Exclusive versus Non-Exclusive Buyer's Agent Agreement

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From an email:


I was in the process of buying and selling the house when we saw a FSBO house we liked was for sale. But sale fell through, which is a good thing anyway because of contigency on our house. But I also suspected it failed because the seller refuses to pay commission to our buyer agent.

My question is that this real estate agent that would represent us as a listing agent is also a buyers agent. However, I had another friend look into the contract and the buyer's agent agreement is valid until December 31, 2005. So that means anytime we find a house, he will be paid? We do the work to find a house and he gets paid? It didn't strike to me as ethical or fair. It will simply takes us off the real estate market until January 1, 2006 when we can start all over with a clean slate. Correct?

We don't think it should've been in effect until December 31. It should be in effect only for that FSBO house we liked, and if the deal falls through, then his job as a buyer's agent also stops.

Am I dealing with a greedy real estate agent or is this typical?

Can I have one agent to sell our house and another agent that represents us to buy a house?

This depends upon the nature of the agreement you signed with him. I use non-exclusive buyer's agreements, which basically say that if I introduce you to the house you decide to buy ("procuring cause"), then I get paid when you buy it. Others use exclusive buyer's agreements, where they get paid no matter who finds the house.

If I have an exclusive buyer's agreement with you, then I am going to get paid on any house you buy. If I have an non-exclusive agreement, I will only get paid if I introduce you to the house, and you may have any number of non-exclusive agreements in effect as long as you are careful to inform each agent you are working with that you have previously been introduced to a given property, and therefore, any commission that takes place will be paid to the other agent. All of the forms used by California Association of Realtors state that you will pay a commission to the agent if the seller won't, so an agent has comparatively little stake in which house you buy, as long as you buy one through them. This gives them the largest possible incentive to work on your behalf, without binding you to one particular agent who rather be working with another client who came along with a bigger budget, and therefore a bigger commission in the offing. When looking for homes to show, ethical agents won't seek out a For Sale By Owner (FSBO) for reasons I go into near the bottom of this article (basically, protecting your pocketbook), but these do not apply if you, the client, choose to make an offer on a FSBO.

I suspect that you signed an Exclusive Buyer's Agent Contract with him, something I would not do unless he's providing you with lists of foreclosures or something that costs him money on an ongoing basis. Once such a thing is signed, that agent is going to get paid no matter what house you buy during the agreed upon period. I would never agree to either a listing or buyer's agents period longer than six months. This gives the agent plenty of time to sell your house or find you one. So if the agreed upon expiration is December 31, 2005, then if you buy before then, that agent will be paid - out of your pocket, if not the seller's.

There are two competing factors here. One is your desire not to pay for services not provided for this particular transaction, versus the agents desire to get paid if they actually do the work anyway. If they serve as your negotiating agent, or help expedite the transaction by providing services, they are ethically entitled to be paid whether or not they introduced you to the property. On the other hand, if all they do is obstruct, there is neither a legal nor an ethical reason why they should be paid. Depending upon the nature of their obstruction and how much it cost you, you may wish to contact an attorney to recover, or your state's Department of Real Estate

Sad to say, there are agents out there looking to line their own pockets in any way they can. A better agent wants to get paid, but realizes they will make an excellent living - better in the long term - by putting your interests first. Without more evidence, I cannot say for certain, but it appears at first glance that this agent had you sign an exclusive buyer's agent agreement in order to represent you in a transaction you found. I am not aware of any regulation prohibiting this, but it does seem like it's excessive from a neutral viewpoint. It is probably not voidable, however.

There are standard California Association of Realtors (CAR) forms for both exclusive and non-exclusive buyer's agents agreements, and this applies in every state I'm aware of. Look up at the title of your copy. If it says "Exclusive", you are stuck with this person. If it says "Non-exclusive" you may do business with anyone you please, as it applies only to those properties this particular agent works on. Of course, many agents and brokers use non-standard forms for this, as the standard CAR forms are readable and understandable by anybody. If they want to throw curves, non-standard forms are one of the best ways to do it.

As to whether you are dealing with a greedy agent or if this is typical, the truth lies somewhere in the middle. As in all sales occupations, the idea of locking up your business creates powerful motivations for them to have you sign exclusive agreements. There are nonetheless, people such as myself who feel that if I am not helping you, I don't deserve to be paid, and let someone else have a shot. But if I've got an exclusive agreement with you, I should be providing daily foreclosure lists, copies of all new listings with personal feedback from having visited, or at least something that goes above and beyond sitting on my hands.

Many agents want you to sign an exclusive buyer's agent agreement before they do anything else. Unless you're getting something special out of it, you shouldn't sign one at all. Offer to sign a non-exclusive buyer's agent agreement - that way you have leverage over them, not them over you. They are motivated to work for you and find you a property that is attractive to you at a price you want to pay, because if they don't, someone else will. Even the best agent can't find stuff that doesn't exist, like a 3 bedroom home in La Jolla for $250,000, but if it does exist I'm going to work to find it first, and I will get paid for it because our agreement says I will get paid if I introduce you to it. If you have signed an exclusive agreement, there is no particular hurry for them to help you.

Finally, listing agreements for sale are (in general) individual agreements for a particular piece of property for a particular period of time. As long as there is no more than one listing agreement per property in effect at a time, you can have any number of different agents for sales, even if you have signed an exclusive buyer's agreement for purchases. Furthermore, I would never consider using the listing agent as my buyer's agent - all the agents legal responsibilities point towards the seller in such a case.

Caveat Emptor

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9 Comments

Suzette said:

This information is not correct and misleading. I had posted an explanation on here, but it was removed. I suppose someone here does not want the public to know the truth.



***

No, I deleted the previous comment because 1) IMHO, you were comment spamming. This is the on-line equivalent of my home. If someone poops in the middle of the living room floor, I am going to clean it up, 2) You had either misunderstood or deliberately misinterpreted the article, and I believe it was the latter 3) You're basically full of ****. Your comment suffered from at least two logical fallacies, the straw man and the ad hominem. This comment of yours also suffers from ad hominem. If that comment and this one are typical samples your thought process, I pity your clients. I've got nothing against exclusive buyer's AGENTS, only exclusive AGENCY AGREEMENTS. DM

Suzette said:

No, I was not comment spamming. I was only offering a different opinion on the value of an exclusive buyer agency agreement, when it is properly negotiated between buyer and agent. Buyer's can use it to lay down the ground rules and boundaries with their agent. What is wrong with saying this?



You falsely accused me of "straw man" fallacy, when in fact, you did say that you are against exclusive buyer agency agreements. Therefore, I did not misunderstand you.



You also falsely accused me of "ad hominem," but I did not attack you. I only offered a different view from yours, that's all. If anything, you attacked me with your accusatory language.



By the way, there is no need to pitty my clients because they know me and the kind of person I am. I put my client's interests above my own and I work very hard for them always, not that I have to justify myself to you.



I should also mention that it is wrong to slander people you don't know, it's called "defamation of character" and it won't be tolerated.



I thought this was a public board and did not realize it belonged to a private party.



Please remove all of your slanderous comments against me from your board, or I will have no choice but to contact my attorney. Also, feel free to remove all comments that I posted.



***

DM here

1) You touted your skills (while denigrating mine) including references to your website. In other words, comment spam. I don't get that much, which is the point of requiring a login, but you're hardly the first. The benefits of a link from what I'm told is a Page Rank 6 site has people willing to do it. 2) You kept talking about the skills of the exclusive *AGENT*, ignoring the same skill set in the same agent working on a nonexclusive basis, but not about the differences in the exclusive versus non-exclusive *AGENCY AGREEMENTS*, which is symptomatic of not understanding the point of the article. However, you're right in one instance. It's not really a straw man argument, and I was mistaken to label it as such. It's a red herring, although it does have elements in common with a straw man as well. 3) You say you did not attack me, but you attacked my logic in not negotiating buyers agent commission with seller at point of an offer as a bad practice. Well perhaps where you are has different laws, but the way it was explained to me, any negotiations that have the effect of negotiating buyers agent commission at point of offer is illegal in California. The way I am given to understand it, it is only by seller offering said commission ahead of time that said payment from seller to buyer's agency does not run afoul of the fiduciary agent requirements. 4) I started to type something else, but I'm just going to let the adhominem thing lie at this point in time 5) That you fail to understand the nature of the site is not my failing, but yours. There are indications on every single page of the site, including the one you made your comments on. 6) I feel confident in saying that there is nothing actionable in a defamatory sense in my comments to you, but there is in your comments to me. Get your attorney, if you insist. I'll countersue, and win. To further illustrate your limited understanding of this subject, it would not fall under the definition of slander even if there was something actionable. I believe "libelous" was the word you are looking for, but it doesn't apply either. In my honest opinion, you are best off letting it drop right here. Finally, a threat of legal action, such as you made above, is a member of the class of actions known as "threats". I am not going to ban you yet, but any further repetition of said behavior will result in your being banned from further comments at this site, as will another incidence of comment spam - and my opinion is the controlling one for this site. You are still welcome to make the case for exclusive agency agreements as opposed to non-exclusive ones, provided that your behavior does not offend, yet again, the guidelines set down by this site. You want to borrow my audience, which may not be the biggest there is but is nonetheless here because they want to read what I put up, you live by my rules. When in doubt, it is my opinion and my judgement that controls this site. I try to keep it logical, rational, and on-topic, and my motivation is that my readers are free to not bother stopping by if they don't think what I have here is worth their time. If you cannot deal with the boundaries I set, you do not have my permission to address the people who have chosen to sit in this theater. You are still welcome to create your own, and good luck to you with it.

hup said:

Thanks for the post on exclusive buyer contracts. I am going through the exact same thing and they want me to pay them for 1.5 hours of hello, good-bye! We made an offer after an open house we walked into, at $30,000 under the list price. Turns out that deal didn't go through. At that time he knew we were signing a 104 day exclusive buyer agreement against our knowledge and wants. The difference in our case, I had told every agent at open houses we have ever visit as first time home buyers, "We do not want an agent to represent us, as we feel that we can be more specific in our own searches and benefits of the internet housing market." The agent replies back, "Well, you can't always find the deals, someone can take advantage of you." I tell him, "Yes, I agree, I have done a good bit of research and you're right, people can be taken advantage of, though I feel I know the market fairly well."

Little did I know, even after telling him 2-3 times, even during the contratual signing, "we only want your representation of this house." He had us in his office for 15 mins and out. Later I come to find out we signed something called an 104 day exclusive agreement. This is not right! We put our trust in this guy thinking he should be looking out for our best interests. Not once did he ever ask, "what are you looking for a house" We just assumed it was no different than the last non-exclusive form we signed and signed away. The agent knew our toddlers were running around during signing, my partners cell phone was ringing off the hook, my head was tired from issues of my daughter moving to her fathers. He knew he was setting us up into something we didn't want. STUPID, YES, this is not usually like me, but I put my trust in this person because he seemed like a nice guy and we were so very tired!!!!!! In fact, we didn't know that we had signed this type of contract until after he filed legal action with the court and the paper work was delivered to our home. We through the contract out after finding a house on our own. I though it was a standard form as he told us. Thinking standard, our last agent agreement form had a 5 day period that we were not allowed to use another agent. That agent had also told us the forms were standard. I feel entrapped!

Anyways, I call the agents office, (agent that never once asked what we're looking for in a house) and asked him why he lied on his court submission. He filed that we came to him looking for him to find us a house in the area. Which is not the case at all. He tells me, I didn't start the court proceedings, my boss did, I am his client. He tells me to call his boss and schedule a meeting with the three of us. I called his boss and now I await a phonecall back for a meeting date. I can only imagine what this is going to lead to. I don't feel we owe anything. This guy never sent us any houses and knew we didn't want to be binded to this type of contract. GRRR! This is not very ethical at all. I don't care what the law says! We dealt with this guy for a total of 30 mins over a 24 hour period and that's it! $8500.00 in lawsuit is ridiculous!

Dan Melson Author Profile Page said:

The standard purchase offer has a confirmation of agency relationships. If I'm just making an offer, I don't need an agency agreement at all - the purchase offer takes care of that for the property in question all by itself.

But have you considered that perhaps having signed that non-exclusive agency contract with someone would likely have protected you not only from this, but from many other things as well?

Furthermore, most listing contracts stipulate that the listing agent keeps the buyer's agency commission if there is no buyer's agent. I'm sure they blessed your name, but they are working on behalf of the seller, not you.

In short, your benefit from not having an agent is zero, and it demonstrably cost you significantly. It is possible, furthermore, that if you had had an agent, your results would have been more positive than they were.

Perhaps it might be prudent to reconsider your "no agent" position?

hup said:

I think we did it on our own just fine! We figured to wait five days before looking at another house and 16 days later we found the house we wanted and went dual agency. I don't need to pay someone to do the work myself. The problem is, I put my trust in signing paperwork that was not discussed with us as a service. Sure that makes me silly! Though we assumed he heard our words 3 times, stating "We do not want to be bond to a agent contract. Our dual agent that did us a good deal on this house heard us! All the other open house people and this man heard us. That's why they jump in and sound like most of the opposition involved in exclusive agreements. :) Sorry, exclusive seems like it could be ok, but reading here, if they aren't going to do the work for you, don't sign it! LOL

It was my understanding that we were singing the same form as we told him we signed with the last agent. The exit with the previous offer/agent was due to the counter-offer being increased too high and the date of move in was changed by 2 more months. That house is still on the market. I'm guessing the tenants aren't so serious about selling.

Ok, so, "We only want representation on this house." He knew when we signed our signature away, (and I wonder what he was thinking as we did) he was going against our word. Even if it is legally binding, that's not good business. We are the stupid ones for trusting so blindly. 1.5 hours of meeting this man in less than 24 hours, not one house did he show or send us via email. Even 16 days after dealing with him, and up until we found our new house, did he ever send or show us a house. He knew, as like before signing the contract, we are on a mission to do this ourselves.

Of course when he called back a few times, he only states, You know you're in an agreement with me right." I'm not understanding and I say, we told you we were more than likely going to find the house without an agent and thank-you, bye! He says ok and hangs up. He not once, not even when he called, did he mention the type of contract. Now 3 months later, after suing us, I see the court paperwork shows WE DID sign this type of contract.

He should have asked us if we wanted to enter that type of agreement before he pulled the paperwork from the drawer. But then, why would he ask us, I would have gotten mad and walked out! He was told 3 times, we do not want to be binded by agent. Which is why he didn't ask or point it out on the forms we signed so dumbly! :) Is it normal practice not to mention the type of contract and discuss it? I'm sure it isn't standard practice that people don't read what they are signing, BUT, I was a mental mess and trusted. TIRED! I had no idea you didn't have to have a agent agreement. I thought it was a "standard form"

Dan Melson Author Profile Page said:

Seriously, your own words have proved that you didn't do "just fine." Twice.

Furthermore, it looks more and more like an ego thing. You have the right to feed your ego at the expense of your wallet, and so long as you're willing to admit to this being the case, that's absolutely fine.

I rescued both comments from the spam pile because I'm writing here to help consumers, and your comments showed that agents do pull this sort of thing. However, we turn the Searchlight on everything here, and that includes all parts of the stories that get submitted. The only agenda that is honored here is consumer education. I'm not here to bash agents - I am one, for one thing. For another, every time I hear someone telling the story of how well they did without an agent, it seems there's always some not so little detail in there that tells me how badly they got taken. Trying to do without an agent is a mark's game. I'm writing to help you tell a good one from a bad one.

hup said:

An ego? I'm an honest, loving mother, caring person, and when someone goes and does anything that affects my family life like this, yes, I will carry that right is right and wrong is wrong about about me. "Stern" That's how I was with the agent about any agreement.

As like you, maybe the agent took it personal and thought that I had an ego, because he may have thought that I can't possibly have the skill to find a house. I had 2 years of research in that area. The skills I missed were reading the fine print and in trusting that an agent will look out for expressed interests. Of course, a house is a big purchase in ones life, nobody should choose how you are going to buy.

We did do just fine with our house purchase. I like my house, and my family fits in it well. That doesn't mean I'm not hurt, feeling stupid and upset that this could happen. I am overly upset, emotionally up all night and I'm at fault with an ego? It's a PROBLEM, not an EGO. What is it that leads you to believe I have an ego? I feel I can find a house at the right comparative market value on my own? Is that it? I am in no way bragging, ego'ish, I'm actually pretty ticked off that there are people that do these things in this world. I'm not suggesting all agents. I had excellent dealings with the first and the last agent. These honest ones should do well in the business! :) I really respect the agent that sold us this house. That's where I'm coming from, not ego! Sorry if it sounded as such. I'm still ticking! The papers were served yesterday and I had to come online to read more about these exclusive agreements. This is where it landed me.

Dan Melson Author Profile Page said:

You made half a dozen errors I spotted from what you wrote here, let alone what I could find by auditing the transaction. Errors you wouldn't have made with an agent. When I pointed out one, you got all defensive. That's ego trouble. You hosed yourselves, and you're still in denial about it. As defensive and angry as you want to get, that doesn't make any difference to me. But until you face the fact that you have made mistakes, you're going to repeat them.

hup said:

According to you, we're realty pets. You can take your comments and live in your angry place. I like to keep myself out of trouble and keep the peace. Are you an exclusive agent? That would make more sense. Please don't reflect your life issues on me. I came here to ask if this is normal practice and you dance around the question in hateful tone. I can just imagine your life. Whew! You're angry!

DM: Who's the one being hateful? The one making wild accusations in defiance of evidence, or the one who calmly observes facts?

I wrote against Exclusive Buyer's Agency Agreements here. In fact, this is only one of several articles I've written on the subject. I don't ask for them in real life. Non-exclusive works fine - I get the job done, I get paid. If not, I don't. I'm perfectly happy to make that bet on my skills.

You're so angry you're mostly incoherent, and so defensive that you can't even go into computer mode and consider things dispassionately.

Please be civil. Avoid profanity - I will delete the vast majority of it, usually by deleting the entire comment. To avoid comment spam, a comments account is required. They are freely available, and you can post comments immediately. Alternatively, you may use your Type Key registration, or sign up for one (They work at most Movable Type sites) All comments made are licensed to the site, but the fact that a comment has been allowed to remain should not be taken as an endorsement from me or the site. There is no point in attempting to foster discussion if only my own viewpoint is to be permitted. If you believe you see something damaging to you or some third party, I will most likely delete it upon request.
Logical failures (straw man, ad hominem, red herring, etcetera) will be pointed out - and I hope you'll point out any such errors I make as well. If there's something you don't understand, ask.
Nonetheless, the idea of comments should be constructive. Aim them at the issue, not the individual. Consider it a challenge to make your criticism constructive. Try to be respectful. Those who make a habit of trollish behavior will be banned.

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This page contains a single entry by Dan Melson published on October 22, 2014 7:00 AM.

Don't Allow Yourself To Become A Victim of Bad Real Estate Practice was the previous entry in this blog.

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