What to do with Exclusive Buyer/Tenant Brokerage Agreement in MD?

Question

Hello Everyone,

We've been looking for investment properties in Maryland for a couple of months and have talked to several RE agents and brokers. One of them (she's also a broker) showed us a few properties in Baltimore County and at some point asked us to sign an Exclusive Buyer/Tenant Brokerage Agreement with her, which we did. It might have been a mistake, a small one or a big one, but what's done is done, and I need to figure out the best course of action at this point.

The document does not have a termination date on it, as far as I can tell. The agent hand-wrote "Baltimore County" at the top, but does it mean legally that I am stuck with her just for that region, or for the whole of Maryland or something else?

The issue is that a couple of other agents I've contacted found properties that might be good investments. One is in the county, the other is elsewhere in Maryland. These properties might require fast action on my part, so the question is: do I need to terminate the agreement with the other agent before proceeding? If so, what's the right way to do it? And what's a wrong way to do it that should be avoided? (I realize that I can't just take my ball and go home because I don't want to play anymore.)

Just to clarify: it's not that I am terribly unhappy with that agent. It's just I want to have the freedom to deal with whichever agent finds me the best deal.

Thank you

Ruth Lyons · Answer

Responses here offer a lot of great information and sound advice to consider. Here's another perspective.

I invested in real estate for 3 years before I got my license in Maryland. I paid agent fees as needed. I was working with an agent who charged a minimum of $3000 which meant that, on one of my properties I purchased for $92,500, I paid the bulk of his commission at closing. Would I have rather not, of course! But there's a cost of doing business and agent fees is one of them.

Since getting my license, I realize how hard agents work -- and how much work they do for free in hopes/expectations of getting paid down the road. Agents have hard costs that are paid out of pocket each year, whether they do any business or not.  Between licensing fees and fees for the tools of the trade (Broker fees, Association membership which is required, Showing Time membership, Sentrilock boxes and monthly assess fee, MLS assess, etc.), I paid over $3,800 in obligatory fees alone out of pocket my first year as a Maryland-licensed agent. That doesn't include marketing, gas and car expenses and other costs incurred in doing business to potentially earn a commission. During my first year, I had multiple deals fall through for no reason other than what I refer to as  "buyers and sellers behaving badly".  Agents spend tons of time, energy and money working on deals that never get to the settlement table and no commission is paid.

Most people don't realize agents work on 100% commission -- that's how the industry is set up. And that is good for consumers in that it acts as a barrier to entry for many people who think they can make a lot of money in the industry by just showing up. Agents who make it (and the attrition rate on agents is very high in the first 2 years of being licensed) work hard to provide an exceptional service for their clients, with the hope and expectation that their clients will turn to them with their next real estate need and refer them to friends and family.

Do your due diligence to find and hire a good agent, and then be loyal to that agent. Agents can't afford to work for free nor should they be expected to.

Theresa Harris · Answer

You can tell her you want out of the agreement and see what she says.  One problem with working with a bunch of agents is that they aren't as invested as they might be if you were only working with them.  By working with one agent, they get to know what you are looking for.  All the agents have access to the same set of listings aside from knowing about ones that are about to hit the market.

Chad Gallagher · Answer

Her incentive to cancel the agreement would be the long-term relationship with you.  We find the most successful people in real estate value the relationship more than forcing someone to stick to a contract like that.  Obviously that doesn't apply to everyone.  But I'd try something like this --- "Hey, we like you as an agent and want to work with you in the future, but we just got a good opportunity from another agent and hope you are understanding.".  The unique thing about investors for agents is that it's not a one time deal since you'll probably want to buy more relatively soon -- and hopefully the agent understands that.

Yannik Cudjoe-Virgil · Answer

Tough decision but I think you should be honest and tell her. Agents work for free until they close and they want to protect their time so they will ask to sign an agreement to do so. There are can a lot of tire kickers in real estate. Are these agents that are sending you deals on the listing side or the buyer's side ? Moving forward I would try to build a relationship with an agent and ask them to send you automatic listings that fit your criteria. @Ilya Z.

Marylin OShea · Answer

Hi @Ilya Z., you got a lot of really good advice here!

To answer your question about the area or type of property, yes, you can make the agreement more restrictive that way, and it is obviously better to talk this through with the agent before you sign the agreement. (But you're not stuck here! Read on...)

In Maryland, the standard Coldwell Banker representation agreement reads: "The Buyer seeks the following type of property: _____________" So here you could state the county, price range, property type to restrict the "specialty" you're shopping for with a particular agent.

Also the duration is totally up to you, so don't hesitate to write it up for a day, or a week. Again for the brokerage I work with, it looks like this: "This agreement shall be effective on _______ (mm/dd/yyyy) and shall continue until midnight on _______(mm/dd/yyyy)" and understand that you're tied to the agent for properties shown to you by her/him during that time. This protects the agent for her/his time, and gives you the flexibility you need. Some agents may be reluctant to do this, hopefully they're interested in building a long term relationship with their investor clients over time.

That being said, you can cancel the agreement in writing pretty easily, and that's clearly stated in the same paragraph of the agreement on the first page: (hopefully your agreement has something very similar)

"Broker by giving written notice to Buyer may terminate this Contract, which termination shall be effective at midnight one(1) day following Buyer’s receipt of notification from Broker. Buyer by giving written notice to Broker may terminate this Contract, which termination shall be effective one (1) day following Brokers’ receipt of notification from Buyer. Buyer and Broker may terminate this agreement at any time by mutual written agreement."

So if you want out, send a written letter to the brokerage with delivery confirmation. Ideally you've explained your reasons to the agent beforehand. No agent want to "force" any client to work with them, that's just not the business we are in :)

One other thing, I agree that generally agents have access to the same information via the MLS. However I believe that there are many non MLS listing that are pre-sold before they hit the market. It's the case in Annapolis, we have our CB sales meeting weekly during which we announce listings before they're published anywhere. Same goes for "investor specials". Find the agent that will give you the inside scoop!

One other resource I use is the Facebook group "Baltimore Investors Network"

https://www.facebook.com/groups/358674524275464/?f...

Good luck!

Cathy Baumbusch · Answer

I know this post is 2years old, but I wanted to respond anyway.

If you want the freedom to deal with whatever agent that finds you the best deal, then don't sign an exclusive agreement with anyone. However, don't expect to get the same service you will get when you have actual representation.

Maryland Title § 17-532. Duties to client. describes very clearly what a client is (someone with an exclusive agency agreement) and what the duties to a client are. You are not entitled to those duties when you are merely a customer and don't have an exclusive agreement. That does not mean that an agent is not obligated to act ethically towards you, but they are not bound by those duties. Without an exclusive agreement, they are NOT representing you, they are representing the seller as a subagent. They are allowed to perform "ministerial acts" for you but have not formed an agency relationship with you.

Secondly, without an exclusive agreement with you, the agent is then working with the very high risk that they will not get paid for all their efforts. I personally would not want to be running all over town showing properties to you knowing that there is a high probability that I'm not going to get paid. It's a waste of my time. Nobody should be expected to work for free. And before you say that agents make enough to make up for it, you should know that real estate agents make on average $40,000-50,000. It is not worth it.

Real estate is definitely a relationship business. There's really no such thing as "getting you the best deal", it's not like car sales. It's just a matter of finding a property that works best for you in terms of numbers. Certain agents may work in the off-market wholesaling space which might work for you, but all agents have the same access to the same MLS, especially now where the MLS in the DC/Baltimore area stretches from parts of PA, NJ, VA, DC, MD, and WV.

If you want the best deal, work with an exclusive agent who will put your needs first, and if you want to search in different geographical areas, at a minimum let your agent refer you to other agents so that they at least get a small referral fee. Nobody is keeping info or available properties close to the vest, believe me, especially for investors. Our #1 desire is that we close because we need to eat.

In your initial discussion with the agent, the agent should have discussed with you the "Understanding Whom Real Estate Agents Represent" form. That explains who represents you and how it works.

This article talks about knowing what you sign and what the law says.

https://www.washingtonpost.com...

Good luck.

Lamont Marable · Answer

Simply write the agent a letter indicating what you want to do.  It's simple.

Joe Norman · Answer

Buyer Representation agreements in Maryland are required to have both an Expiration Date and a Termination Clause (@Marylin OShea gave great examples of both).  Double check your agreement because if its one of the common standard templates that Maryland agents use it will have both, and if it doesn't its probably not enforceable (note that I'm not a lawyer and am not giving legal advice!)

I do require that my retail clients sign Exclusive Buyer Representation with me for a period of 6 months (although it is easy to terminate via the Termination Clause).  For my investor clients I have them sign Buyer Representation that is limited to the single property I am showing them/writing an offer on.  I also have a Handskae Agreement with all of them that I will be there agent (and get paid my full commission) on the purchase and sale of any deal I find for them, although that isn't specifically documented outside of email.

If your agent is a pro who is experienced working with investors and focused on a long term relationship then I think she will totally understand where you're coming from when you talk to her about terminating the Exclusive Agency agreement.

Lynn McGeein · Answer

Many agents and their brokers will lock you in and expect you to pay the commission.  We sold a condo in Annapolis to a buyer whose agent wouldn't even show her our home because it was a FSBO, but that buyer ended up paying the agent a negotiated 2% of purchase price because she had signed an exclusive agreement with her.  We had negotiated the price without using an agent, unaware the buyer had an agreement with one, so we weren't paying it.  And she had just signed it the week before, where the agent had only showed her property for one day previously.  So be very careful what you sign, and never sign an exclusive agreement.  If there's no end date in the contract, many states have a specific time period,  like 90 days if no end date listed, in the state laws.  As an aside, that agent actually called me and told me I should be paying her the other 1% to make it 3% for her, so don't under-estimate how brazen some agents can be.

Ozzy Sirimsi · Answer

I agree with @Yannik C- V. You should build a relationship. If you want to cancel the agreement, just tell her and move on.

What to do with Exclusive Buyer/Tenant Brokerage Agreement in MD?

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