent there is a strong possibility that you could get taken for a ride by some unscrupulous builders. The builders have representation and so should you, if for nothing else than a guiding hand during the paperwork review and purchase process.
  • lalalulu999
    I am a buyer and I regret signing one. I'm buying within a month and the guy is really not motivated or something. It's very strange. I'm more the kind of person that likes to get things done quickly but he seems like he could care less about my timeline. When I signed it he said they are very easy to get out of but I don't even know if that's true. Maybe easy for him, since he gets paid even if he doesn't help me, it seems.
  • nobuyersagreement
    There is NO benefit to signing an exclusive search agreement as a buyer. None. Zip. Nadda. 'I won't waste my time' as stated by Lou is simply a cop out. A 'search' involves a few clicks of a computer, and you want 4 or 5% for this? Not on my watch. You pick me up, you buy me coffee and lunch, you take me to the properties that you want me to see, you negotiate a savings on the asking price - then I'll sign an agreement. Show ME you will work FOR THE MONEY!
  • Betty in Georgia
    To the realtors: It is very loyal of you to speak out on behalf of your profession. However, I will never sign a BA again. A realtor on a previous post wrote that she is a good person who is honest, and work hard. So am I.
    To future buyers: After signing a 6 month BA, my husband and I endured the less than desirable services of realtor out of good faith for 5 months. We finally asked to be released at the end of the 5 month period because of the realtor's unavailability. She agreed but sent a list detailing that she expected to receive commission on any properties that we had access to in a Gateway (internet)profile that she established when she was trying to woo us as clients in the event we make any purchase within the next 60 days. So it ties our hands and keeps up from moving forward with another agent.
    My advice: Buyers Beware!
    Know the exact terms of what you are signing because there are people out there who are depending on your lack of knowledge to exploit and take advantage of you.
  • Lou

    As a Realtor for nearly 20 years, I no longer work with buyers longer than one week without a Buyer Agency Agreement. That should be long enough for a buyer to decide whether or not I am competent enough to represent them. My time is too precious to me and my family to waste it on a disloyal buyer. If they (buyers)want to terminate our agreement, that's fine, but if they want to buy a home I have previously shown to them, they'll need to "offer" thru me or pay me a fee.

  • Susan
    Lou,

    I would never hire you for a million years. My time, my money and my health are too precious to me to deal with not professional people. Y
  • CP

    Right on Alysan! You said it perfectly. I feel for buyers and sellers b/c there are a lot of bad agents out there. However, most people are good judges of character and you can tell when someone is on the ball...if so, sign the B/A you can get out of it at anytime but at least you both know that you are both working in each others best interests!

  • AlySan

    I can understand the point of view of the buyer who has had a bad experience but, I want to say that, I, as an experienced agent, have spent months with buyers, only for them to buy a home from someone else. I'm always at my phone and I have a Blackberry so I answer emails very quickly. When I get a request for information on a property, I get to it immediately and I represent my buyer to the fullest extent.


    I've rearranged my schedule and have given up my personal plans to meet the schedule of buyers, I've been hit on by husbands, had people's children running through someone's home and the parents didn't tell them not to. One child stole a toy that I noticed in the car and I had to ask for it back and bring it back to the house. I was accused of not liking children for asking someone's kids to put gum back into their mouths in someone's home and the buyers bought a home from somewhere else. There was no winning with that. I've had buyers go directly to the seller or builder after I showed them the home. We are legally unable to give out certain information (we can give sources for information) yet I was fired by a buyer for obeying the law.


    I ran out a number of times to show one home at a time to a lady and when I asked her and her husband to sign with me, the man said he wouldn't sign with anyone. I continued to help them (I shouldn't have) and they bought a home from someone else because they called on the sign.


    Please consider that some of us are very astute, educated and serious about good service. My mother was a Broker as am I and I'm an educated, good person, as well, who has the right to make a living doing what I'm very good at.


    With any agreement, it works both ways; it's not just for the agent's benefit. A buyer's agreement holds an agent accountable for representing the buyer to the exclusion of any sellers. We owe the buyer the loyalty to find them what they're looking for, educated them on the process, assist them with getting a mortgage and find information and report to our "client" anything that can assist the buyer in negotiating. I've been in the business long enough to be able to anticipate problems and catch them before they happen or get out of hand. An agent who isn't representing the buyer owes the buyer nothing. The agent needs to be held to that responsibility. Buyers deserve to have an experienced, licensed party to advise them. If your agent does not adhere to their part of the agreement, the buyer has the right to request to get out of the agreement. Talk to the agent's broker and/or put it in writing.


    Listing agents negotiate their commission with their sellers and then offer buyer's agents a portion of their commission to bring buyers. If you go directly to a listing agent, they will keep their negotiated commission; not give it to you.


    In return, my hours of working for buyers, taxiing them around and money I've spent in gas shouldn't be for naught. The amount of time I've worked with no paycheck brings down my hourly rate considerably. I'd appreciate that people not stereotype and use one bad experience to label all Real Estate agents. We are not all the same. Thank you.

  • Mercy

    We have 4 page complaint letter against our Realtor & Broker. Should we file this complaint with TREC? Any suggestions?

  • Mercy

    We are in a tensed situation with a realtor right now and Karel, your words are very soothing at this time. Thank you for your comments.

  • Joel Stern

    The need for clarity in real estate transactions is crucial. I was victimized by a sham buyers agent in 2005 because of my naivete, misplaced trust, and ignorance of obscure toohtless statutes. For more information about my experience, go to Google and type in my name "Joel Stern", then "Weichert": you'll find numerous blogs and websites devoted to my lawsuit against Weichert Realty of Maryland for consumer fraud.

  • Bill

    Karel is absolutely correct!!

  • My point of view is from a buyer’s perspective only. I was thinking about to become a Realtor, because of the miserable service I am experiencing it should be very “easy” for me to make a lot of money. My focus is on customer satisfaction and not to focus on if I am working for free. HA HA


    I can say that signing a BA is not in my best interest. My experiences with realtors are quite disappointing. Being reliable, competent and up to date with market trends is not likely in Oklahoma. I had to "run" from so many agents, because of this.


    I just got tired of waiting weeks for an answer or waiting at the estate with an appointment and the agents are always late or not showing up at all. Dishonesty up to thick lies is very common. Also to find out if a realtor is willing to work in "my" favour has to be discovered from me yet. Everybody is so focused on that they are not working for free that they are totally forgetting about the buyer’s needs.


    Anyway….. in general comparisons of buying a “product”. If I go to a car dealer and they are asking me to sign a BA before they actually have a car what I am interested in…….What would I do? I would just walk away until I have a specific car what I want to buy. PERIOD.


    I hope that my post is an “inspiration” to all the realtors out there who are thinking about “their needs” first.


    Do you want to sell? Serve the customer’s needs! Be reliable, honest, competent and educate yourself in business customs.


    Here are some things of interest of what I am missing in Oklahoma – Business customs:


    “Hello”, “thank you” “goodbye”, “you are welcome”, something to drink when I am in a Realtors office.


    I noticed the more money I am willing to spend on a “product” the worse the service gets. I get better customer service at a grocery store then from a realtor where I could spend a lot of money. I think realtors have a lot to learn.


    Another thing of interest:


    When I am opening the phone book to find a realtor every second number is already disconnected. That speaks by itself. Realty is NOT about “quick shots”.


    Conclusion:


    Any realtor who is asking me to sign a BA prior to the sale is out of the game immediately and I do not care what anybody has to say about this. If a realtor wants the buyers money they have to serve the “clients needs” first and not their own. The argument that “I do not want to work for free.” is completely inappropriate from an independent business person’s point of view. People who have that in mind are just not ready to be on their “own”.

  • Michael P Lindekugel

    One of the most popular reasons for lawsuits and arbitration is procuring cause. A buyer's agency agreement helps protect the agent and the buyer from an intentional or unintentional lawsuit.


    Findwell doesn’t really believe in using buyer’s agency agreements. Do you use listing agreements? If you do, why?

  • Thanks for the comments Reba. That is great clarification for Washington residents.

  • I find it interesting that your comments about what to look for in a buyer's agency agreement and specify the "make sure you both can terminate". In WA State there are 3 ways that agency can be terminated: 1) expiration of the contract and there should always be an expiration to be a valid contract - no business relationship is in perpetuity, 2) since agency is transactional in this state a relationship with an agent ends if you've concluded your business, meaning, that a home sale has been completed, and 3) termination by either party (usually required in writing).


    Don't forget though that buyer's agency agreements should spell out not only what the buyer's requirements of the relationship are, but also the agent's duties to the buyer. Much like your firm puts the rebate info in your forms, we also put any guarantees, disclosures, and other aspects of what the state or our broker requires us to put in.


    Welcome, findwell to the local marketplace. It will be interesting to watch how your firm grows and how Redfin responds to your business model.

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