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Beware Real Estate Agent Buyer Contracts

We 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 [3], 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 [4])