Buyer Representation Makes Sense
Originally appeared in Hills Publications, January 24, 2003 and ANG Newspapers, January 18, 2003
Before starting your home search and committing to a particular Realtor, it is wise for you to know about Buyer Brokerage. Buyers in our area have generally not heard of a Buyer’s Broker, the Accredited Buyer Representative (ABR) designation that is associated with it, or the numerous benefits related to Buyer Representation.
According to a 2001 National Association of Realtors (NAR) survey, 46% of buyers nationwide who worked with a real estate professional opted to have their own Buyer Representative. Despite the fact that Buyer Brokerage is common in other parts of the U.S., it has been slow to catch on here.
Although it is routine for sellers to sign a listing agreement with a broker when putting their home up for sale, local buyers rarely have a similar contractual arrangement with their agent.
Why should buyer sign?
- It shows you the agent is taking the relationship seriously. As a buyer, you will have someone working diligently for you.
- Your willingness to have a written agreement is an indication that you are earnest about buying. Top professionals work only with loyal buyers.
- From the beginning, it clarifies the critical agency relationship between you and your Realtor. This is especially important with regard to “dual agency.” Customarily, this is not done until right before the buyer is ready to sign a purchase contract. It is better for you to do it much earlier.
- Your agent has more flexibility to act on your behalf. You will be shown all properties, including For Sale By Owners (FSBOs), listed homes with commissions perceived by selling (buyer’s) agents as too low, and new homes or condos that do not “cooperate” with other brokers. Without a Buyer Broker agreement, it is doubtful agents will show you these types of properties as they are unlikely to get paid.
- It specifies the Buyer Representative’s duties and obligations as well as yours. You will receive a copy of the two-page “Buyer Inspection Advisory” at the outset, rather than just before making an offer.
- It explains how compensation to the agent will work.
Your greatest hesitation in signing a contract may be the prospect of being obligated to an agent you just met. This is handled by adding a statement to the Buyer Broker contract that either party (agent or buyer) may cancel the agreement at any time with 24-hour’s written notice.
Commission Misconceptions
- Sellers pay the commission. Yes, it comes out of the seller’s sales proceeds, but it is always the buyer who actually pays because commission is factored into the asking price.
In a Buyer Broker agreement, the buyer agrees to pay the commission if the seller does not; however, in most cases it is not necessary for the buyer to pay anything. - Many buyers believe that agents do not do much, if anything, to earn a big commission. On the contrary, buyers receive an amazingly long list of services from their Realtor. Unfortunately, less skilled agents are not able to fully explain to their clients what they do.
- Some buyers think their agent gets the entire commission. In fact, commissions are normally split between the listing agent and the selling agent. Each agent then splits his share with his broker.
Accredited Buyer Representative (ABR)
This is one of the advanced Realtor designations recognized by NAR. Only three per cent of Realtors nationwide are ABR designees.
Obtaining the designation requires experience in closing residential sales and the satisfactory completion of several extensive courses. Those who have taken the time and made the effort to earn the ABR have a unique perspective on the buying process. Buyers who work with an ABR notice the difference.
As in every business, not all real estate salespeople are equally competent. By definition, a Buyer Representative will take the time to listen to your needs and review the buying process before showing you property.
Final Thoughts
Buyers who flit back and forth between Realtors end up with less service and protection. If you want an excellent agent, you need to be willing to commit. Find someone you trust and stick with him.
Related Articles:
Understanding Agency
Deciphering Those Letters