I always find it amazing how the general public still hasnít grasped what buyer representation is. Perhaps this is because itís not been around anywhere near as long as some other forms of representation. Perhaps itís also our fault. Maybe our board needs to get the word out better than they have. I also believe itís up to us realtors to inform you.
This topic really is huge, and you could spend days on it. Instead, I just want to give you the short and simple version of what it is, and how you benefit from it.
Buyer representation is the opposite of a listing agreement. When you decide to sell your home, and want to hire the services of a realtor, you will sign a listing agreement. The listing agreement sets out a number of particulars, such as the listing period, the asking price, the commission youíll pay, etc. Everyone seems to be aware of this agreement, and know of itís existence.
The buyer representation agreement is a much newer agreement, but by no means new. Iím sure itís been around in excess of 10 years. This is an agreement that you can enter into when you want to hire the services of a realtor when buying a property.
The buyer representation agreement will state the following information:
- The real estate brokerage you are entering into an agreement with.
- The type of property they are finding for you, and itís location(s) or areas.
- The agreement time period, a month, a day, 6 months, whatever.
- The commission the realtor will earn for his services.
- A whole bunch of legalese to protect you and the brokerage, and some disclosures.
This agreement is beneficial to both the realtor, and yourself.
Benefits to the realtor:He/she can work for you whole heartedly to find you a property, and know that if you do indeed buy something that falls within the criteria of the agreement, he will get paid for the effort & service provided.
Benefits to the buyer:Youíve just motivated the heck out of a realtor to find you something. When you refuse to sign one of these agreements, many realtors arenít motivated to help you, as they donít know if you are serious, and if theyíll ever get paid for their services. They simply would rather spend time with other clients who are more committed to the process.
You have someone with the knowledge, experience, and access to find you a home. If you think you can do it on your own by surfing the net, and reading home magazines, youíre right. But if you think you can do it better than a realtor whose job it is day in and day out to find homes for clients, youíre wrong.
Also, you now have professional representation, who is legally bound to represent your best interests. When that home is found, and the negotiation begins, your realtor must do everything he can legally to get you the best deal possible. He also must insert all the clauses and conditions that protect you, and make the deal go smoothly, and in your favour. This is a pretty serious benefit. If you think you can do it without representation, youíre right. If you think you can do it as well as a realtor whose job it is to write up and negotiate transactions for clients, wrong again. Representation will save you thousands, not to mention stress, and keep you away from potential pitfalls.
Buyer representation agreements are optional, I just donít think itís smart to work without one. Considering that in most cases, both agents are paid through the proceeds of the sale, youíve essentially received free buyer representation. The only reason I can see why buyers would prefer to work without one is because they donít know what it is, are unclear of itís benefits, or have incorrect knowledge about it.