Among the decisions a buyer has to make while buying a property, it involves deciding how to work with the real estate agents. This will determine whether a buyer agency agreement exists in their relationship with the agent, which outlines the terms of your relationship with them. The contract may either be exclusive or non-exclusive; it’s a decision between the two, which helps a buyer determine what they want for their property search.
A buyer agency agreement is a contract between a buyer and a real estate agent that defines the responsibilities and expectations of both parties. It usually includes the services that the agent will provide, the area in which they will help, the compensation the agent will receive, and the length of time the agreement will be in effect.
A buyer agency agreement is created specifically for protection for a buyer. Unlike that listing agreement often signed by sellers with their agents, it suggests how the agent must do her business and will leave one of very few clearly defined lines of communication into perhaps one of most confusing arenas of this world-realtor jargon.
Why You Need a Buyer Agency Agreement
A buyer agency agreement has the following purposes for both the buyer and the agent:
Clarity of Expectations: Both the agent and the buyer know what each other’s roles, rights, and obligations are.
Protection for both parties: A buyer agency agreement protects a buyer’s interests and safeguarded the agent’s commission rights.
Avoidance of Conflicts: The terms of the agreement will help eliminate conflicts, especially those created by commission disputes, both in terms of what either the agent or the buyer expects from the other.
Commitment: It creates a level of commitment between the agent and the buyer, which is very important in competitive markets.
These agreements are especially beneficial when dealing in competitive real estate markets. The reason is that they both keep the agent and buyer committed to the process, which generally leads to faster and more efficient home purchases.
Exclusive Buyer Agency Agreement
An exclusive buyer agency is a contract in which the buyer agrees to conduct all business with a single real estate agent within a geographic area for a specific period of time. These agreements typically are drawn up for periods of time ranging from six months to a year, depending upon the needs of the buyer and the market in question.
Key Features of an Exclusive Buyer Agency Agreement:
Only One Agent: The agreement binds the buyer to using one agent exclusively; thus, no other agent may be employed for searching within the defined area for the same property.
Commission Structure: Typically, the commission of an agent is due upon a property’s sale to a buyer. The type of commission might be fixed or percentage on the selling price of the property.
Term: An exclusive buyer agency agreement has a term of six months to one year. Still, the period might be shorter or extended according to the needs of the agent and buyer in specific scenarios.
Benefits of Exclusive Buyer Agency Agreements
There are many reasons for seeking an exclusive buyer agent. Some of the primary benefits are:
Commitment and dedication: An exclusive agreement with a real estate agent will commit his time to finding you a home since he is assured of receiving compensation for his efforts. This may lead to more personalized service and a stronger, more focused search for properties.
An exclusive buyer agent can focus more and concentrate his efforts in finding the perfect property for you. Knowing that they are only paid after you make a purchase, they can concentrate their search on finding the ideal property to suit your needs.
Better Negotiation Power: With an exclusive agent representing you, he is likely to use the full negotiating power to his advantage. He will do so better if the agent gains sufficient knowledge about your preference and has had time to do market research in lieu of you.
Personalized Advice and Experience: An exclusive buyer’s agent may be able to tailor the advice given specifically to meet the needs of a client. This is often particularly valuable for first time homebuyers or other clients with little knowledge about a particular real estate market.
Downsides of Exclusive Buyer Agency Agreements
There are many benefits to such a contract, but there also some potential negatives to such an agreement:
Limited Flexibility: One of the disadvantages of exclusive buyer agency agreements is being tied up with one agent during the entire term of the contract. This means that in case you need to use another agent or feel that the given agent cannot assist you, you are locked out.
This may bring unsatisfactory service from the agent, especially if they do not perform well or do not meet your expectations. You might face difficulty in terminating the agreement if you are in the middle of the contract, which may frustrate and prolong the home search process.
Overlapping Coverage: If you sign multiple exclusive buyer agency agreements in the same area, then there could be a possibility of conflict of commission, which may result in a legal battle or problems.
Non-Exclusive Buyer Agency Agreement
It allows you to use several real estate agents because this agreement is not exclusive. Compared to an exclusive agency, it provides more freedom to the buyer. This kind of agreement is normally opted by the buyers who are not finalized to a particular location or a specific agent or who are working on a wide geography scale.
Flexibility to Work with Multiple Agents: You are not tied to using one specific agent. What this means is that it can work with different agents whenever you like it to; this is pretty good, especially for those buyers who wish to consider other options, or even look at several markets.
Shorter Terms Most non-exclusive contracts have only a month or two at most, while longer time periods are definitely negotiable.
Compensation: The agents who have been dealing with an exclusive with you may receive some commissions because he or she has helped buying a house with you.
Benefits of Non-Exclusive Buyer Agency Agreement
The exclusive agreement itself has an advantage:
Maximum flexibility: In cases where you’re unsure about wanting to work with one particular agent or maybe looking at several markets, a non-exclusive agreement leaves you free to see how different agents are in performing what you need for your properties.
Less Commitment: It best fits people who have just started searching for a property or are not yet ready to commit to a long-term relationship with one agent. You can browse around without being locked into a long-term contract.
More Options: Since you are not committed to a single agent, you may have access to more properties and information. You can tap into different networks and get access to different listings by working with multiple agents.
Disadvantages of Non-Exclusive Buyer Agency Agreements
Even though non-exclusive agreements have several benefits, they also come with some disadvantages:
There’s no guaranteed priority. In a non-exclusive deal, your representatives might not really consider your needs, for they collect their commission only upon sales, hence making you less personal in their service lines.
Chances of Split Interests: With too many agents to deal with, you can barely hope to get proper coordination regarding property search. Chances are that there are going to be missed opportunities and possible confusion or even contradictory advice.
Commission Conflicts: You hire two agents to find you a property, but you end up buying it through one of them. One of the agents will still want their commission. Disputes may occur on who gets the commission.
Choosing an Exclusive or Non-Exclusive Agreement for You
You can choose either an exclusive or non-exclusive agreement depending on your circumstances and your desire to commit yourself to a particular agent.
You may consider an exclusive contract if:
You want to build up a robust working relationship with one agent that will give you preference and priority.
You only target one geographic area, and you would like an agent to take you from start to finish.
You want a committed, customized service from your agent-including greater access to the flow of market information and greater influence in negotiation. For non-exclusive agreements, these would be the following considerations.
You want more freedom, and you are not willing to commit to one particular agent.
You are still exploring various markets and require working with several agents.
You are willing to have a less personalized service in exchange for more freedom and wider options.
Conclusion
Whether exclusive or non-exclusive, the decision comes down to personal preferences of commitment level that one can commit himself or herself into, as well as specific needs during property search. Consequently, by weighing the pros and cons of either choice, a type of buyer agency agreement may determine.
An exclusive agreement ensures that you will work with a dedicated agent, while the non-exclusive agreement leaves your freedom and flexibility open and enables you to explore a range of options. Thus, it makes you understand and adapt your choice according to your real estate goals, so that you make a confident move in the home-buying process.
Ultimately, the best decision is that which supports your unique needs and helps you achieve your real estate goals with the guidance and support you deserve.
