Friday, March 30, 2007

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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