Buyer’s agents, seller’s agents, listing agents and selling agents…just how many agents are there in a real estate transaction?
Usually two. But to understand the nomenclature we need to go back a few years, before the rise of “buyer agency.” Years ago, there was no such thing as a buyer’s agent. There were, however, still two agents in the transaction: the listing agent (who represented the seller and listed the home for sale) and the selling agent (who ALSO represented the seller but, by ‘bringing the buyer’, actually sold the property.) So the listing agent listed it, and the selling agent sold it. But both represented the seller. Not very comforting for buyers, who were actually spending all the money, right?
So along came buyer agency agreements. In our area, buyer agency agreements are several pages long and are a contract between a buyer and a brokerage—Keller Williams, for example. That brokerage then, in turn, assigns an agent to work with the buyer. The contract is actually with the broker, not the agent though.
If a buyer has a signed agency agreement, often referred to as a ‘buyer-broker agreement’, then there is still a selling agent, but now that selling agent owes his allegiance to the buyer, not the seller. The fiduciary duty is owed to the buyer regardless of who is paying the commission (more on that below.)
Buyer agency agreements are legally binding so you should read them carefully before signing and you should NEVER have more than one in effect at any given time, or you may inadvertently obligate yourself to pay two agents. Typical terms* that may be included (again, all negotiable):
- Retainer Fee, if any
- Brokers Duties – Generally (but not limited to) finding a property acceptable to you and providing assistance to you as necessary while maintaining confidentiality
- Buyers Duties – Generally (but not limited to) working exclusively with the broker and pay directly or indirectly. In our area, indirect payment is the most common. Indirect payment means that the seller pays the buyer’s agent. This gets a little tricky and has the potential to create a conflict of interest – a subject worthy of its own post.
- Discussion of dual agency and designated agency – again, a subject worthy of its own post.
- Admin fee, if any – this is where any fee charged to the buyer (outside of sales commission) is disclosed. These are now being called “transaction fees” or “broker fees” but in my opinion are still “junk fees.”
* Not a complete list. I just hit the highlights here.
These agreements are negotiable, so don’t let an agent bully you into signing one for a period of time longer than what you are comfortable with. Of course an agent wants a period of time long enough to give himself a fair shot at finding you a home, but until you get to know the agent and are confident that he is a good fit for you, why commit yourself to longer than necessary?
If you have an agent you are working with, and especially if you have a signed buyer broker agreement, make sure you contact your own agent to inquire about properties or arrange showings. This is critical because of (1) procuring cause issues might be created and you could obligate yourself to two agents who both need to be paid and (2) it’s your agent’s job to help with those things!
If you have questions about buyer broker agreements, or are ready to start your search, please contact us.