Buyer Agency

NOTICE:  This page and article is copyright © Brian K. O'Malie and may not be used, copied, or posted elsewhere on the internet, in whole or in part, without the express written permission of this author. 

 
Although I may (or may not) ultimately get paid by the Seller/Lessor in a Buyer/Lessee agency arrangement as discussed above; until such time as a Buyer/Lessee proceeds with consummation of a property sales or lease transaction, all expenses incurred in the Buyer/Lessee representation process are out-of-pocket expenses advanced on the Buyer/Lessee's behalf and paid by me.  Therefore, to guarantee re-reimbursement of costs advanced on the client's behalf and payment of my professional services; and to also discourage "run-offs" or theft of professional services, time and resources; I will require:

• A Signed Exclusive Buyer Agency Agreement (which stipulates that this agent is entitled to X% commission for professional services)

• An Agent Retainer Fee Deposit which is a "Good Faith" or Earnest Money Deposit. This can be placed in my broker's escrow account and credited against Buyer's obligation to pay agent brokerage commission fee if not fully paid by the Seller and/or Listing Broker.  If the Seller and/or Listing Broker offer cooperating commission split with me and my broker which is equal to or greater than what I charge for Exclusive Buyer Agency representation, then the Retainer Fee or Good Faith Deposit will be fully refunded to you at settlement/closing, or can be used as a credit towards your closing costs at settlement/closing.  If the Seller and/or Listing Broker pays the Buyer Agent commission agreed to in the Exclusive Buyer Agency Agreement, you will ultimately get my professional representation and services totally free of charge!

• Buyer has a Lender's Pre-Approval Letter to demonstrate that they have the wherewithal and resources to purchase property they wish to be shown and are an "able, ready and willing" Buyer. Any lender condition(s) precedent such as selling existing home first if trading up to a larger home or even trading down to a smaller one or any other credit repair, debt to income ratio issues, or other contingencies need to be already met or you are in the process of taking care of any final lender approval issues that could impede settlement/closing on your new home.  Lender approval should only be subject to contingency for satisfactory valuation appraisal of property, (required home condition repairs if FHA financing), and no new credit taken out since date of approval or commitment. If the prospective Buyer and client has not already sought mortgage financing, I can of course connect you to a mortgage lender or broker. If you already have a mortgage lender or broker then I will of course be working with you and your lender to insure a smooth settlement/closing and to assist and guide you through this entire process and ensure a "safe landing" at settlement and on your move-in day just like an "air traffic controller".  

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There is another option if you do not feel comfortable working with only one Buyer Agent and do not want to commit; but you just want to go out looking at properties only:

• You can hire me as your "chauffeur" and "locksmith" for the day to be shown properties and be able to view and access homes for sale which have a Realtor's lockbox on the door. 

• I charge a daily flat rate fee for this type of service, which needs to be scheduled and paid in advance of going out to be shown properties.  

• Please note that in this arrangement, I am not representing you and I have no fiduciary agency duty to you.  

•  In the event that you wanted to write a contract on a property you were shown in the "hire a chauffer & locksmith for the day" arrangement, I would be working as a sub-agent for the Seller and not necessarily protecting and promoting your best interests (which I am not being paid or hired to do under an Exclusive Buyer Agent Agreement).  In this arrangement I cannot answer certain questions about the home, neighborhood, price of comparable homes that have recently been sold, architectural or other home maintenance or condition questions, etc.  I am merely being hired to take you around (in an amicable and friendly manner of course) and show you properties only. 

If you wanted to write a contract on a home you were shown under this arrangement, there is a separate flat rate charge for providing all the contract forms and addendum and for the time taken to provide those to you and assist (not represent) you in filling the contract forms out. This too would have to be paid in advance before rendering this service to you.

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Notes on How Buyer Agency Brokerage Typically Works

• First and foremost, if you have not entered into a a Buyer Agency Agreement with a Realtor, then you are a customer, and not a client.  There is a HUGE difference between the two and the duties and obligation a Realtor has to you if you are their client, vs. merely being their customer.
• There are several types of buyer agents or representatives; Standard Agent, Limited Service Representative, Independent Contractor. For the legal definitions of these in Virginia click on this link.
• The following points and discussion assumes a Standard Agent.
• In the case of buying a "FSBO" (For Sale By Owner) or "URO" (Unrepresented Owner) property, the Seller is likely to NOT pay any Buyer Agent commission at all or in part, which is why they are trying to sell the property themselves in the first place and save the Listing Broker sales commission. In such an instance or case, YOU the Buyer, would have to compensate me fully for Buyer Agency Representation and Buyer Brokerage commission fee as stipulated in the Exclusive Buyer Agency Agreement as I will be getting no compensation from the Seller.  Someone has to pay for my professional services.
• In the event the Seller has listed his property through a Real Estate Brokerage Company and is offering cooperative Buyer Agency commission to the Buyer Agent (me), then your final obligation to pay me the Buyer Agent commission will be offset by what is ultimately paid by the Selling Broker at settlement/closing.  For example, my Buyer Agency Brokerage commission fee is 3% (of final settled sales price), and the Seller only offers Buyer Agent Broker 2%, then YOU are responsible for making up the 1% difference.  If Selling Broker offers Buyer Agent Broker 3%, then you ultimately get my professional representation FREE of charge to you. I credit the commission paid by the Seller to what you are responsible for paying for Buyer Agency representation. These numbers are just used for illustration purposes; each case may be different but this is a general guideline how Buyer Agency brokerage typically works.
• If I work with you as a Buyer, I may defer the final Buyer Agency Brokerage commission fee you are responsible for paying until settlement/closing solely as an accommodation to you, but this concession is NOT considered or construed as a waiver of the Buyer Agency brokerage fee commission.
• Until such time as the Buyer chooses a suitable property and goes to settlement/closing; all expenses incurred in the Buyer Agency process are costs advanced by me to you, the Buyer, out-of-pocket.
• I will therefore require a Good Faith or Earnest Money Deposit to ensure or guarantee final payment for my professional services to you. When you go to closing/settlement on a property of your choice, then the Deposit will be fully refunded or returned to you, or may be used to pay any buyer brokerage commission fee not fully paid by the Seller, or it can also be used as a credit towards your settlement closing costs .
• If the Buyer does not want to incur any out-of-pocket expenses for buyer agency representation and Buyer Agency Brokerage Commission directly (such as what could occur with a Buyer selecting a "FSBO" or "URO", or a distress property, short-sale, foreclosure, bankruptcy trustee sale, etc where Seller offers either nothing or less than full buyer agency commission) then Buyer would have to agree in the Exclusive Buyer Agency Agreement to be shown only properties where my commission would be fully paid by the Seller as expressly stipulated in the MLS listing or other marketing or sales disclosures. 
• There is no legal mandate, "unwritten law", practice nor custom which states that the Seller MUST pay the Buyer Agent's commission for rendering that professional service to the Buyer and for assisting Buyer in finding and ultimately going to closing or settlement on a suitable property of Buyer's choice or desire.
• The Seller may make some price reduction or concession, help you (the Buyer) pay for some of your closing costs, make some repairs as identified in a home inspection contingency or make some other concessions to you; however, there is no mandate that they also pay your obligation for Buyer Agency representation (in full or in part). At the present time, however, it is prevailing practice in traditional "MLS" type of sales (or those properties listed for sale through another Real Estate Broker) for the the Seller to offer "cooperative brokerage sales commission" split with the Buyer agent/broker real estate firm.
• Be aware and cognizant of the fact when working with a professional Buyer Agent or Realtor that the buyer agent representing you does not work for free, "pro bono" or get some sort of Government grant to assist you. The Buyer Agent or Realtor receives absolutely no salary or remuneration whatsoever from the broker or real estate company he is affiliated with as an independent contractor.
• If you want professional fiduciary representation and buyer agency to have a professional and licensed Realtor protecting and promoting your best interests at all times as a "Standard Agent" throughout the entire course of being shown properties all the way through to closing and settlement, then be flexible and understanding in your working relationship with your Buyer Agent.  All of this, and some of the considerations mentioned above, should all be clearly and unambiguously spelled out in black and white in the Exclusive Buyer Agency Agreement contract that you enter into with your buyer Realtor agent and his broker or real estate firm.
• The Exclusive Buyer Agent Agreement should be a welcomed and embraced affirmation of your mutually beneficial or rewarding working relationship with each other and the bi-lateral promises and commitments that you make with and to each other.
• Be amenable to paying a "good faith deposit" for professional services, advise and counsel rendered to you by your buyer agent Realtor, just as you would when presenting a contract offer to a Seller which would require you to remit an "earnest money deposit" with the sales contract offer.  
• If you get "cold feet" or otherwise decide not to buy a property for any reason or for any unforeseen or unexpected life circumstance (job transfer, job loss, marriage, divorce, children, elderly parents, or other income or domestic relations related matter) after substantively engaging the services of your Realtor, you should compensate your buyer agent Realtor for their time, energy and personal resources spent on your behalf in assisting you.  You walk away with valuable knowledge and experience in the process; make sure your Realtor also walks away with something too for their investment of time and resources in you.  Here is where your "good faith deposit" could be used as a form of "travel Insurance" should you decide to cancel your "itinerary"