Expert: David Beckett - 1/2/2004

Question
Hi David,

Thanks so much for your quick response.  We will certainly let you know how we do with the people you recommend.  Actually, we've identified and put a bid on a property, but we're not all that far along.  

I have one follow-up question.  We're in NY, and buyers don't normally sign exclusive agreements with brokers, other than for the specific places that they show them.  We've been asked to sign an Exclusive Right to Represent Buyer Agreement.  This says that anything we buy within the next six months has to be through this particular broker.  Is that normally done?  Do most people sign these?  It seems kind of odd to me that wherever we look in the area we'd have to go back to this one particular agent.  We'd like to sign something ensuring that he will represent us for any property he shows us, but not a blanket statement for any property at all.

What do you advise?

Again, thanks so much.  

Vivien

Answer
Hi Vivien -

Thanks for asking this question, which it seems to me is one of the most important a buyer can ask.

The short answer is that you'll benefit enormously from an exclusive relationship with the right agent or broker. I'll tell you why in a moment. If it's not a particularly terrific agent or broker, you won't, but you'll still have somebody who owes you certain legal duties... and that's important.

I seperate the property and the agent in my mind. Any agent can sell you any home because of the Multiple Listing Service. This is an enormous benefit to buyers. Access to everything, using the same trusted professional. Now... it sounds like you have started working with an agent, perhaps because the agent was attached to a home you decided to make an offer on. If you buy that home, that's most likely the agent you'll use. It can work out very very well even if the agent is automatically in the position of representing the seller's side. If you don't end up buying that house, then ask yourself if the agent is somebody you'd be comfortable working with as you go looking for another place. If the agent is honest, knowledgeable, well qualified and helpful - it's a much better bet to use that agent than just using whoever you find attached to the next house you like!

My experience is entirely in Vermont, but my many contacts in other States and knowledge of nationwide Real Estate practice is such that I can tell you that exclusive buyer agency has become more and more common recently in most states. Indeed at one point, the Federal Trade Commission conducted a study in which it was discovered that most buyers thought that the Realtor they worked with was "thier Realtor" even when the duties owed by the Realtor in question ...were to the seller. Subsequently there's been enormous change in the way Realtors are educated and in the way Realtors conduct business. The National Association Of Realtors formally adopt policies directing all Realtors to adapt to buyers who chose to be represented by buyer agents. And then on July 1, 1989 the State of Vermont adopted new rules mandating (among other things) written disclosure of agency issues and office policies. That disclosure is the single page your agent showed you "at first substantial contact" which says "not a contract" on it.

So - We've got two issues here: exclusivity, and "agency". Ordinarily, I draw a cartoon when I discuss these issues with people so we can all see the various parties and thier relationships and the buyer can make decisions. I draw the house, the sellers, the sellers agent, and the sign in the yard from the agent's company. Then over on the other end of the page there's the  buyers and the agent. Typically there's a commission, and the listing agency charging it to the seller, offers half of it to the other agency/agent. That agent can accept it either as a buyers agent or as an agent representing the other side, the sellers side. If the buyers have not chosen to enter into a client relationship with thier agent, that agent is collecting a commission for representing somebody...and it's not the buyer! If the buyer IS represented as a client, the commission is collected for representing the buyer, which is much better from the buyer's perspective. The agent working with the buyers gets paid the same dollars - the question is, who does the agent owe fiduciary duty to? Since the agent working with the buyer collects the money as a commission split, paid from the proceeds of the sale and not from the buyers pocket, the buyer should get represented as a client if possible it seems to me. So that answers the "agency" part of the question.

The exclusive part is even easier in a sense. Since (presumably) the agent has access to every property regardless of which company listed it, via the MLS - the question is this. Is it easier to go through the process of finding, financing and getting to closing on a home with one Realtor you have some confidence in - who you've interviewed and selected for the job? Or with whoever happens to have his/her name on the sign...who's getting twice the commission and not representing the buyer?

I often get calls from people who are just worn out from calling on advertisements and talking to several different Realtors every day. It really does make sense to assemble a team, including a Realtor who's a qualified Buyer Agent (an ABR or CBR designation is a very good sign, but a lot of experience representing buyers is a good thing too) - before looking seriously for a home. Because otherwise, you simply put twice the dollars in the pocket of an agent who doesn't represent you, but instead represents somebody on the other side of the table.

Before you sign an exclusive right to represent buyer agreement, simply ask the agent to show you his/her background on paper (references, credentials, awards, etc) and ask "who do you represent and how do we proceed if...A) the home we become interested in is listed by your company? B) The home we want to look at is for sale by owner?, C) in the multiple listing service? If the answers to these questions make sense and you feel you can work with the agent well - I'd sign an exclusive agreement myself in a heartbeat. If not, interview a couple of other agents in other offices and THEN choose.


Good luck!

David Beckett
1 800 488 5609 x215
drcwb@hotmail.com