Do you really want to tackle one of the most personally significant and largest financial decisions of your entire life without having the protection and guidance of a professional?
Throughout the process of buying a house, there are somewhere in the neighborhood of 42 +/- people involved – REALTORS, Lenders, Appraisers, Inspectors, Attorneys, Bug specialists, Repair professionals, Air Quality specialists, and myriad other participants . . . Do you feel up to this task of taking on this level of coordination DYI (Doing it yourself)?
- Who’s in your court?
- Who are you going to call when things go weird?
- How will you know if you’re paying too much?
- Are you prepared to negotiate on your own behalf vs a trained real estate sales professional or worse . . . an unrepresented home seller?
My opinion is that I know my specialty . . . It’s all things Real Estate . . .
and I know what I don’t know . . .
I don’t know Plumbing, Electrical, Automobile Mechanics, Website building, Brain surgery, Rocket science and many many other things, so when I need those things done, I find the best professional I can to do the job RIGHT.
I hire specialists and gladly pay them well so that I can worry less about the things I don’t know and focus more on the things that I do.
So . . . Why are there so many unrepresented Home Buyers running around out there?
Interestingly, most Home Sellers wouldn’t even think about putting their house on the market without REALTOR Representation and seldom hesitate signing an Exclusive Agency Listing Agreement, yet those same folks might walk into an open house unrepresented and buy the house with no professional guidance whatsoever . . . not mentally processing the fact that the very nice Listing Agent has only one person’s interests in mind – The SELLER’S because she has a binding Contract that requires her to advocate for the Seller’s best interests.
So, I ask . . . What sense does it make for ANY home buyer to wander into such a lion’s den without representation?
Sometimes, it’s the REALTOR’s fault that the Buyer Representation Agreement doesn’t exist.
Yep! The REALTOR might agree to “work with” a Buyer without having this important agreement signed.
This way has a mountain of risk for everyone.
The REALTOR could be wasting his time – LOTS of time – showing houses to a buyer who has no intentions of actually using him for the purchase of a house. Without a Representation Agreement, the buyer could wander off and buy any house on her own or through another agent just because . . .
Then there’s this thing that could really mess up the REALTOR’s day . . . You know they say that “if it walks like a duck and quacks like a duck, it’s probably a duck?” If a REALTOR walks and talks like a Buyer’s agent without having a signed agreement, then there could be “assumed Representation” which, in a court of law, could possibly hold that REALTOR accountable for any hot water the Buyer got herself into.
What if the REALTOR who is acting like the buyer’s agent without a signed agreement has a car wreck with the Buyer in the car, and the buyer sustains injury . . . Uh oh! THAT’s a quagmire!
OK . . . enough of the schpiel to build the case for the necessity of the Exclusive Agency Buyer Representation Agreement . . . Let’s take a look at the parts of said agreement . . . after all, you DO want to UNDERSTAND what you’re signing, right?
All of the below references the Tennessee agreement – Other states may vary
Our Exclusive Buyer Representation Agreement (Designated Agency) is 6 pages.
- It names the parties (The real estate firm and the Buyer) and the term of “Employment” of the REALTOR by the Buyer or Tenant. (Starting Date and Expiration Date)
- What’s the type of Property Sought by Client? This is important because any buyer could possibly be seeking to find different types of property simultaneously (A residential house and a commercial Office Space) and therefore may be working with 2 REALTORS with differing specialties
- Client duties – This is a MOST important paragraph in that it sets out very clearly the Buyer Client’s resposibilities which mainly boil down to working exclusively with the agent – not any other agent during the term of the agreement . . . and that, in the event the Buyer wants to buy a house in which the Seller is refusing to pay commission, the Buyer agrees to pay that commission at closing. This could happen in the case of Buying a house from an unrepresented Seller (FSBO For Sale By Owner)
- AGENCY – Ideally, This section gives rise to an informative conversation about the variety of ways Real Estate Sales Professional can represent Buyer Clients such that the Buyer has a complete understanding as to the level of representation she can expect – Broker Agency, Designated agent for the Buyer (to the exclusion of ALL other agents including the agents within the same firm), Dual Agency (in the event the Buyer wants to buy a house the agent has listed), Facilitator/Transaction Broker (Not an Agent for either party) – The agreement provides for the possibility that if Dual Agency exists, then the agent can “Default” to this role of “Facilitator” thereby representing neither party but seeing the transaction through to the closing.
- Duties owed to all Parties to a transaction and Duties Owed to Client spell out the requirements of the REALTOR in the agreement.
- Agent Disclosure – In every transaction, every agent involved must disclose the Agency relationship with the Buyer. Similarly, the Buyer is required to inform any other agents (eg at Open Houses) that she has Exclusive Representation.
- Other stuff – The remaining 2 pages of the contract include “Standard Legalese” and addresses confidentiality requirements, handling of Earnest Money deposits, and clarifies the “Expert Assistance” of the agent (states that the REALTOR is not a CPA or attorney or structural Engineer and will recommend the client engage specialists for matters outside the realm of real estate.
- LEGAL DOCUMENTS – This whole paragraph is in ALL CAPS because it is imperative that the client understand that this agreement is a legal document . . . a binding contract that should not be taken lightly without full understanding.
- Special Stipulations – and Confidentiality allow for space to note circumstances relavent to the Buyer that the Buyer wishes the agent NOT to disclose (Such as impending divorce, job transfer, etc)
Having now been on my soap-box for a LONG time this morning 🙂 I am hoping that I have convinced you, the reader, that signing an Exclusive Buyer Representation Agreement prior to “working with a real estate agent” is a FABULOUS idea!
and when you do it . . . be sure that you UNDERSTAND what you’re signing BEFORE you sign it.
BTW – I and the superlative “Vital Few” Real Estate Sales Professionals of Pareto Realty stand poised and ready to serve you impeccably in your Middle Tennessee real estate purchase.
If you’re not in our area and want a referral to a great agent in your area, connect with us . . . I’m betting we know the perfect REALTOR for you.