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Beware Real Estate Agent Buyer Contracts

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Signed ContractsWe had some friends over the other night and they were sharing with us their home buying experience and how challenging it was for them. They were in a similar situation to ours – they’ve outgrown their home and were actively searching for their “forever” home. They weren’t in a rush to buy anything that fit, they were picky. They also knew that the home they wanted was outside their price range at the moment so they were happy to put in bids below asking price and hope they got lucky. Worst case, they would wait a year or so to build up a cash cushion for a larger down payment so they could get into a price range that fit their wants and needs.

As it turns out, the realtor they were working with wasn’t down with this strategy. There was some name calling, someone threw out the words “unethical,” and it came time for the two parties to go their separate ways. There was a catch – my friends signed a contract. I don’t know the exact details but it was a mess to get out of the contract and our friends have to wait a period of time for the term to expire. Until yesterday, I didn’t know real estate agents had their clients sign contracts. I’ve only ever bought two houses and both with the same agent and in neither case did the words “contract” ever come up.

That said, I can see why contracts are necessary. Agents only get paid when their buy or sell a house, so all that up front work is unpaid. All the showings, all the offers, all the negotiations, and all that work is for free. It’s on the hope you buy a house. Without a contract, it’s potentially wasted effort.

That said, what if the agent doesn’t want to submit an offer because they think it’s too low? A realtor can’t actually object and refuse to submit an offer but they can cajole you into offering more. Or they can tell you that they think the seller will be offended. Or they can wait before actually submitting it and by then it’ll be a little late.

How can you avoid signing a contract to work with an agent that might not like your strategy? Interview them. Ask them about how they’ll work with you and tell them exactly what your plan is. If they aren’t on board, they should let you know. If they are, fantastic.

Next, if they insist on a contract, avoid contracts with a long term. I’d try to go with six months or less. One year is simply too long. I think it’s fair that the agent still gets the commission on a house they show you, even if you terminate the contract after the term.

What if you’re in a contract and want to get out? Try to ask nicely and the agent will most likely let you go, why would they want to work with you if you don’t want to work with them? If they won’t let you go and you have serious grievances, Steve McLinden recommends that you file “written complaints with her agency, the state real estate commission and the local board of Realtors.” I suspect that will get the agent’s attention and get you out of any contract!

I’m always hesitant to sign a contract unless there is a compelling reason to do so. I recognize that people need protection. Our realtor was our friend first and our agent second, so there was a trust factor there that wouldn’t exist with a random realtor.

That said, it’s still a business. If an agent can’t find you your house or isn’t willing to be your representative, you have to kick them to the curb.

(Credit: WordRidden)

{ 6 comments, please add your thoughts now! }

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6 Responses to “Beware Real Estate Agent Buyer Contracts”

  1. Catherine C. says:

    As an agent I would also be weary of any buyer unwilling to sign a contract. Too many try to use several agents at the same time which is really not a good idea. I will show a buyer homes and work with them for about 2 weeks without a contract, after that I will drop them if they refuse to sign a contract. Per experience the one that are serious will, the other will just string along another agent for awhile and rarely buy. I agree the contract should never be for longer than 6 months.

  2. Michael says:

    Ive used buyer agents under contracts before. Normally I’ve done it for a four month period and limited the geography to a list of towns the agent is near to. 1 year is way too long and limitless geography is not smart, I want different agents for different geo areas sometimes.
    However if an agent shows you a house and you buy it that agent gets the commish case closed …..

  3. Shirley says:

    Both in buying a house and in selling one we fortunately have been able to use real estate agents that we knew. I don’t think I would ever sign a contract, feeling that the agent would likely try to get you into a more expensive home in order to fatten his/her commission.

  4. ace carolla says:

    real estate agents can be the scum of the earth. you really have to watch out. since they make their money on whether you buy or not, they’ll always push and push for the sale. EVEN if the sale is not in your best interest.

    RE agents are salespeople, just like a wily used car salesperson. they are the scum of the earth, not the salt of the earth.

    they dont give two shits if it was a good deal for you. once they get their commish, it’s sayonara!

  5. Caroline says:

    The purpose of the buyer-broker agreement is to protect the buyer, yes thats right, protect the buyer.

    Under the law of my jurisdiction, absent a buyer-broker agreement an agent represents the interests of the seller. No, that doesn’t mean that I am the listing agent. No that doesn’t mean I have a relationship with the seller, in fact more likely than not I’ve never met the seller. That’s just how the law is written. The whole purpose of this buyer-broker agreement is to PROTECT the buyer. Without a buyer-broker agreement, it would be UNETHICAL for me to share information that I have received that might benefit you the buyer over the seller.

    For example, the listing agent tells me that the seller is really motivated and will sell $100k less than list. Can I share this information with you, the buyer? Sure, if we have a buyer-broker agreement. No buyer-broker agreement you say? Than the answer is nope, no way. Why? Because I could lose my license since I am not acting in the best interests of who I legally represent, the seller. Keep in mind though, I am always legally obligated to disclose material defects and information about the home.

    Personally, all of my buyer-broker agreements are for a term, but they have a clause that states that either party may cancel the agreement with 24-72 hour notice (its a blank that you fill in). There is also a clause that states that if you buy a property within 30-180 days (another blank) after termination, that I as an agent would get the commission UNLESS that person signs another buyer-broker agreement – this is so you dont use my services and then go out and try and negotiate on your own. I agree with one of the above posters, that its a red flag if someone is unwilling to sign a buyer-broker agreement.

    It seems like you really dont understand the purpose behind the buyer-broker agreement and what the law is (it varies from jurisdiction to jurisdiction) but no, I’m not the scum of the earth trying to get $$ in my pocket. Yes, I want you to buy something. Why? Because I’ve spent $200 in gas minimum and 50 hours with you and if you don’t buy something I don’t get diddly squat. That’s right, I’ve spent months working for nothing. That doesn’t mean I’m trying to up the price on you or force you into something you dont want – you control when and what you offer. YOU. Regardless of what the agent recommends, at the end of the day you make the decision about how much to spend and what to spend it on. And if you feel you overpaid you have no one to blame but yourself or perhaps the market at the time.

    Have I met some shady agents? Yes. Do I loathe them? Yes. Am I shady? No. I always try and do whats best for my client.

    Here’s my advice: If you are trying to avoid a shady or money grubbing agent, ask if they do dual representation. That’s when they represent BOTH the buyer and the seller, and in my opinion can’t adequately represent either. Some jurisdictions allow it, with a disclosure and signature, others don’t allow it all. I would never do dual agency even though it means more $$ in my pocket, because I couldn’t do my job and represent your best interests. But it’s a good litmus test in the very beginning. Also, go with a reputable agency.

    I hope you find this information helpful and informative and can now understand the purpose behind and the need for the buyer-broker agreement

  6. fabclimber says:

    This is an excellent post with excellent comments. Very informative!

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