The Truth About Exclusive Buyer Agency Services

Exclusive Buyer Agency - A Value to Buyers:

Many traditional agents and brokers have nothing good to say about exclusive buyer agency, for the obvious reasons. The truth of the matter is that exclusive buyer agency offers something that traditional agencies do not; loyalty and commitment to the buyer only--without any possibility of dual agency conflicts.

An exclusive buyer agency agreement spells out in writing the expectations between client and broker. It is a negotiable instrument that protects both broker and client. It demonstrates that a buyer is serious, which allows room for other types of negotiations--such as buyer rebates. It will contain a cancellation clause that will allow a buyer or agent the option to cancel the agreement, should either party decide that the association is not working for them. It establishes mutual respect, loyalty, confidence, honest communication, and trust--five elements that create a fantastic working environment and team synergy.

If a client does not agree with certain elements of the proposed agreement, then they should raise their concerns and negotiate for better terms. The best agreements are those that are win/win, meaning that both client and broker feel good about the terms negotiated, as well as, feel good about working together. It is very important to establish honest communication, mutual respect, trust, and loyalty between broker and client upfront--and this is the primary purpose of the agreement.

An exclusive buyer agency agreement assures a buyer that the agent or broker working with them is only working for them. It means that they will have maximum choice of available properties, listed and unlisted, as well as, properties that are both on and off the market. It also means opening up the possibility of negotiating special terms, as already mentioned above.

Favorable feedback from traditional real estate brokers and agents about exclusive buyer agency is highly unlikely:

Buyers need to understand that getting honest feedback about exclusive buyer agency from traditional agents or brokers is highly unlikely, because their priority is to get your business, and if their company takes listings, they will not be able to sign an exclusive buyer agency agreement with you even if they hold an ABR designation.

Their first priority is to keep your business with them, and not necessarily talk to you about the purest form of buyer representation; which is always the best option for buyers. As a matter of fact, there is plenty of mixed information on the Internet regarding whether or not a buyer should sign a buyer agency agreement, let alone an exclusive buyer agency agreement. The negative information found happens for reasons already described above.

Working with clients:

As a policy, my company only works through exclusive buyer agency agreements, also known as, Service Engagement Letters. While there are some buyers out there who prefer not to work this way, we prefer not working with such buyers, because clients receive the highest levels of loyalty, integrity, advocacy, and commitment. Therefore, it is only fair to expect the same in return. Ideal clients understand that it is a good thing to give and receive mutual consideration and commitment in writing--as all real estate agreements are supposed to be.

A Word About Fees:

Fees are negotiable and depend on the type of property purchased, for example, if the property is listed or unlisted. For properties listed on the MLS, fees are covered by the “Selling Office Commission” through the listing company. This means that clients receive the purest form of buyer representation at no cost to them. While there are real estate companies out there that would like the public to believe that buyers actually pay for real estate commissions on listed properties, the truth, is that commissions on listed properties are deducted from the seller's side of the closing statement, not the buyer's.

This means that the seller is paid the purchase price first, and then his or her costs of sale are simultaneously deducted to result in net proceeds. The notion that buyers pay commissions on listed properties makes about as much sense as employers paying their employees income tax deductions. An employee must be paid by his or her employer first (aka. Gross Pay) before taxes are simultaneously deducted to result in an employee's Net Pay. Hence, an employee pays his or her own income taxes through automatic deductions. The employer does not pay the employees income tax deductions--just like in real estate--buyers do not pay the sellers costs of sale on listed properties. The seller's costs of sale are deducted from "Gross Sale Proceeds" to result in "Net Sale Proceeds."

Buyers can owe commissions or flat rate fees, however, if they desire to include unlisted or off-market properties in their search--unless a seller agrees to cover the cost. This would require negotiating with the seller to pay some, if not all, of the fee. Since our fee is generally less than what a seller would pay to a traditional real estate company, a motivated seller should not have a problem with this. However, the portion that is not covered by the seller would be owed by clients at closing.

Clients have the choice of limiting their property search to only MLS listed properties, or including unlisted and off-market properties. It is entirely up to them, how they would like to go about it.

The bottom line:

Clients have the opportunity of customizing their own exclusive buyer agency experience to fit their individual needs, while completely avoiding dual agency, designated agency (just another name for dual agency), and the limitations of single agency. It only takes communication, honesty, and a willingness to reciprocate mutual respect.

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The Agency Debate Rages On

I recently came across a blog entitled Exclusive Buyer Agency Discussed in Realtor Magazine Online written by fellow EBA, Stephen Scholls, from Buyers Broker Of Northern Michigan, LLC. His blog was a synopsis of an article done by Realtor Magazine Online, which intended to gather the views of perceived innovators in the real estate industry, regarding their opinions of where they believe the real estate industry is heading.

When three brokers were asked where they saw exclusive buyer agency heading in the coming years, it was not surprising when all three responded negatively, since they were all from traditional real estate firms. What I did find surprising, and Stephen pointed this out in his synopsis, is that Realtor Magazine Online did not even consult with brokers who actually work in the field of exclusive buyer agency. This caused me to question the motives of the magazine, as well as, question the association behind it. As a Realtor member in good standing, it concerns me, because it means that my trade association does not support my company's business model. By not consulting with brokers working in the field, they demonstrate a bias in favor of traditional agency, which can introduce the risk of dual agency to consumers.

The general negative attitude towards exclusive buyer agency is apparent in the comments made on Stephen's blog by those who do not fully understand the need to completely avoid the risk of dual agency. Some believe that most consumers do not know, and could care less, about exclusive buyer agency; but, would consumers not care if an issue arose in their purchase, and their "designated agent," aka. dual agent, had to remain neutral to both parties? No one wins with dual agency, neither buyers nor sellers.

Some brokers believe that exclusive buyer agency will not last. Their reasoning is that listings have traditionally attracted buyer leads. While there is some truth to this, it is a truth that is in transition, as more consumers become aware of the risks posed by dual agency, aka. "designated agency." Real estate consumers are not simple-minded, nor are they stupid.

To imply that consumers do not have the ability to understand or care about agency issues is downright insulting to them.

There is a general confusion about agency issues that seem to be generated by those who are intent on muddying the waters, and it is worsened by law makers. Introducing terms like "designated agency" and "single agency" are designed to compete against exclusive buyer agency, but the truth, is that "designated agency" is only dual agency called by another name, and "single agency" means that a buyer will not see properties listed by their agent's company.

The bottom line, is that exclusive buyer agency helps buyers completely avoid dual agency, while having access to all properties, whether they are listed or unlisted. Buyers do not win with "single agency" because it limits their choice of available properties.

Smart real estate consumers want maximum choice of properties, with absolutely no risk of a conflict of interest. This is the ideal buying position to be in. This is only common sense.

Here is the comment I posted on Stephen's blog:

"According to Elizabeth Weintraub's definition of single agency: on Ask.com

'Single agency means a real estate broker represents the buyer and cannot show the buyer properties listed by the broker's agency.'

With exclusive buyer agency, the buyer has access to all properties. This includes all listed and unlisted properties. The issue of who pays the buyer's agent is not really an issue, because if the seller agrees to cover the buyer's broker fee to make the sale, it is no different than when the buyer asks the seller to cover closing costs.

The problem with merely being a transaction coordinator/facilitator is that consumers do not get the level of service they should receive when fully represented. After all, this is not like going to Walmart and shopping for clothes, or basic goods and services. This is what real estate consumers need to understand. No two real estate transactions are identical, and often times, problems can escalate if not swiftly and properly dealt with (as I am sure everyone here is aware). Knowing how to do this comes from having years of experience, which the average real estate consumer does not have, unless they are also in the real estate business.

Designated agency is just another name for dual agency, in my honest opinion. As more exclusive buyer agents enter the field, and earn the trust and loyalty of their clients, the truth about dual agency, aka. "designated agency," and the downside of "single agency" will become more familiar to the average consumer. Exclusive buyer agency is a virtual infant, when compared to the age of the real estate industry in general. It is only a matter of time, patience, and perseverence on the part of real estate professionals who recognize the importance of establishing a fair and balanced closing table between buyers and sellers, and not introducing the risk of dual agency. Changing its' name is not the solution, but avoiding it is. I firmly believe in exclusive buyer agency, and what it means for buyers, as well as sellers, because no one wins when there is a conflict of interest.

I do not regret choosing to specialize in this field of work. I enjoy educating buyers about dual agency, as well as, helping them to avoid it. It is a calling to do this kind of work, because it is challenging, as much as it is very rewarding."

Here is the feedback I gave to Realtor Magazine Online:

"When asking about the future of exclusive buyer agency, it would have been more appropriate to ask Realtors who have chosen to specialize in this field, and not asking traditional brokers, who will naturally display a negative bias towards it. Did you really expect them to speak positively on this topic?

You do the public a great disservice by presenting biased and negative views from traditional brokers, without presenting the views of brokers who actually practice exclusive buyer agency.

For those who are confused and misinformed, exclusive buyer agency is about the complete avoidance of dual agency, which is a conflict of interest in real estate. No one wins when there is a conflict of interest, especially, when issues arise requiring the dual agent to remain neutral. The truth of the matter, is that exclusive buyer agency is here to stay, and it will flourish in the years ahead."