Should I sign an exclusive agreement with agent?

[Kmsuea Abdei]

Hello Everyone, 

I want to do fixes and flips, Nowadays, I connect with an investor-friendly real estate agent, and we have a good and informative conversation. He wants me to sign an Exclusive Buyer Agency Compensation Agreement. As I plan to purchase a property within one month, I hope to not just work with one agent, so that I can expose as many deals as possible. So I doubt whether I should sign, or it's a kind of rule that I have to sign if I work with agents to find the deals. 

Thank you so much for your advice! 

[Benjamin Aaker]

This is not unusual in the retail real estate agent world. The agent puts a lot of time into finding and showing you potential properties. This is a way to ensure compensation. You don't have to sign the agreement, though some state laws require an exclusive contract. If you don't sign, it's likely the agent will bring you less or no deals. If you do agree to sign, you can (at least in my area) specify in the contract that it is just for a particular property, or a particular location, etc. 

[Marc Winter]

There is a set time for the agreement, so if you can't give 30--45 days for the agent to find you the right deal, or don't trust they can/will, then move on to the next agent.

By entering into an agreement with the agent they become your fiduciary, and as such will represent your best interests.  This has become increasingly popular after the suit settled 2024 with the National Association of Realtors regarding commissions and client representation.

see article:  

https://www.cnn.com/2024/03/15/economy/nar-realtor-commissio...

Good luck!

[Peter Mckernan]

Quote from @Kmsuea Abdei:

This used to be a state requirement, some states required it, and some brokerages required it. This is something that now NAR (National Association of realtors) requires as of August 17th 2024. This is something that the agent you are talking with also had required prior to the changes.

There are a couple of things that I would think about here, the timeframe you want to work with this agent (can be 1 month or 2 months or a longer time), whether you could do it for a specific area/city/town, or you could do it for a couple of properties you see. You should have an opt-out of the contract too, so if there is anything that you are not being represented correctly on you can opt-out of it as well.

 This agreement is just like a listing agreement when you go list a home, you are hiring the right person for the job, so this is the same type of contract, but this person is hired to find you the right home. 

[Chris Ayars]

@Kmsuea Abdei although the laws vary from state to state, NAR now requires agents to have an agreement with buyers before they can show them a property. You have a choice. 1. Sign an agreement for a period of time that can be as short as one day. OR 2. Sign an agreement for a specific property. Either way, you have to sign an agreement if you expect to have an agent show you any property.

With that said, an agency agreement gives the agent incentive to work with you to find a property. The more active you are in the pursuit of obtaining a property, the more attention the agent is likely to pay you. It does not pay well for an agent to have a prospective buyer who shows no loyalty by not signing an agency agreement. Nor does it pay well for an agent to spend a lot of time with a buyer that has an agency agreement but chooses to sit on their laurels instead of actively pursuing a purchase.

Most agents who are serious about helping people do not have time to spend with lackadaisical clients or people who refuse to sign a buyer's agreement. It is up to the buyer to determine their own incentive and timeline, but if the agent feels like they are just wasting time and not going to get a transaction, the buyer is likely to be back-burnered since agents only get paid when a transaction occurs. Of course, if the agent has an entire team of people working with him, he might pawn off any contact with a client or potential client to a team member who may or may not be licensed until the buyer gets serious about purchasing. 

[Zachary Deal]

Lots of great advice in here already and does vary from state to stat but, I think it is important to find an agent you trust and like and then allow them 30 - 60 days to find what you are looking for. As others have mentioned they will be putting a lot of time and effort into this so it is important to have an agreement that protects them as well and allows them to do their job. You can go the one property route but I think doing an agreement period is much more motivating for the agent (and will save you time, hassle, etc)

[Frank Pyle]

I agree that part of the NAR settlement requires agents to have a comp agreement signed prior to showing a house. They risk their commission if they do not execute one. Personally, as a buyer I would limit the time frame until I had a solid relationship with the realtor. The department of justice filed a request to eliminate the comp agreement requirement due to possible anti trust violations. The judge rejected it. We will see where it goes from here…

[David Martoyan]

@Kmsuea Abdei 

signing an Exclusive Buyer Agency Agreement is common, but it can limit you to working with just one agent. If you want to keep your options open to access more deals, it’s worth having an honest conversation with the agent about your concerns. Some agents might offer flexibility, like a non-exclusive agreement, especially if you’re upfront about your plans to explore multiple opportunities. Ultimately, it’s about finding an arrangement that aligns with your goals without compromising your ability to discover the best deals. Best of luck with your flips!

[Griffin Malcolm]

I would only sign something like that for specific properties unless you know you're getting good volume from a single agent. To me, signing a broad exclusivity agreement kills your bubble; you're now cut off from every other agent's network.

Of course, it has to be worth the agent's while to bring you a deal over someone else, so try and offer something of value like a finder's fee or, if you're flipping, the right to list the renovated house with the agent. 

[Bryan Stengel]

Hi Kmsuea, it all depends on your commitment to actively looking for and purchasing a property.  Signing an exclusive agreement with a real estate salesperson indicates to them that you are committed to finding a property.  Realtors often put a lot of time and effort into their job, which is why the exclusive signing indicates your commitment to compensating them as they get to you finding a property, getting into contract, and officially closing.  I would encourage you to sit down with a couple of real estate salespersons and choose one based upon experience as well as knowledge of the area.  I would also say that many real estate salespersons will not be committed to an investor that just tells them to send properties to them that fit their buy box and then never hear from them again.  You will get much further in your search by signing with somebody experienced in the space.

[Andy Sabisch]

As others have said, the settlement that was reached in 2024 requires this contract for an agent to show you a house.  With that said, unless you know the agent's abailities, do not go out more than 45 days.  If they do not have a property for you by then, start interviewing other agents. Investor savvy agents are few and far between so take the time to find the right one - you are not looking for your forever home and simply giving the agent a list of homes you want to look at which is what most agents do anymore.  Finding an agent that knows the market and can find you properties that provide a profit (for both of you) is worth the effort.

One more thing about the contract . . . be sure to read the ENTIRE document and ask for clarification is needed.  We recently looked at a property outside our agents area (2 states away) and found a fee that was added which we questioned and were told it was a mistake and was removed . . . not sure if it was a mistake but be sure to read these new contracts BEFORE signing as things have changed since August.

[Ken M.]

Quote from @Kmsuea Abdei:

Hello Everyone, 

I want to do fixes and flips, Nowadays, I connect with an investor-friendly real estate agent, and we have a good and informative conversation. He wants me to sign an Exclusive Buyer Agency Compensation Agreement. As I plan to purchase a property within one month, I hope to not just work with one agent, so that I can expose as many deals as possible. So I doubt whether I should sign, or it's a kind of rule that I have to sign if I work with agents to find the deals. 

Thank you so much for your advice! 

I'm not an agent and I haven't read the NAR requirements, but I believe it commits you to paying a fee to the agent. If that is so, it behooves you to understand how much that fee is and when it becomes due. It is not a trivial thing.

[Frank Pyle]

The buyer comp agreement has to be a specific dollar amount or percentage.  It also states the term of the agreement.