Buyer Representation Agreements

One of the drawbacks to working with buyers is that unlike taking a listing there is no requirement that you have a contract with a buyer. Many agents will only work with buyers that are willing to enter into Exclusive Buyer Representation Agreements. So what is that?

It is a contract with the buyers, formalizing your working relationship and spelling out the responsibilities on both sides. A buyer rep agreement tells the buyer what you are going to do for them and what they are responsible for during the home buying process.

The brokerage agrees to use their best efforts to find the client a home that meets their needs and to assist in the negotiation of the contract.

The buyer agrees to work exclusively with the brokerage to find their new home and to inform other agents they may come in contact with that they have an exclusive agreement with the brokerage and to refer all questions and issues to the brokerage. in other words, they agree not to deal with any other broker or agent.

Issues such as intermediary status and competing clients are addressed as well. But what you really want to know about is compensation issues. Compensation is addressed in paragraph 11 and discusses what fee you are going to charge for your services and who is responsible to pay that fee. That's a good question. The answer is it depends. How much you charge is up to you, or to your broker if company policy spells it out. You can charge a flat rate, an hourly rate or you can work under the traditional business model of being paid a percentage of the sales price at closing. This type of contingency fee allows for no additional money up front for your buyer and is the way most agents have been paid for a very long time.

The agreement authorizes you to be paid regardless of how the buyer acquires the property. If they contact a For Sale by Owner(FSBO) or if they call another agent you could be entitled to be paid under the provisions of your representation agreement. On the other hand, without a buyer rep agreement, if your clients call another agent or a FSBO you have no recourse to collect a commission. OUCH.

Many agents work without buyer rep agreements because they don't know how to explain them properly to their clients. They are afraid that these folks will go work with someone else that doesn't require them to sign anything first. And the fact is some of them will go elsewhere.

You have to figure out if it is worth your time to work "without a net." If you want to take a chance on every deal then don't worry about buyer rep agreements, but if you would like to help ensure that you are compensated for the work you do then you need to learn what to say, and how to say it, to convince your clients that it is in their best interests to agree to work with you exclusively.

If you are interested in learning some of the scripts and dialogs to get buyer rep agreements signed, just give me a call or send and email.