Buyers Contract with Realtor

[jazz4cash]

DD is looking to buy her 1st home. Working with a Realtor that helped two family members buy their 1st homes. DD was asked to sign an exclusive agency contract. I’ve heard of these but I was never asked to sign one. The term is 1 year. The fee is 3% which I presume is 1/2 of the typical commission paid by seller plus $500 paid by buyer. I don’t see anything in the contract that benefits the buyer. It seems to favor the broker, not the agent. We are advising her not to sign. Maybe we are behind the times. Thoughts?

 

[CardsFan]

DW was a realtor years ago. The 1 year term is a no go in my opinion. That means ANYTHING she buys in a year is subject to that fee, even if she finds it 9 months later on her own. 1 month to start, 3 months if you really like what they are doing. Never more (do I hear a Raven)

 

[PaunchyPirate]

I signed a 3-month one on a past search many years ago. For a few other other purchases I was not asked to do this. As a buyer, I don’t recall the 3% fee being mentioned at all in the document I signed. The seller usually pays the commission based on the sellers agreement they have with their agent. Whatever that commission is agreed upon. The agents work out the split between them.

Also, I’ve never had to pay $500 to anyone other than the seller.

Maybe this varies by location. But I’ve purchased homes in 3 states.

 

[jazz4cash]

The routine I am familiar with is that a realtor coaches a prospect to tell any other realtor that they are working with someone. That works pretty well in my experience. This contract prohibits a buyer from looking at an open house without their realtor.

 

[PaunchyPirate]

The routine I am familiar with is that a realtor coaches a prospect to tell any other realtor that they are working with someone. That works pretty well in my experience. This contract prohibits a buyer from looking at an open house without their realtor.

If it explicitly says that then I would not sign this contract.

 

[ERD50]

Our realtor mentioned that (she did several buy/sells with 2 of our kids), but I don't recall the length of it. I just couldn't see that - what if I don't think they are doing a good job, I should be free to move on. I pushed back a little, never heard it mentioned again.

-ERD50

 

[Morgan22]

She should not sign that contract.
Seller normally pays commissions netted out of the sale of the home. It's usually set when put on the market.
I've been looking lately at the market (since I'm thinking of buying soon) and see that commissions are down from the classic 6% total. (3% to seller's realtor and 3% to buyers realtor). I've seen anywhere from 1.5% to 2.5%, with an average of 2% now to buyer's realtor. (Normally equal amount to seller's realtor. Though I have seen less to buyer's realtor.)

 

[Lewis Clark]

I've bought five homes over the years and have never been asked to sign a contract with a realtor as a buyer. I would not sign that contract.

 

[SnowballCamper]

She should not sign that contract.
Seller normally pays commissions netted out of the sale of the home. It's usually set when put on the market.
I've been looking lately at the market (since I'm thinking of buying soon) and see that commissions are down from the classic 6% total. (3% to seller's realtor and 3% to buyers realtor). I've seen anywhere from 1.5% to 2.5%, with an average of 2% now to buyer's realtor. (Normally equal amount to seller's realtor. Though I have seen less to buyer's realtor.)

+1

Edit to add: What does the buyer get for that exclusivity? It's possible that the buyer is so busy with work and family that she doesn't have the time to look on Redfin, Zillow, or whatever the local listing site is... does it come with a guaranteed number of pre-market opportunities (inside info on listings before they are listed). not likely...

 

[sheehs1]

Ditto what others have said. I would tell your DD not to sign it. I signed one for 6 months many decades ago and it locked me in to only using that realtor in that location. Years later, I was with a realtor looking at a property in a different location and she asked me to sign one just for that property. So they can be property specific or any term but typically for 1 to 3 months...not a year!

 

[pb4uski]

I've bought five homes over the years and have never been asked to sign a contract with a realtor as a buyer. I would not sign that contract.

+1 The only time that I have ever signed a realtor contract is as the seller, NEVER as a buyer... and I wouldn't. We're currently looking at real estate and have not been asked to, though if we stumbled on something that we like we would bring the agent who has been working for us in on the deal.

If the agent doesn't like it then move on.

 

[OldShooter]

Don't sign. Find another agent. This one is not to be trusted.

 

[pb4uski]

The routine I am familiar with is that a realtor coaches a prospect to tell any other realtor that they are working with someone. That works pretty well in my experience. This contract prohibits a buyer from looking at an open house without their realtor.

Then a HARD NO.

 

[Texas Proud]

Not sure about other states (heck, not sure about Texas anymore).... but the law in Texas is a RE agent is an agent for the seller even if it is 'YOUR' agent..



IOW, if you say to your agent to bid X but I would go X +10% then they are supposed to tell the buyer that you are willing to pay more... if you sign an agreement then the agent looks after your interests not the seller...


I would ask the agent the reason that you should sign... if there is a good one then sign for a short time and resign if needed..

 

[jazz4cash]

Thanks for the replies. There is NOTHING in the contract for the buyer as far as I can see. Really there is nothing for the agent either. It is the broker that gets exclusivity. If the agent breaks up with the broker the buyer is stuck with the broker. DD might counter with 3 months/no fee. I’m actually surprised she asked for our advice.

 

[socca]

... DD might counter with 3 months/no fee. ...

There is no need for DD to counter a dumb proposal - just say NO. Agents know that buyers have options and tailor their "investment" in any particular client accordingly.

 

[Mark1]

Don't sign. Find another agent. This one is not to be trusted.

+1 Seems crazy to even deal with this agent.

 

[jazz4cash]

There is no need for DD to counter a dumb proposal - just say NO. Agents know that buyers have options and tailor their "investment" in any particular client accordingly.

Again I say, it's not the agent....it's the broker IMO. The agent is getting very positive reviews from another DD and niece. The agent sold other DD's townhouse and assisted niece on a purchase. Niece can't recall if she signed this contract. I am hoping DD can just say no but a compromise on the terms might be acceptable.....of course it's not my call!

 

[HawkeyeNFO]

Around my area, property is so expensive that 6% isn't a standard realtor fee anymore. It's usually lower, around 4.5 or 5%. Sometimes less than that. As a buyer I wouldn't sign that agreement, especially if it locked me in to paying higher than standard fees. Sounds like the prospective agent isn't working in DD's best interest.

 

[MarieIG]

Can you limit the time frame, location, and specify that the fee is payable out of the seller's commission, (not to exceed 1/2 of same) unless specifically agreed otherwise in writing?

 

[jazz4cash]

I guess you could negotiate anything. The realtor.com site says 6 months is “normal”. I’m hoping DD can get it down to 3 months if at all. The 3% comes off the sellers fee but the issue is buyer is expected to pay the difference between 3% and 1/2 of sellers commission. (E.G. if seller’s commission is 5% buyer will pay 1/2%….not good). This area is very HCOL and the RE agents/brokers seem to be very entitled IMO.

 

[Ian S]

That sounds onerous to me. When we started looking four years ago, we went to a few open houses and used Zillow extensively. That helped us identify our needs and wants in the way of a new place. When a place showed up on Zillow that looked very interesting but I was about to leave on a trip out of the country, we decided to call an agent we had met at an open house a couple of times and see what he could do for us on very short notice considering the home was occupied. When he managed to set up a showing for us two days after a storm dropped 18" of snow on the area, we decided to let him work for us but there was no exclusivity agreement - IIRC, he was set up as the "buyer's" agent on the purchase agreement. While he was able to show us other houses, we ultimately came back to the one I found on Zillow. After a bit of back and forth, we signed a purchase agreement for the home. Subsequently, our agent was very helpful with dealing with the issues we found with the home and working with the seller's agent to rectify them.

I guess the point I'd make is that there should be no need with all the online resources these days to depend totally on an agent to find you a home. Rather, IMHO they are more useful once the purchase process starts with handholding through to the final closing.

 

[MarieIG]

I guess you could negotiate anything. The realtor.com site says 6 months is “normal”. I’m hoping DD can get it down to 3 months if at all. The 3% comes off the sellers fee but the issue is buyer is expected to pay the difference between 3% and 1/2 of sellers commission. (E.G. if seller’s commission is 5% buyer will pay 1/2%….not good). This area is very HCOL and the RE agents/brokers seem to be very entitled IMO.

It very well may be negotiable. She would probably prefer 2.5% of a big fat fee than 0% of said fee. I negotiated some terms in my RE (ok and attorney) contract(s) when I sold my house.

 

[jazz4cash]

I suspect some policies unfavorable to buyers have developed during the recent sellers market. Now the leverage has shifted a bit but these policies are still being practiced. DD may need some help beyond zillow et al to get access to properties before they are widely listed. There is some type of new pre-listing category called “coming soon” that is bring used nowadays.

This all started a few months back when DD returned from apartment shopping with brochures from some fancy new “luxury” apts marketed to young professionals. I glanced at the brochures and scoffed at the pricing. I told her the rent was more than our mortgage and the message must’ve struck a nerve.

 

[socca]

Again I say, it's not the agent....it's the broker IMO.

Yes, but if the agent complains to the broker that this policy is costing them business, perhaps the broker will back off.

I encountered a RE agent in Denver who handed me a buyer's agreement back in the early 2000's. I just said no. The two houses I've bought in my life were both strongly DIY projects and I didn't regret either purchase.