Why should I sign an exclusive buyer-broker contract?By: Kari McCoy
I am a first time homebuyer, and I was referred to a Realtor by one of my coworkers. On our first meeting he asked me to sign a contract he referred to as an exclusive buyer-broker agreement. I was a little shocked about the idea of being locked in an agreement. I told him I needed some time to think about it and I left with an uncomfortable feeling. Maybe he asked me to sign it because I am young and a first time homebuyer. Could you tell me if this is common practice?
To answer your question in short, some Realtors will only work with a buyer under an exclusive buyer-broker contract. This decision is up to the individual Realtor’s discretion.
Let’s look at why some Realtors may have this policy. Realtors only get paid a commission when a home closes escrow. They do not receive a salary as they are independent contractors. The companies they work for do not give them a salary; in fact it is quite the opposite. Realtors pay out-of-pocket for all their business expenses such as desk fees, use of computers, marketing, internet, insurance, health insurance, errors and omissions insurance, cost to belong to the multiple listing board, etc.
When a homeowner decides to sell their home, they hire a Realtor and a binding listing contract is written up. This contract assures the Realtor will be paid for all of their hard work and experience when the home is sold. Likewise, when a buyer wants to purchase a home, they hire a Realtor to help them through the process. The only way a buyer’s Realtor gets paid is if they write up the purchase contract and that home sells. In the event the Realtor and buyer don’t have an exclusive buyer-broker contract, a buyer could use months or even years of the Realtor’s time, effort, energy, knowledge looking at homes with the Realtor and ultimately elect not to use that Realtor. In this event, the poor Realtor has worked their buns off and will not receive one penny for all their hard work.
As you can see this would be a very good reason for a Realtor to want to work with a buyer using the exclusive buyer-broker agreement to ensure all of their efforts, expertise, and hard work transpire into a paycheck.
A plus for a buyer working with an exclusive buyer-broker agreement is they do not have to hop from Realtor to Realtor looking for properties; the buyer may rest assured their exclusive agent is already hopping for them.
When working with an exclusive buyer-broker agreement, here are some of the duties of the Realtor:
- Represent you as a true client.
- E-mail listings that fit the buyer’s guidelines as soon as properties hit the market.
- Call the listing agents to determine the availability, reason for selling, and so on.
- Making appointments with the sellers ahead of time to fit the buyer’s schedule.
- Show you all the homes on the market that meet your needs
- Keep your negotiation and financial position confidential.
- Offer market analyses of comparable sold and pending sales of market conditions, to help keep you informed to make a correct offering price.
- Write an offer with only your best interest in mind.
- Call attention to potential negative aspects of each property so you can make a fully informed decision.
- Offer good sources of lenders, inspectors, Pest/termite companies and others.
- Get you the lowest price.
- Guide you through the maze of the escrow process to the closing date.
As a buyer, in having an exclusive buyer-broker agreement you avoid the possible conflict of interest in dual agency, which occurs when one agent represents both the buyer and seller. Before hiring a Buyer’s Agent you should consider spending some time with him or her, you would be wise to spend an afternoon looking at some homes while getting to know more about the Realtor and their qualifications. See if their personality is a good match with yours.
There is no right or wrong answer in signing and electing to work with an exclusive buyer-broker contract. It is an individual choice for each buyer.
Buying a home is a significant financial decision and since it doesn’t cost the buyer to have their own sole representation, why would anyone not want to have their own professional in their corner with a myriad of complex decisions to be made.
Kari McCoy owns the Kari McCoy Group, Residential Real estate, at Lyon Real Estate and can be reached at 916-941-9540 or firstname.lastname@example.org.