Real Estate Buyer’s Representation

October 20, 2006 — Leave a comment

Buyer’s Representation

by baldyguy

The latest thing being talked about is buyer representation, which has numerous related issues open to discussion. One that seems to inspire much angst on the part of agents is how much they should pay. But the issue that fascinates me is the one of value and what the buyer really pays…or doesn’t pay. The newest thinking says, in a nutshell, that the buyer pays for everything and isn’t getting equal value as it relates to agent representation. Also, that somehow the actual value of the home is affected by these issues. Ayn Rand taught me that if something doesn’t make sense, check my premises. That single concept has served me well in all aspects of my life.

If the buyer is nominally represented by his agent, and his agent is being paid by the listing agent, who was paid by the seller per the listing agreement, how was the buyer financially injured? If the buyer wishes to have absolutely separate representation, he can do that very simply. Sign a contract that says he will pay his own agent with his own money, and negotiate the home’s price separately. This results in surgically removing the seller’s agent from anything to do financially with the buyer’s agent. The buyer is now officially represented by an agent paid only by him, and owing allegiance only to him. There are now no gray areas.

My premise is simple. Real Estate representation isn’t rocket science. If a buyer wishes to divorce himself from a seller’s agent, and have his agent work only for him – signing a separate contract with a negotiated and well defined fee will do the trick.

So what’s all the fuss about? I’ve read thousands of words extolling the virtues of this or that approach on this subject. If separate buyer fees and representation are truly their main concern, why all the hand wringing?

In my practice I use buyer/broker agreements much of the time, but not always. If the client is new and asks me, I tell them they will be signing the contract with me, that I’ll not be paid by the seller or his agent, and that my sole allegiance in fact will only be to him. This means, I continue, that the price we negotiate will not include his fee. His fee to me will be paid on top of the price. I inform the listing agent up front of the relationship with my client. Everyone now understands the seller is paying their agent, and that I’m not participating in that commission. Obviously this results in the listing agent (though not always) cutting his commission in half.

Even though I was never on M.I.T.’s short list, I can understand this. Let’s stop debating something so easily understood, and get on with the real issues.

Next – from the broker’s viewpoint, should his fees be value based, or based upon his expenses? Yeah, I know, another silly question, but one being debated all over the place.

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