When buying a home you have the opportunity to have a Realtor work with you in your search and help you every step of the way, and almost always at no additional cost to you. Why then do some people not take advantage of this option? I think it goes to a basic misunderstanding of the process, or potentially because some people think they can get a bargain if they work with the realtor representing the real estate listing.

Buyer agents work with clients from start to finish in real estate. They learn what the client is interested in, often through a face-to-face sit down meeting to determine needs and wants. They can set up automated searches that send listings to the clients so they don’t have to scour websites daily for this information. They help pre-qualify homes, sometimes through previewing the home, and sometimes simply by understanding the area and any major stigmas or concerns for certain areas (i.e. high crime rate, beside train tracks, etc). They educate their Buyer and they become a business partner in the job of finding a good home for the Buyer. Buyer agents commit to make themselves available, within reason, to help view properties, all with the goal of finding the right home for the buyer and getting paid a fair commission for their efforts.

Some buyers decide instead to call the real estate listing agent directly for every listing and won’t sign any representation agreement. In this scenario, the listing agent is working for the Seller, not the Buyer, and their fiduciary duty is to the Seller so the Buyer is not protected like they would be if they were being properly represented. There is also a possibility the Buyer could be represented by the listing agent as well, and in this case their needs must also be covered, but the listing agent often won’t have the benefit of learning through viewing properties with the Buyer what it is exactly that their goals are – and will have to assume that they are being met by the house they are offering since the Buyer has chosen to purchase it. This also makes negotiation more difficult because there are rules around providing any direction with respect to what price to offer, so the Buyer will be presented with factual comparable data, but no direction with respect to what might make a good negotiation stance. Some Buyers forego this since occasionally the listing agent and Seller have an agreement to reduce commission when representing both sides of the same transaction. Without the benefit of typical negotiation this could end up costing the Buyer more than they are saving. If the Listing agent is not representing the Buyer they are put in a position of having to sell the house, not themselves as a representative and often will feel forced to sell to this person or never see them again – this is not a position a Buyer should put themselves in and it will make them feel like they are in a salesroom versus having a consultant that they can bounce ideas off and can educate them.

Since realtors participate by paying commission on properties listed on MLS and any agent in a local board should have access to all listed properties equally, there is only one scenario where a Buyer might have to pay a commission to their Buyer agent, and that’s when dealing with a ‘For-Sale-By-Owner’ (FSBO) property. Typically however, most FSBO’s do pay commission to a Realtor and only a small percentage refuse to pay anything reasonable. In this scenario, having a Buyer agent might mean that you’ll have to pay a commission to the agent directly for any shortfall in commission but it is in an extremely small percentage of deals – and you still will benefit from the agents help in negotiating and bringing the deal through to closing day. (It should be noted that some properties may offer a commission less than the rate on the representation agreement and a Buyer representation agreement may require that the buyer ‘top-up’ the commission but this is typically rare in most markets – in any case a Buyer must be told before they sign an offer if this is the case so they can take it into account)

When a Realtor asks you to sign a representation agreement, they are offering to commit their time, help, knowledge, and negotiation skills to you in hope of earning a commission and hopefully a very satisfied client that will refer them in the future. I do not know of any other profession where, at no direct cost to you, you will get a professional’s time and expertise to help you in this manner. If you plan on using a buyer agent, which everyone really should, then you are asking for their time in setting up appointments, showing you homes, researching areas, and handling all the documentation and offer paperwork and it’s only fair to expect that they deserve something for their time. I commit my time to buyer’s that commit to work with me during the process. If a buyer does not recognize that my time is valuable by committing to work with me, then I will move on to a client that will. My hope is that, in the future, the governing bodies require a representation agreement be signed before any viewings can take place so that it is recognized that time is a valuable commodity and that fair and consistent representation is important for everyone in a real estate transaction.

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Eric Klimstra
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