One of the most misunderstood concepts in real estate involves Buyer Representation.
In fact, I know a lot of REALTORS who don’t even get it.
I’ll try to break it down as simple as I can…
Normally, when a home is listed, the seller agrees to “co-operate” with any real estate professional who brings a buyer, negotiates the sale, removes the conditions and closes the transaction.
The listing agent works for the seller – that makes sense.
But here’s the part people have trouble with…
All the other 20,000 agents in the Toronto area? They also work for the seller as “sub-agents”. After all, the seller is paying them, so it makes sense that this is the default setting.
In other words, if you emailed me today (out of the blue) asking for information about a home, I would work for the seller. My sole interest is to protect the seller and get him the highest price and best terms to his benefit.
Even if you’re my best friend in the whole world. Seriously.
UNLESS we agree that I will be your “Buyer Representative”.
A Buyer Representation Agreement is something that’s done in writing, because everything in real estate is in writing.
Our Code of Ethics says we need to disclose this as soon as possible. Unfortunately most Realtors don’t.
Simply put, this Buyer Representation Agreement says that even though the seller pays me as your Buyer Representative, my legal duty is to ensure YOUR interests are protected as a buyer. It gives me permission to work for you, and not the seller.
It also allows me to get paid from the proceeds of the sale, and not from a buyer directly. Most buyers seem to appreciate that.
Wait, there’s more — under a Buyer Representation Agreement, it’s the duty of your “Buyer Agent” to keep your information confidential, and to make sure that the best price and terms are negotiated for your benefit. They will tell you the truth about market value, because they are under a contractual obligation to look after your interests.
On the other hand, if there is no Buyer Representation Agreement in place, your agent automatically works for the seller, and they would show you prices that would validate the seller’s asking price. Their job is to protect the seller instead of you.
As you can see, NOT signing a Buyer Agency Agreement could cost you thousands of dollars more than what you might pay with the help of your own Buyer Representative.
The purpose of this Agreement is so that there is understanding, consent and clear boundaries about who’s really working for who.
It switches the default setting over to YOUR best interests, instead of the seller.
The agreement can last anywhere from one hour to several years.
Is it a commitment in writing? Yes it is. So be sure to ask your representative if they offer an “Easy Exit Guarantee” if you’re not happy.
All great businesses offer a satisfaction guarantee, and real estate should be no different.
Needless to say, we have an “Easy Exit Guarantee” in place. 🙂
This isn’t a sales pitch – it’s something everyone needs to know who is trading in real estate, now or later.
Here’s a sample of the paperwork if you’re curious.