If you're thinking about purchasing a home, you'll have to make a decision whether to acquire representation by a real estate agent. The purpose of this article is to educate you about the ins and outs of working with a Buyer's Agent, so you can decide what approach you should take.
There are a few things you should know about real estate agency in general, before we get into what a buyer's agent does and how you can benefit from having one.
Agency is the act of representing the interests of another party. Real estate agency is the brokering of the sale, purchase or transfer of real property on behalf of another. These real esate brokerage services can be legally performed only by persons or companies licensed by the State of Maryland to do so, unless the act of brokerage involves the sale of one's own real property.
Those licensed to perform real esate brokerage services fall into three categories: Brokers, Associate Brokers and Salespersons. The "Broker" designation is bestowed only on one individual in a real estate company, and that individual bears responsibility for proper auditing and accounting for all real estate transactions within that company. Under that Broker are any number of agents who can be affiliated with the company and authorized to perform real estate brokerage services on behalf of the Broker's company. These are the Associate Brokers and Salespersons. Associate Brokers have met the mandated educational and experiential requirements to open their own real estate brokerage but still practice real estate in affiliation with an already established broker. Salespersons can only ever sell real estate under a Broker. Most real estate agents are Salespersons.
The first thing you should understand is that an individual real estate agent (whether Associate Broker or Salesperson) can only represent the interests of one party in a real estate transaction. Only a Broker can represent both the buyer and the seller in the transaction, which creates a situation called "Dual Agency". In this case, all parties to the transaction must explicitly agree to work under this "Dual Agency" representation since the potential for a conflict of interest can occur.
Buyer Agency is the act of representing the buyer in the purchase of real property. That representation brings with it a fiduciary responsibilty of care and confidentiality, and generally a willingness to do all things legally and ethically to manifest the interests of the buyer client. Effectively, the buyer's agent must put the needs of the client first.
The highest form of buyer agency is called "Exclusive Buyer Agency" and as the name implies, the agent is the only one who can assist the buyer in the purchase of real esate, as specified by an Exclusive Buyer Agency Agreement. This agreement is is a legally written binding contract, and as such, is very specific about the requirements of both the agent and the buyer. It has a specified start and end date, a brief but clear summary of the type of property which is being sought by the buyer, terms for either party to cancel the agreement, provisions for compensation of the agent, and legalities that result from the breach of the agreement by either party.
A buyer's agent performs a number of tasks in assisting the buyer with locating and purchasing real estate. A non-exhaustive list of these duties includes:
First and foremost, a buyer's agent should be knowledgeable about the areas within which they are assisting a buyer to find a property. The agent should also work well with the buyer and be someone the buyer feels comfortable with. If there is any degree of contentiousness with the agent, it could be a non-productive arrangement. While disagreements on a professional level are natural, having an agent who you don't trust or don't like is a situation that should be ended promptly by either the agent or the buyer.
Also, a buyer's agent should be reasonably available within the buyer's schedule, so that homes of interest can be seen in relatively short order, and not missed because some other interested party put an offer on the property before it could be seen. It is important for the buyer and agent to discus availability up front.
The buyer agency agreement specifies the amount the buyer will compensate the agent upon successfully completing the transaction. In most cases, the buyer will have to pay no commission, because the seller pays both the buyer's agents commission and the seller agent commission. This convention makes buyers generally more amenable to retaining the services of a buyer's agent, since the cost isn't coming out of their own pocket. There are some exceptions to this convention, that are noted below.
It is important for the buyer to be aware that if they have signed an "Exclusive Buyer Agency Agreement" as outlined above, that they will have a legal obligation to pay the agent's commission even if the seller does not. It is important for the buyer to discuss these scenarios with their agent before the search for homes begins. It should also be noted that commission arrangements are negotiable by law and cannot be fixed or conventionalized by agents.