Why Should I, as a Buyer, Sign an Exclusive Buyer Brokerage Agreement?

Last Saturday, I spent the afternoon showing property to a prospective client. Instead of meeting her in the office as I normally do for a first meeting, I picked her up at her home. We visited and toured approximately 12 homes during the afternoon.

Typically, when I meet people in the office and among other things, we discuss the "agency" concept, 99% of buyers choose to become a "client" rather than a "customer". It's really kind of a no-brainer.

Buyers do not pay for the services of their Buyer's Agent. UNLESS, for some reason, (which will be discussed further down this post), there is no commission already factored in to the sale of the property. This rarely happens. It is unlikely that Buyers would ever be expected pay for the service of their agent. So, WHY wouldn't you want your Agent checking out the structure of the home you want to make an offer on? Why wouldn't you want your agent to run comps of the neighborhood as well as the area so you could make an informed decision about whether you truly want to purchase the property?

Your agent is NOT permitted to perform these tasks if you are not a "CLIENT".

Back to my story. Because my client was somewhat pressed for time as well as the fact that we didn't meet at the office, I neglected to bring up the subject of "agency". As a result, we did not discuss buyer agency options. I made the mistaken assumption that the "prospective customer" would become a full "client". I did perform tasks as usual of checking foundations and structures. I did a lot of due-diligence on each house we entered. Again, I was wrongly assuming this women would be a "client".

However, 3 days later, this prospective client decided she wanted to make an offer on one of the properties we visited during the previous weekend. While I was preparing the contract, she mentioned that she did not want to sign the Exclusive Buyer Brokerage Agreement.

WOW! I have never had anyone decide NOT to be a "client". She told me that she had worked with previous agents who never asked her to sign a Brokerage Agreement.

In Georgia, our contracts and paperwork, dictate that all Buyers need to determine whether they want to be a "client" or a "customer". There is a definite difference in the service you will receive from your Realtor. If your Agent declines to do due-diligence, that you think he/she should be doing, the reason is most likely that you have determined you want to be a "Customer" and not a "Client". It surely isn't that your agent does want to help you with the transaction.

For this reason, I share with you an article written by Ann Bone, VP and head Broker of Better Homes and Gardens Real Estate Metro Brokers. Here, Ann outlines below the reasons that it makes good sense for every buyer to sign a Buyer Brokerage Agreement to determine whether they are a "client" or a "customer".

Why Should I, as a Buyer, Sign an Exclusive Buyer Brokerage Agreement?

If I am considering purchasing real estate, what are the pros and cons of selecting one agent to work with exclusively? Why not “play the field” and contact several (or even lots of) agents and have all of them scouting properties and deals for me? Why not just look around on my own? After all, I know what I’m looking for, right?

Let’s cut to the perceived “cons” of signing a Buyer Brokerage Agreement first, since they may seem obvious to most potential buyers:

* “If I can strike a deal working with the listing agent only, won’t I be able to save money since the seller won’t be paying a selling commission?”

* “If I have several non-exclusive agents out looking at deals for me, won’t I get more good properties to consider? And only the agent who brings the best property to me will be paid; that’s fair, right?”
* “I would be promising to ONLY look at properties with my exclusive agent. What if he/she isn’t available when I want to look?”

Will I really save money by dealing directly with the seller’s listing agent? Overwhelmingly, no. That listing agent realizes that he/she will earn every penny of both the listing AND selling commission since they will be solely responsible for seeing the entire deal through to closing. And I have absolutely no power or standing whatsoever to renegotiate the commission agreement already signed between the listing broker and the seller since I am not a party to that agreement. It’s none of my business and some listing agents may even tell me so. Unrepresented buyers like me, in addition to needing much more “hand-holding” than I ever believe I actually will, are also placing ourselves in a position of “spilling our guts” to the listing agent, only to find out later that the listing agent MUST report any pertinent information to his/her CLIENT, the seller. What I say can and will be used against me during the negotiations and at the closing table. Ouch!

Will I get more or better opportunities if I have several agents out scouting properties for me? Not likely, because those agents will be spending their time and energy with their CLIENTS, those buyers who have actually hired them. If the agents have spare time, they may think of me, but only as an afterthought. Why would they waste time with me if they have CLIENTS to work with? And those CLIENTS haven’t paid a dime upfront and will only owe a commission IF they select a property not listed by a licensed brokerage or the seller won’t pay the commission in the case of a FSBO (and today 99% of FSBO’s are delighted to pay a buyer’s agent’s commission just to get an offer).

Won’t it slow me down to have to wait for my agent to meet me at properties I’m interested in? Probably not, since my agent is going to be able to eliminate a lot of properties I wouldn’t be interested in anyway AND the fact that I’m a CLIENT would get me priority time with my agent. I’m first in line for my agent’s time, not last.

So, are there any other “pros” to interviewing buyer’s agents and selecting a single agent to work with exclusively?

Yes. Consider these:

* Good buyer’s agents KNOW LOTS OF NEIGHBORHOODS AND AREAS I’m not familiar with. Once an agent gets an idea of what puts a sparkle in a buyer’s eye, the agent can and will suggest alternative neighborhoods and properties I would have missed. They also know properties not yet on the market which may fit my needs and will approach those owners on my behalf!

* Buyer’s agents know how to work with For Sale By Owners (FSBO), too, and negotiate to have their commission paid by the seller if I select that property to buy.

* Buyer’s agents PREVIEW properties on the inside before taking me there. This is such a time and stress saver! I don’t have to waste time and gas money going to properties that aren’t what I am interested in. Plus, buyer’s agents can suggest I see some properties that I may have passed on because I didn’t care for the curb appeal or the interior photos online.

* Buyer’s agents VERIFY that what the seller and listing agent are advertising and telling me is true. And buyer’s agents have a goo-gaggle of information sources I don’t.

* Buyer’s agents can and will alert me to potentially EXPENSIVE PROPERTY CONDITION ISSUES. They notice that the support column holding up the second story is leaning, that the retaining wall is bulging and that the garage may not fit my SUV, among a million other things. They know these things because of their previous experiences and by swapping “war stories” with other buyer’s agents.

* Buyer’s agents will do a DETAILED COMPARISON of the property I’m considering and what’s sold recently nearby. After all, I don’t want to overpay. Even if I become infatuated with the beauty (in my eyes) of a property, that doesn’t mean the bank appraiser will have the same opinion. Unless I’m paying cash (hey, wait a minute, ESPECIALLY if I’m paying cash), the appraiser’s opinion is necessary.

* Buyer’s agents are really good at finding out what the seller’s “HOT BUTTONS” are and can advise me on certain offer terms which will make my offer more attractive to the seller. If the seller absolutely wants to move really soon, my buyer’s agent will help me parlay that information into a lower offer price in exchange for making the move convenient for the seller, for example.

* Buyer’s agents love to be able to present offers to sellers and their listing agents because they can “HUMANIZE” me (and my family) to the seller. Buyer’s agents are ADVOCATES for their clients.

* Buyer’s agents have the responsibility to NEGOTIATE in my best interests, over and above their own interests.

* Buyer’s agents know the TERMS AND CONDITIONS of the Purchase and Sale Agreement backwards and forwards. Shockingly, there are over a dozen potential hurdles the seller and I will have to navigate to get to the closing table. I want someone on my side reminding me of deadlines and handling all paperwork in a timely manner.

* Buyer’s agents know REPUTABLE mortgage lenders and work WITH them rather than stepping on their toes.

* Buyer’s agents can and will help me avoid a buying mistake by advising me about FUTURE SALABILITY ISSUES I may face when I want to make my next move.

Trying to find the best property for myself and my family and navigating all the hurdles to closing without the enormous resources, help and advice of someone working FOR me seems foolhardy to me. And it doesn’t cost me a dime.

Sara Hibbard is a licensed Realtor in the state of Georgia and specializes in assisting home buyers and has earned the elite ABR (Accredited Buyer Representative) certification and designation from the National Association of Realtors. Call Sara with all your real estate needs or for a free consultation. Sara can be reached at anytime at 770-399-8108. E-mail Sara at sara.hibbard@metrobrokers.com.