When interviewing for a real estate agent to help you purchase a home, be sure to ask them what type of buyer representation they are going to provide to you. There are multiple types of buyer representation with differences in what they entail. There are benefits and downsides to each type. Some provide services without any commission due from you, and some may have you paying a commission. Inquire about your options and decide which type of buyer representation is best for you.
Exclusive Buyer Representation
Exclusive buyer representation is the most comprehensive type of buyer representation and requires you to sign an Exclusive Buyer Representation Agreement. This type of representation has many advantages including requiring your agent to place your interests above their own. The contract states that they will use their best efforts to find a home that meets your criteria. Sellers usually pay real estate commission, and the seller’s brokerage cooperates and shares commission with the buyer’s brokerage. However, the Exclusive Buyers Representation Agreement states that your buyer’s real estate brokerage will receive a certain percentage of commission. This percentage is stated in the agreement. If the seller’s brokerage is not cooperating and sharing commission, you may find yourself paying your buyer’s brokerage the commission. This of course varies from location to location across the country. It may be worth it with the top-of-the-line service you are receiving with this type of representation. Even though home values are rising, and buyers are competing for homes, exclusive buyer representation requires the agent to do everything in his or her power to get you the home on terms that are beneficial to you and for the best price.
Non-Exclusive Buyer Representation
Non-exclusive buyer representation is a signed agreement which states you are not required to use this real estate agent and you are not required to pay them any commission if they find you a home. The seller’s brokerage will pay them commission if this real estate agent helps you find a home. It is in your best interest to remain faithful to the real estate agent you have this agreement with; however, if you find a home on your own or decide to use another agent for some reason in your home-buying process, you are not obligated. On the downside, they are not obligated to work as hard for you.
Dual Agency is when you are interested in a home that is listed by the same broker you are working with to find you a home. In this case, they will be representing both the seller and you in the purchase transaction. Many states allow this type of dual buyer representation. The real estate agent has to be very careful not to disclose any confidential information to the other party that may hinder the negotiations in the transaction. Your agent is responsible for performing due diligence to both parties. Taken directly from the Illinois Association of Realtors Disclosure and Consent to Dual Agency form, this would include:
1. Treat all clients honestly.
2. Provide information about the property to the buyer or tenant.
3. Disclose all latent material defects in the property that are known to the Licensee.
4. Disclose financial qualification of the buyer or tenant to the seller or landlord.
5. Explain real estate terms.
6. Help the buyer or tenant to arrange for property inspections.
7. Explain closing costs and procedures.
8. Help the buyer compare financing alternatives.
9. Provide information about comparable properties that have sold so both clients may make educated decisions on what price to accept or offer.
Also taken word for word from the form, a dual agent cannot disclose:
1. Confidential information that Licensee may know about a client, without that client's permission.
2. The price or terms the seller or landlord will take other than the listing price without permission of the seller or landlord.
3. The price or terms the buyer or tenant is willing to pay without permission of the buyer or tenant.
4. A recommended or suggested price or terms the buyer or tenant should offer.
5. A recommended or suggested price or terms the seller or landlord should counter with or accept.
No Agency or Ministerial Acts
On occasion, buyers find homes themselves, such as homes for sale by owner, and don’t want official buyer representation from a real estate agent. However, they may need an agent's help. They can request no agency or ministerial acts from the agent. In an article on lawinsider.com, ministerial acts are described as, "those acts that a real estate brokerage agency performs for a person who is not a client and that are informative or clerical in nature. One of the acts the agent can perform is filling in the blanks on a purchase offer.
The inventory of homes for sale is historically low. Buyers are competing for homes and home values are rising. Hiring the best agent to help you find a home is key in today's market.