This post explains 5 common misconceptions about buyer representation:
- 1 - If I sign a buyer representation agreement, I’m locked in with this realtor. Why tie myself down? I hardly know this realtor. What if his/her service is not up to my expectations?
Buyer representation agreements are very flexible, and do not have to be written in a way that locks you in with the realtor. For example, if you only want to go out once and see four homes, the representation agreement can be for a time period of one day, and only for the four homes you view. If you are pleased with their services, you can change the agreement to something mutually agreeable.
- 2 - I’ll get a better deal if I work directly with the listing agent.
This is probably the most common misconception I hear. With literally hundreds of variables in any transaction, how can one assume that you’ll get a better deal without representation, or multiple representation? You can never know. The listing agent may reduce his commissions to the seller if only one realtor is involved in the transaction. However in my experience, the majority of realtors do not reduce their commissions, they simply earn more. There’s much more liability and work required when handling both ends of the transaction, and most feel they deserve the extra pay. Getting a better deal without buyer representation is possible, and so is winning the lottery. Perhaps your odds aren’t that bad, but they’re not that good either. You’re going up against a professional negotiator who has been trained in the field, and if he or she is not working for you, they’re working for the seller.
- 3 - Why am I signing a contract just to view a home? I don’t want to buy yet.
Fair enough. You’re just looking. Looking leads to nothing, or buying. Your leisure long term search for a home can end today when you see the perfect home you never expected to find. Now you want to put an offer, and have no representation, or a real estate lawyer handy. You could be forced enter into multiple representation, or simply act as a customer without representation.
- 4 - If there’s more than one offer on the table, and my offer is directly with the listing agent, I have a better chance of getting the home, as the listing agent would earn more on my deal.
This is incorrect as well. If the listing agent is earning more or less dollars due to him/her representing a buyer in a multiple offer situation, it must be disclosed to all parties, including the amount. This allows a level playing field for all buyers, and everyone is aware of where they stand. In the end, it’s the best offer in terms of dollars, clauses, conditions, closing date, and other factors wins the deal anyhow, and commission plays a small or no role at all. Commission rates are negotiated on the day the home is listed for sale, and are not part of the negotiation on your agreement of purchase and sale.
- 5 - When I bought my first home xx years ago, I never had to sign anything.
This is very true. However, prior to buyer representation, your agent became a sub-agent to the seller as soon as you decided to put an offer on the property. The listing agent, and your agent were BOTH working for the seller, trying to negotiate the best price and result for the seller, not you. Things are different today, different for the better. You now can have the same professional representation.
So there you have it, hopefully that clears it up for some. If not, you can always ask your real estate lawyer for further clarification, and perhaps a different viewpoint. Contact me anytime if you have questions.