Is it wise to sign with a REALTOR when BUYING?
Article by Nate Moquin
Published by Eau Claire Journal April 24, 2015
In my real estate experience, the most misunderstood aspect of the process is the Buyer Agency agreement. The assumption among is that the Buyer Agency agreement was created to benefit real estate agents. It wasn’t. The Buyer Agency agreement was created by the government to protect the buyers. To my amazement, most real estate agents don’t understand this either. I suppose it stands to reason that agents are under this impression, because having it in place reduces the likelihood that another agent will get paid for the work they do. But the Buyer Agency agreement was not developed for the agent’s benefit; it was developed to protect the buyer. The Buyer Agency agreement came about because until the 1990’s in Wisconsin, both real estate agents in any real estate transaction automatically represented the seller. To the detriment of the buyer, neither agent was required to act in the buyer’s best interest. This was silly and unfair. To rectify this, the Buyer Agency agreement was developed as a way for buyers to have equal representation in the transaction and to have a professional negotiate on their behalf. It is important to note that even today, without a Buyer Agency agreement in place, both agents are still required to operate under the old rules in which they both represent the seller!
Consider how harmful the 2 following examples can be to your net worth:
1) You see a property for sale and call the listing agent on the sign and ask them to write an offer for you, but don’t require them to sign a Buyer Agency agreement with you. They are not allowed to reveal their opinion that the sellers listed this property $15,000 higher than the agent thinks it is worth. It’s the law. The agent must put the sellers’ interests first. If you have your own Buyer Agent however, the agent would warn you about the price and negotiate on your behalf. Again, even if you are working with your own REALTOR but do not have a Buyer Agency agreement in place, ‘your’ agent is actually the seller’s agent!
2) Here is another scenario. You view several houses with an agent but decide not to require them to sign a Buyer Agency agreement with you. You get to know them and mention that you are willing to pay $140,000 for a property but want to first offer $135,000 to see if the sellers would take it. The agent is obligated to seller and to let them know that you are willing to pay $140,000 when submitting your Offer. Goodbye five grand. Fortunately, all real estate agents are required to explain who they are representing the first time you ask them any negotiating question. This can be something as simple asking the agent if they think the sellers will leave the fridge. If a real estate agent does not explain who they represent on your first meeting, it would be wise to find a competent REALTOR instead.
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