Why work with a buyer's agent??

Question

I've been working with a few Realtor agents to look for property. Each agent covers a different geographical area.

I've been researching everywhere looking for opinions on the relationship between a buyer's agent and an investor. I've even read the Realtor's association web articles trying to get a sense of how they feel. I understand there are agents that work well with investors and others who don't take it so well.

Both agents want me to sign a representation agreement but are very opposed to the idea of modifying the agreement for shorter than six month terms and are also opposed to a modification that excludes FSBO and unlisted properties from our agreement.

My thinking is: if I sign with agents and then I find a private seller who does not want an agent or brokerage involved, I don't want to have to tell my agent if I don't want to. I definately don't want to pay comission to my agent if they didn't find me the house and I can handle negotiation and paperwork!

The buyer's agreements are worded so that ANY property I acquire within the term will be subject to comission fees.

What should my position on this be?? How do agents handle investors? HELP!

Jonathan Newman · Answer

GTDriver:  Keep looking.  The run-of-the-mill agent has their mind set on a piece of that 6% pie.  The investor has a bigger picture in mind, and believes everyone who works in the deal should get a cut of the deal.

Some investors pay a flat 1% to an agent to list a property in MLS.  When they buy, they pay a reduced commission.  The understanding, and it isn't always a contract, is that everyone gets fairly compensated.  And, more deals get done because of the good working relationship.

Keep looking until you find an agent who "speaks your language."

Account Closed · Answer

Find new agents.

If they bring you a deal you will work with them. If you find a deal on your own and you want them to represent you then you will also pay.

If another agent brings you a deal where they are not the listing agent then I would consider working with them as my agent. I do not do exclusive broker deals when I am buying unless I have worked with someone on multiple deals. That way I can find out if they can cover an MLS area. Most agents focus on a small area or are less skilled when you get them too far from the office. I am not looking for average service and no local knowledge.

Mark N.A · Answer

So I see from your profile you have no completed deals.  Which makes you at the very least an unknown quantity to a broker, and at most a time-waster.

Put yourself in their shoes:  they're in the biz to make a buck.  How will you help?

Used to be, you could find good deals on the MLS and a good agent could help you find them.  Now everybody and their monkey are scouring the MLS for deals.  And the good agents are either buying them up themselves or portioning them out to favored investors.

The fact is, once you have a couple of verifiable deals under your belt agents will start treating you different because you will be 'real'.

The choice is yours how you get 'real' and make your first deal.  There's been some great advice to you already.  Mine might be: if you're worried about a FSBO, negotiate a deal that covers the agent's fee.

Howie NA · Answer

I dont know about your state, but in Ontario, Canada, in our buyer agreements there is a section towards the end of the first page that has a description of the property that you are looking for.  So you could technically get one agent to search for single family detached while another would be looking for a commercial property.

Here is the catch...if you find any sort of single family detached within your contract period you owe them a commission (the one that you signed for a SFD, not commercial).

Also, what you could do is instead of write SFD (which is broad), write something like "SFD in Anycity".  That way if you buy a SFD in Anytown (which is next to Anycity) you wont owe them a commission because it was not in the contract.  I dont know the contract law in your state, but maybe you could look into it.  or get a real estate lawyer for advice.

Also a few posts up someone mentioned a period after the contract that you might have to still pay them.  This is called a Holdover period.  This ensures that you arent going to go back to the owner the day after your contract ends to buy the house.  But this would only apply to houses that they showed you during your contract period.  So if it is a FSBO you wouldnt have to pay commission

Obviously, being this picky and stuff they probably wont want to work with you or might make things sour, but sometimes you have to do what benefits you....

Again, I am from Ontario, Canada, so it is probably different, but thats how we do things up here in the great white north  :D

Richard F. · Answer

Well, maybe they do things different where you are, but in my experience if I accept buyer's agency, the buyer agrees to pay my company's commission, and it has nothing to do with the seller. It may or may not have anything to do with the final sale price (not COST). It may be a flat fee, percentage, or combination. The seller has NO obligation to pay the Buyer's agent, absent written agreement to the contrary.

The Buyer's agency agreement is between Buyer and Buyer's agent; the Seller's agency (listing) agreement is between Seller and Seller's agent. The cooperating Broker's agreement is ultimately between the two agent's Principal Broker's.

IMHO, if your buyer's agent is negotiating a commission with the seller, that would create a dual-agency situation. Dual agency can get an agent into hot water FAST, and, for the purposes of an investor buyer, I would say it defeats the whole idea. The smart investor wants someone WHOLLY in his corner.

Misty McMillan · Answer

MANY FSBO'S WILL AGREE TO WORK WITH A BUYERS AGENT, BECAUSE REALISTICALY, THEY DON'T KNOW HOW TO COMPLETE THE PROPER PAPERWORK NEEDED IN MOST CASES, OR HOW TO PROTECT THEMSELVES, not to mention that buyer's probably have not been knocking on their door much. It is your agent's responsibility to call up the fsbo and negotiate their commission terms for the deal. Many people feel awkward dealing and negotiating directly with people, especially investors as in many cases investors and agents are still looked upon as greedy people only trying to take advantage of people, which we all know is not the case.

Buyer rep agreements go both ways by the way, it not only protects the agent for completing all this property research and gaining valuable information for buyers, but it protects buyers interests, what they are willing to pay, personal information such as cash availability, terms, ect, that if a rep agreement is not in place, or at least a signed agency agreement, what ever you say to an agent is not held in confidence until that agreement is signed. If you don't agree to some form of representation agreement, that means what ever you say, can go directly into the ears of the seller and kill a deal.

Whats the big deal??? work with an agent for a three month period. If you don't like how they do business, not qualified enough for what you need, ect. move on. If you feel they are working hard for you in your best interest, extend the term of the agreement. Don't assume a FSBO or anyone else for that matter won't work with an agent, cause in these markets, if a buyer comes knocking, regardless of who they come with, they will talk.

Ryan A. · Answer

Great responses. I'm starting to see both sides.

I have no problem working with a buyer's agent on a listed house. In this case, the seller has already agreed to pay someone a commission.

My problem is that if I find a FSBO, the seller has no intention of paying commission. That's why he's FSBO. Why bring in an agent if the seller wants to work an awesome deal without? I have an RE lawyer who will check my work and help with closing.

So why should I sign something that allows them to control this?

That was my motive.

Thanks for your input!!  :wink:

Lisa Sanderson · Answer

Not sure how many that replied here are real estate agents, but I am. And all I have to say is, hire an agent. I know, it sounds self-serving, but truly it is not. If I were going to invest in property in an area I don't work in, I would hire an agent...even being in the business and knowing all there is to know! ;)

There are a million ways you can test them out before you sign a representation agreement...phone conversations, asking them for bits of info here and there, emails to see how responsive they are, etc.

But the important thing here is, you aren't hiring an agent to find you properties...that is the easy part. It is the knowledge, experience and resources that an agent brings to the table that are important...even on fsbo's etc.

Any good agent worth her salt will require an exclusive relationship because she knows she's worth it.  Frankly, there are a million of y'all running around looking to make a killing!

Ryan A. · Answer

I've read over and over to be sure I'm not missing anything.
I'm positive this agreement is in effect a blanket agreement to cover any property I acquire.

Wow.

So I've created an addendum which I will attach in this post. Maybe this will help anybody else who may run into the same situation.

If anybody wants to read this greedy and almost predatory agreement, let me know and I'll post.

Account Closed · Answer

1. Read the contract closely. Read it more than once. Then see if you have an issue. If unsure get a lawyer to read it.

2. You can agree to terminate the contract early. If she is doing a good job consider leaving it in place and then ask for an exception if you find a FSBO. Get the exception signed before you close the deal. Set up the exception so that she can not contact the seller and let the seller know about the agent prior. That way she will not come around you.

3. Remember to check and see if the agent has a boss. Some of the time the brokers supervising are more balanced and mature in their thinking. They are in for the long term even if an agent is likely to crash and burn.

Everything is negotiable. Just figure out what you want and then make sure you know the details of the deal before signing.

Why work with a buyer's agent??

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