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I am in the process of looking for a new home to purchase/build and have talked with a couple of realestate agents in the area. Everyone I have spoken with insists on having me sign a buyer representation agreement, some immediately, and some before a contract is signed.
All of these documents are of varying length and details but all have a common theme. The agent agrees not to be a "double agent" (i.e. work for the buyer an seller), that I am okay with. The seller also must agree to only use the agent for a specified period, typically six months. I can understand this, if the period is the length of the closing process, maybe 30 days. Lastly, it sets a guaranteed commission for the agent, always 3%, and has the client agree to pay any part which the seller does not pay.
The agents all insist this document is for the clients protection, which is in my opinion, a half-truth. All of the agents I have talked with insist, that even on a new home construction, I must sign one of these documents or they can't work with me.
The question I have is this, is this document really required before a client and agent can conduct business?
Second, it is my understanding that the builder pay the agents 3% commission + a potential referral bonus. Why would a client have to agree to pay this if the builder does not?
I never signed that agreement with my realtor. I'd be happy to give you his info if you want.
(/rant)I don't understand the pushyness of some realtors. Ours was low key and worked well with us, and we have repayed him by buying two houses with him, and sending two friends to him. (/rant)
I am in the process of looking for a new home to purchase/build and have talked with a couple of realestate agents in the area. Everyone I have spoken with insists on having me sign a buyer representation agreement, some immediately, and some before a contract is signed.
All of these documents are of varying length and details but all have a common theme. The agent agrees not to be a "double agent" (i.e. work for the buyer an seller), that I am okay with. The seller also must agree to only use the agent for a specified period, typically six months. I can understand this, if the period is the length of the closing process, maybe 30 days. Lastly, it sets a guaranteed commission for the agent, always 3%, and has the client agree to pay any part which the seller does not pay.
The agents all insist this document is for the clients protection, which is in my opinion, a half-truth. All of the agents I have talked with insist, that even on a new home construction, I must sign one of these documents or they can't work with me.
The question I have is this, is this document really required before a client and agent can conduct business?
Second, it is my understanding that the builder pay the agents 3% commission + a potential referral bonus. Why would a client have to agree to pay this if the builder does not?
Having worked with realtors numerous times in the past, I can answer some of these questions.
1) NO, the document is not REQUIRED before a client and agent can conduct buisness. That is in the legal sense. Now, some agencies may insist that their realtors get this form signed, or not take on a client. For instance, Keller Williams may require all their agents to get this form, or they may not work with that particular buyer. So the realtor might be required to get it signed, but you aren't. I wouldn't know any realtor that wouldn't get you to sign this though. That is their protection against you.
2) Some builders (read most) will pay a realtor a finding fee in addition to a portion of the sales price of a new construction. But some don't. That clause is for the protection of the realtor. It is possible that the home building place could take you aside and say "Listen, let's cut your realtor out of this deal, and instead of us paying her 3%, we will just knock 2% off the price of your new home." Your realtor is going to spend a lot of time trying to find you the proper home, find the right area for you, answer any questions you have, and get you the best deal on a home. It is possible that they could do all that work for you, and then you can cut them out of the deal. They need reasonable assurances you are not going to do that. That is why they ask you to sign a buyer's representation agreement making you responsible for paying them. You agree to pay it on the off chance that the Builder tries to stiff them on the deal, or if you try to stiff them. Since they are working for YOU, it is reasonable for them to expect YOU to pay them for their services. That almost never happens, as 99.99% of the time a buyer's agent is paid by whomever is selling a home. But in any buisness relationship, it is a good idea for a realtor to tell you up front, "this is what service I am going to be offering you, this is what you are going to pay me." Just in case one of their clients tries to pull some shennanigans.
The buyers representation agreement does protect you somewhat, but it protects the realtor more. I don't find it unreasonable though, I am guessing you don't either. Technically, you don't need a realtor at ALL if you are buying directly from a home builder. I would always get one though. They don't cost you anything and they can help you avoid a lot of pitfalls.
The agents I talked with seemed like nice people so I will give them the benefit of the doubt and assume that it is like what you said JayBrown80, the company is requiring the document.
It is really difficult for me to accept the fact that these realtors will act in my best interest after trying to convince me that this form is to protect me!
Depending on where you are, the STATE may require that the agent get the document signed. Texas does not, however, you should understand that in some states (and Texas is one of them), by default all agents work for the seller as either a listing agent or a subagent (an agent who does not work for the listing broker but is showing the house and assisting a buyer but does not work for them) and have a fiduciary responsibility to protect the seller's interests unless they have an agreement with a particular buyer, at which point their fiduciary responsibility moves to that buyer for the houses that that buyer is interested in.
The Texas buyer's rep agreement (written by attorneys for the Texas Real Estate Commission) spells out, as said above, that the buyer will pay the agent a certain percentage of the purchase price, and in the very next paragraph, it states that the agent will look first to the seller and the listing agent for that. That paragraph is, as said, in there to protect the broker in the eventuality that you fall in love with a for sale by owner and the seller will not pay a commission (or for some other reason the seller does not pay the commission. Usually, in those cases, the commission is figured into the offer.) It actually came about because many buyers did not realize that until they hire the agent to work for them, the agent works for the seller and thought that just because the listing agent or an agent they asked to show them properties was a nice and helpful person, that agent worked for them and represented their interests, when in fact the agent was legally bound to represent the interests of the seller no matter how much they liked the buyer. The buyer's rep agreement (and, indeed, the concept of a buyer's agent, which didn't exist until relatively recently) exists to protect the buyer by clarifying all such matters. Before it, the buyer had no representation, all representation was to protect the seller's interests.
Also, in most areas, the seller or the seller's agent (who has a listing agreement with the seller) pays a portion of the listing agent's commission to the buyer's agent, and many will not do that unless the agent working with the buyer has an agreement with the buyer in writing.
Did you read the document that you were asked to sign? I used to be a legal assistant and I break out in hives if someone signs something they haven't read, so I make sure that my clients have a chance to read it (and go over it with them) when I ask them to sign it. Sometimes, just reading it will allay any fears of signing it, when you see what it actually says.
The document simply spells out who has agreed to what and makes it quite clear who works for whom. In that sense, just as ANY written agreement, it protects BOTH parties from any misunderstandings down the road as to who agreed to do what.
I never signed that agreement with my realtor until we made and offer. We told her up front we wouldn't sign in case we didn't click with her. She was fine with that, she did a great job and we would hire her again.
I usually leave it up to the buyer if they want to sign the buyer's rep form. I let them know it allows me to work for the buyer solely on their behalf. THL did a great job of explaining the purpose of the buyer rep form. But I certainly understand that a buyer and I may not see eye to eye and therefore don't force the agreement to be signed. I'm guessing alot of the larger brokerage firms force their agents to get the buyer rep form signed.
One thing to consider - the length of the buyer rep agreement is negotiable. So, if you (or the agent, for that matter) are not sure if you're going to "click", you could write it for a short period of time - say, a week, or even a day - so that you can try each other out (guess what, agents don't have to work with buyers or sellers that they aren't comfortable with, either!). That way, the agent is legally bound to represent the buyer's, not the seller's, interests, and they are assured that they will be paid if the buyer should find a house while working with them (yes, some buyers will use an agent's time and then go behind their back to purchase a property cutting them out - sad, but true).
Every agent in the State of Texas is required to provide information about brokerage services and how it works upon first meeting, by law (the information, if not the form, but I use the form AND the information so the buyer or seller can go back and read it again if they are confused or forget something). At that point, you can decide not to sign a buyer's rep agreement, and have the agent you're working with legally bound to represent the seller's interests, not yours, in which case you should limit any information you provide to them that might benefit the seller in negotiations, because they are required to use that information in the seller's best interests, or you can decide to hire them to represent your interests and sign the buyer's rep agreement.
The form linked to above is one thing that I DO require every potential seller or buyer who interviews with me to sign, acknowledging that they've received the information (they get a copy of the form to keep), and committing them to nothing. That's required by my broker, to be kept in the file (if we get as far as closing and I don't have a signed copy in the file, the file is incomplete and I don't get paid until the file is complete) and I think it's a good idea, because it means that the buyer knows whether or not the agent they're working with is representing them or is legally bound to represent the seller's interests because they have not been officially hired to represent the buyer's interests instead.
There are two main things the buyer rep agreement establishes: Compensation and Agency.
Agency can be established without a written agreement, so you and a buyer agent can agree to an agency relationship without it being in writing.
Compensation is also spelled out in the buyer rep. It establishes how and when the agent is paid and by whom, the amount of commission, the search area covered under the agreement, the start and ends dates of the agreement, the duties and responsibilities of each party, and other legalities. Why would you not want all of that set forth in advance?
I am one of those agents who won't work with buyers who are unwilling to sign a buyer rep. I never have any trouble at all getting it signed. It's a one page document and it states that either party may terminate the agreement at any time, so it's not intended to lock anyone in or "trap" them, but it serves to avoid the sort of trouble that comes up when agreements are not spelled out clearly in writing.
For example, in ours, we pass through to the buyer any excess commission or agent bonuses because I don't need or want that money. Thus, if a builder or listing agent is offering an extra percent, or a $3,000 incentive to buyer agent, that incentive might induce my buyer but it won't affect my representation or my opinion of one property over another. If you work with an agent without a signed buyer rep agreement that spells out compensation, they keep all of the excess commission and you may not even find out about it until you see it on the settlement statement at closing.
Again, why would you not want to have all of this established and spelled out at the outset of the business relationship?
Finally, the Realtor Code of Ethics states in Article 9:
Quote:
Article 9
REALTORS®, for the protection of all parties, shall assure whenever possible that all agreements related to real estate transactions including, but not limited to, listing and representation agreements, purchase contracts, and leases are in writing in clear and understandable language expressing the specific terms, conditions, obligations and commitments of the parties. A copy of each agreement shall be furnished to each party to such agreements upon their signing or initialing. (Amended 1/04)
If you have an agent requiring you to sign a buyer rep, I automatically think you probably have a better agent than most. I love, respect and admire Realtors who are sticklers for proper paperwork and documentation. Those are the agents that protect clients and avoid problems.
Read the agreement and ask questions. It's for your benefit. Sounds like you have a good agent.
What that 11A clause of a buyer rep agreement really means in practice. It says that first the seller/landlord/... should pay the buyer agent commission and if failed then the Client (buyer) pays the buyer's agent commission.
Let's say a buyer payed 200,000 for a house but seller failed to pay comission to a buyer's agent then will it mean that the buyer will have to pay something extra, in addition to 200,000?
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