Home Buyers Get Extra Service using the
“EXCLUSIVE RIGHT TO REPRESENT AGREEMENT”
Great news for today's homebuyers! In recent years the residential real estate industry has embraced the concept called buyer agency. This revolutionary change means that homebuyers can now employ an agent who offers Extra services to look out for their interests, including working to get the lowest and best price for a property.
An Exclusive Right To Represent Agreement eliminates conflicts by practicing only buyer agency. Exclusive Buyer Agents differ from traditional seller-based real estate agents in that they are consultants focused on their buyer clients. Exclusive Buyer Agents offer services that you would not normally receive from a traditional real estate agent...the highest level of advocacy for the buyer.
Home Buyers benefit from Exclusive Buyer Agents' Extra services:
- Guarantee to represent you
- Protect buyer's bargaining position
- Analysis of property value for buyer
- Advocate for buyer's best interests
- Negotiate aggressively for buyer
- Seek lower price and better terms
- Access to entire market of available homes including For Sale By Owner
- Point out reasons not to buy
- Seek advantageous financing for buyer
- Assist in finding thorough home inspector
Agents within a company, which represents buyers and sellers, disclose their intent to practice what is called transaction agency. Transaction agents represent the interests of both the buyer and the seller in the same transaction. Buyers’ agents must represent buyers as transaction agents when the seller and buyer are both represented by the same brokerage firm. All this means, is that your agent may not treat either party in the transaction to the detriment of the other party. He is still representing you to a higher level of service.
As an example, if your agent feels the property listed for sale by his broker is overpriced, he may not tell you so. Instead he can provide you with the comparable sales information for you to review and make your own educated decision as to a fair price to offer. He is still working to provide you a higher level of service but has not done so to the detriment of the other party.
A homebuyer will be asked to sign a written Exclusive Right To Represent Agreement to take advantage of these important services. Signing a contract is an important protection for the buyer as well as the agent. (If you are not offered a contract with your buyer agent you should initiate one yourself, so the terms and fee is agreed upon and understood beforehand.)
The contract requires loyalty to the agent, so it is important to spend some time interviewing agents to choose someone whose skills meet your needs as well as finding a good chemistry in personalities.
Exclusive Buyer Agents find homes for sale by owner from local papers and the Internet as well as homes listed with the Multiple Listing Service (MLS). Seller agents who participate in this computerized service generally offer compensation to cooperating agents including Exclusive Buyer Agents. This means the best news for consumers is that Exclusive Buyer Agency is generally available at no Extra cost!
In order to understand how Buyer's Agents are paid, it is important to understand the traditional fee structure for real estate agents.
In general, the real estate commission is built into the total purchase price of a home as a percentage fee that is agreed to by the seller and listing agent prior to execution of the listing agreement.
There are two parts of this commission:
- The fee for the broker who lists and markets the property
- A cooperating fee for the broker bringing the buyer
If the listing agent procures a buyer without the assistance of a cooperating broker he/she may keep the entire commission.
Cooperating Brokers
The listing agent (with the seller's knowledge) usually determines the cooperating fee paid to other agents. Agents who cooperate with listing brokers may be:
- buyer's agents
- transaction Agents
- non-agents
MLS (Multiple Listing Service) member brokers are required to cooperate with buyer and seller agents in access and showing of homes, but the cooperating fee may be different for buyer or seller agents. The majority of listing brokers offer fee cooperation to all agents whether they are single agents who represent buyers’, transaction agents or non-agents. A buyer's agent who is paid from the listing broker does not owe any client-level duties to the seller.
When the cooperative fee offered by the listing broker is accepted by the buyer's agent, there is no additional fee due. When the cooperative fee offered is less than the buyer broker's fee previously agreed to, the additional amount can be built into the sales price (so it can be financed).
Buyer Agency Fee Structure
In buyer representation, the buyer and the buyer's agent determine the commission fee, rather than the seller. The fee may be determined from several options, including:
- Percentage of the total purchase price (fixed or open-ended)
- Hourly fee (normally non-refundable)
- Flat fee
For legal and accounting reasons, it is best to disburse the real estate fees from the purchase price at closing. This practice removes any doubt that the buyer's agent has any relationship with the seller or listing company. The Buyer has additional protection when the buyer's agent is paid from the transaction, rather than the listing company after closing. The buyer (who has a contract with, and owes a commission to the buyer's agent) is assured that his/her agent has been paid in full at closing.
In this scenario the buyer's agent takes the fee directly through the transaction (instead of the cooperative fee). The listing agent takes the same amount that he/she would have taken had this been a cooperative fee split, and the seller receives the same net price. The fee is more appropriately distributed, so neither buyer or seller pay additional commission.
Brokerage fees on For Sale by Owner (FSBO) Homes
Many homes for sale by owner have room for negotiation because they have based their asking price on data from Multiple Listing Service homes (which includes commissions for real estate agents). There is also a trend today among For Sale By Owners to offer a fee to real estate agents who bring the buyer for the home. Where no brokerage fee is included in the purchase price, the buyer is generally responsible for his/her agent's fee. But, in those instances, a buyer's agent can protect the buyer by negotiating a more advantageous purchase price, advise and protect the buyer throughout the entire process, and include the fee in the total purchase price of the home. This way the buyer does not pay a commission as an out of pocket expense, for the advice and negotiation assistance provided by the buyer's agent.
Summary
Whether the brokerage fees for buyer representation come from the traditional co-fee method or alternatively, through the transaction, in terms of advice, negotiating power, and time saved... represented buyers may benefit by using the services of a skilled buyer's agent.
Note for Buyers: If the seller is unwilling or unable to agree to include the fee at or below the asking price; the buyer may make an offer higher than the seller's asking price to include the fee in the total purchase price.
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