Buyer Agency Agreement - Why Is It Important To Me?

We've all heard the term "Buyer's Agent" or "Exclusive Buyer's Agent".....but what do these terms mean? What do they do? How are they paid? Aren't they just another Realtor?

Not long ago, the real estate industry operated completely different than it does today! The rule, for many years, was that the seller paid the commission...so therefore, all agents involved in the transaction worked for that seller. It was a "buyer beware" situation. This is not true anymore.

Lawmakers have been trying for years to come up with a way that agents could represent the buyer...legally! As of right now (at least in the State of Tennessee), everyone involved in a real estate transaction must be made aware of who is representing who...and it must be in writing. This document is a legal part of every real estate contract for purchase.

When a listing agent takes a "listing", they enter into a legal and binding contract with the seller to represent them in the sale of their home. The seller is actually signing an agreement with the real estate firm that the agent represents. Therefore, every other agent that works with that real estate firm legally represent that seller.

The problem arises when the listing agent (or any other agent affiliated with the real estate firm) shows the property. How can they represent the buyer when they are already representing the seller? The law provides the solution: The managing broker can "designate" one of the firm's agents to function as a buyers agent to work with that particular buyer. But guess what? That agent is still in the same office...talking over the same water cooler...and many times has access to the files in the office. They do the best they can, but agents are still human...and mistakes occur.

The law goes one step further. In the event that the "listing agent" actually brings the buyer and writes the contract, it really becomes a sad case. That agent must revert to a "facilitator" status. This means that they can no longer represent either side. At this point, they can only take care of the paperwork involved in the transaction. This agent, the buyer and the seller must sign a document that they understand this new arrangement. I've seen this done for years, and I don't believe that most buyers and/or sellers understand that they no longer have any representation.

Do you see how this quickly becomes a "conflict of interest"?

So, when agents advertise that they are "buyer's agents", be sure to check and see if the company they work for takes any listings. True Exclusive Buyer's Agencies do not take any listings. They work exclusively for buyers without this conflict of interest.

What are the Benefits of using an Exclusive Buyer's Agent? First and foremost, is the absence of this conflict of interest. There's no "bonus" for selling company listings. There's no motivation to push any particular property. They are free to focus on your real estate needs.

They usually function as "consultants"...guiding and educating you on the process of your new home purchase. They can be your eyes, ears and legs, especially if you are relocating from another town. Most exclusive buyers agents will preview homes for you, look much deeper into the background of the home as well as tell you the negative points about the home (as well as the good points).

How are they paid? Buyer's Agents are usually paid from the transaction. They normally split the commission that the seller and listing agent have already agreed upon. The listing firm simply pays the buyer's agent at closing. If the buyer decides to remove even this tie to the seller, they can choose to work out a compensation agreement directly with the buyer's agent. The law requires that a buyer's agent agreement be in writing, and this is one of the issued discussed at that time.

There are many wonderful Realtors...that do a really good job. But, the conflict of interest is something that is there anytime they show a listing that belongs to their firm. Legally, there are ways around this problem...but you should be aware that the problem exists. And decide if you want to take that chance...or hire someone to represent you - 100%.