Welcome to Broker's Corner! In this series, I'll be answering some of the most common questions about the homebuying journey every month.
First up? Buyer's agency agreements. Let's dive in...
Q: What is a buyer’s agency agreement?
A: This is a legally binding commitment that a homebuyer makes to a buyer’s agent, who represents a brokerage. It basically serves as an employment contract, stipulating the start and end date, compensation, expectations, as well as any special accommodations relevant to the agent’s work. It also includes a clause for how to end the agreement if that becomes necessary.
Q: And remind me...what is a buyer’s agent?
A: A buyer’s agent is a licensed real estate professional who guides a buyer through the homebuying process. While there are agents that represent sellers and market properties for sale, Landed’s partner agents specialize in representing homebuyers. They understand the intricate needs of our process, streamlining the many moving parts.
Q: What are the benefits of a buyer’s agency agreement?
A: First and foremost, these agreements spell out the expectations for both the buyer’s agent and the buyer. This protects the agent from investing a lot of time and effort before the buyer ultimately decides to work with another agent. It also places a legal requirement for the agent to serve their best interests at all times. And from a legal perspective, signing an agency agreement means everything that a buyer shares with their agent is kept in confidence and cannot be shared with the seller or another party unless permission is granted. Finally, it stipulates that an agent is legally required to negotiate in the buyer’s favor, with no regard to the seller’s benefit.
Landed's Principal Broker and Compliance Lead, Angie Kearns.
Q: Should I sign a buyer’s agency agreement?
A: Some agents require that their clients sign buyer’s agency agreements in order to protect their time and other resources. But most of the time, this is a very personal decision that comes down to this: do you want to remain loyal to a single agent? Or, do you prefer freedom of choice throughout your homebuying journey?
If you are the type that doesn't mind learning as you go along, you may opt for the freedom of choice. Without an agency agreement, a buyer’s agent will still help you find a home and ensure that you are treated fairly. However, they do not have a legal obligation to negotiate on your behalf or warn you of possible red flags.
But if you do sign an agreement, you’ll have many other benefits. When an agent sees that you are making a commitment to them, they are more likely to spend more time proactively working on your behalf: setting appointments, explaining paperwork, working closely with lenders, ensuring you do not miss the many deadlines, and many other steps.
Landed’s partner agents take the additional step of ensuring that your property of choice is of fair value before placing an offer on the property, which is made possible by our proprietary in-house software. We believe the combination of vetted agents and cutting edge technology gives Landed’s customers an edge over other buyers in the market.
Q: What happens if I refuse to sign a buyer’s agency agreement?
A: Not signing an agreement is your choice. Landed’s partner agents, like all good real estate agents, are not pushy, and instead cater to your needs and preferences. But again, an agent who knows that you are fully committed to them is more likely to spend time on your needs, and is legally obligated to act in your best interest.
Remember also that 99% of the time, the buyer’s agent is paid from the seller’s commission, which was agreed upon when the house was listed. Therefore, you have a right to receive representation without paying a fee. The other 1% of the time, the agent might request a retainer fee if the process is one that requires an extended amount of time. However, Landed partner agents do not request retainer fees.
Q: Wouldn’t I get a better deal if I work with the listing agent?
A: Many buyers believe it is advantageous to use the same agent who is representing the seller in a transaction. While the listing agent may offer to absorb some of your closing costs, having one agent represent both the buyer and seller — known in the industry as "dual agency" or “double-ending” — usually works against your interests as a buyer. This is because the listing agent is paid by the commission from the sale, which means that the higher the sale price, the bigger their commission will be.
So why sabotage your own success? Having your own, dedicated representation from a buyer’s agent means you will know everything you as a buyer are entitled to. One example is the right to a “pre-drywall” inspection for new construction properties, which means that the buyer can request replacement of any splintered wooden framework before it is covered up with sheetrock. Now you understand why some of your friends have walls that are bowed once the house settles!
Q: What happens if I want to end the buyer’s agency agreement?
A: That’s an easy fix. Your agreement will indicate which method of communication to use in order to terminate the agency relationship. In the event that a Landed partner agent isn’t to your liking, just let your Homebuying Programs Lead (HPL) know and we will rectify the situation for you!
Want to learn more about choosing and navigating the relationship with a real estate agent? Check out our blog for posts on other relevant topics, including choosing an agent and why you should work with a Landed partner agent: