I wanted to do a quick post to share my experiences with my most recent Real Estate Agent and the Exclusive Buyers Agreement Contract. The agent was recommended by one of the local lenders in the area that I was working with. The agent had solid reviews in Zillow so figured I’d give him a try. However, prior to working with the agent, they required me to sign an Exclusive Buyer’s Agreement.
What is this agreement? It’s an agreement between the buyer and the agent, that pretty much states that the buyer will exclusively buy with the agent and no other agent in a given timeframe until a property is bought. It’s a way to protect the agent and make sure that the buyer doesn’t go behind their back and purchases a property that the agent provided.
The particular agreement I signed had some extra conditions:
- Total Commission is to be a minimum of 3.5K plus a $400 admin fee, if seller offers a commission higher than this value, the agent will receive that in lieu of the 3.5K
- The Agent may terminate the agreement at any time without penalty
- The agreement applies to any corporations or entities under which the buyer might purchase
- If real estate isn’t purchased within 12 months, broker is to be paid a retainer fee
Now there are a lot of conditions there, but basically how I understood it is the agent is looking for a set commission regardless of what I purchase, whether it was a 50K property or a 250K property, they will get the minimum commission. Also, the agent ensured that I am to pay a retainer in the event I don’t end up buying – pretty much to make sure I’m not a tire-kicker and waste their time, got it. So, I signed.
Now I did end up buying a property with the agent, and it was pretty dang good deal. However, here’s what I didn’t realize I signed. The agent informed me that this contract is for an entire year for ALL purchases I make in the area. They even went ahead and said if I worked with an agent with any deal, work with a wholesaler in the area, or even find my own off-market property, that purchase is subject to the contract and I will owe him a commission! What?!
When I signed, I was under the impression it was just in a per deal basis, to ensure that I buy with the agent and ensure that I buy within a year. I didn’t realize I’m locked to them for the entire year! I thought soon as I bought a property, the contract has been fulfilled but apparently not…
When I requested to be Mutually Released from the contract, the agent refused, saying that they were able to get me a property and will continue to do so until the life of the contract. If I wanted out of it, they said I have to “buy-out” for a $5K fee. We were able to get it down to $500 eventually.
Moral of the story? Know what you are signing prior to signing any legally binding contract! Do your due diligence!
Now there are multiple reasons why I wanted to end the contract but primarily I didn’t think the agent was all that professional and was a bit arrogant and a pessimist. Saying things like – “BRRRRs don’t work, they’re a thing of the past, biggerpockets and masterminds are waste of time. Be careful of those gurus, they probably don’t even invest.” That of course strikes a chord as I’ve learned a ton and have accelerated my learning the past year through these so-called “waste of times.” Dude was overall toxic and I wanted to end that relationship as soon as possible.
Note that this post isn’t meant to be a rant or whine sesh, I’m all about taking extreme ownership, and I made the mistake here, no one else. I should have fully understood the contract prior to signing, but didn’t. Lesson learned. Now I gotta pay the piper – luckily dropped it down to 500 bucks! That’s a relatively affordable lesson I can afford!
What this post is meant to be is to inform and educate newer folk out there looking to get in on their first deal. Be careful who you work with and what you sign, learn from my mistakes. Do that due diligence! Thanks for reading!
