Does a buyer’s agent agreement guarantee that your real estate agent is paid a commission? This question may come up in situations where you’ve hired a buyer’s agent to help you purchase property, but things don’t go quite as planned.
In most cases, it’s quite straightforward: If this agent finds you a house and facilitates in closing the deal, he should get paid for his work through the commission (which is paid by the home seller).
But what if you find a home on your own without your agent’s assistance, or you no longer want to work with your agent? Does this agent still deserve a commission? That depends on the fine print in your buyer-agent contract. So here’s how to read between the lines.
Buyer’s agent agreements: What they mean for home buyers
When you hire a buyer’s agent, you will sign a buyer-agent agreement that lays out the terms of the agent’s commission, how long this contract lasts (typically three to six months), and how to cancel it before its termination date. While it’s tempting to skim and sign without pondering the details too much, be sure to read this document thoroughly.
One clause to watch for is that some buyer-agent agreements are exclusive—which means you owe this agent a commission on any home you buy within the time frame of the agreement. Since this is so restrictive, most home buyers are better off getting a nonexclusive agent agreement, whereby if you switch agents midway through your house hunt, you have to pay the first agent only if you purchase a home the first agent introduced to you. If you buy another home that the original agent never brought to your attention, then you owe that agent nothing, and the second agent gets the commission.
Buying new construction? Your agent must take extra steps
If you are purchasing new construction, the rules may change a bit. According to Michele Lerner, author of “Homebuying: Tough Times, First Time, Any Time,” real estate agents often can earn a commission only if they follow specific rules established by the builder.
“Generally, your [real estate agent] must accompany you to the new-home sales center the first time you visit in order to represent you,” Lerner says. “Many builders require [agents] to register on their website with the name of the client they’re representing. Buyers who are looking at new homes and working with a real estate agent should be certain to let the sales consultants at a development or the builder know from the beginning that they have a buyer’s agent and find out if there’s a required registration process.”
Granted, you don’t need a buyer’s agent to purchase new construction; you can also work directly with the builder’s on-site agent. However, having a buyer’s agent with new construction is wise since you’ll have someone representing your interests. A builder’s agent works on behalf of the developer rather than you.
How to terminate a buyer-agent agreement
Sometimes after you sign on with an agent, you realize the relationship just isn’t working. If you feel your agent isn’t doing enough on your behalf, that’s a reason to consider moving on.
“The role of a buyer’s agent involves a lot more than simply writing an offer for you,” says Lerner. “Typically, a buyer’s agent can help you narrow your priorities for a home, recommend lenders, identify prospective homes, help you understand the value in one home or another, and then represent your interests throughout the transaction.”
So what happens if your agent is falling short, and you want to find another agent? Most buyer-agent agreements come with a two-way guarantee that allows either the agent or the buyer to be released from the agreement.
In most cases, “you should be able to terminate the agreement with a letter of cancellation or termination,” says Beverley Hourlier, a Realtor® with Hilltop Chateau Realty, in San Diego. “Usually either side can terminate this way.”
Another option is to just wait until the time period for the contract is up; at that point you can sign with a new agent. But if you don’t want to wait, it’s best to tackle this issue head-on. Here’s more on how to terminate a buyer-agent agreement.
In the end, you shouldn’t feel trapped by a buyer’s agent agreement. It’s meant to protect both you and the agent, not make you feel like you’ve sold your soul.
“It helps the buyer know what their agent will do for them and what their rights are just like a seller has with the listing contract,” says Sean Keen of the Keene Group in Oregon. “It also helps agents weed out people that are just going to waste their time.”
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