Using a Buyers Broker

The special fiduciary relationship between seller and agent should cause buyers to wonder whether they can trust the agent who is helping them find a house. How can an agent who is going to be paid by the seller, and whose pay will be based on how high the sales price is, negotiate in your best interest? This concern about conflict of interest in residential real estate sales—dual agency, as it is called—is why buyer brokerage is a growing business.

To command an agent's undivided loyalties, hire your own. When you do that, you enter into a "single agency" contractual relationship with an agent.

There are several ways that a buyer's agent representing you can be paid. The most common way is the same way other real estate agents are paid: the sales commission is split between the listing broker and broker of a buyer's agent. The difference is in the contract, which states that the buyer's agent's portion of the commission is paid "on behalf of the buyer" and comes from the proceeds of the transaction, so you won't incur any additional costs for the broker's services. Buyer's brokers can also be paid a set fee or by the hour.

There are three or four advantages you get when your agent is contractually obligated to you:

■ You expand your options. A buyer's broker can help you buy a property not currently being listed for sale—without seeking to get the owner to list it.

■ You get help negotiating the deal. A broker you employ and pay is obligated to help you find a home that meets your needs, at the best possible price and terms. Your agent can openly suggest a smaller down-payment, different financing terms, use of a contract that meets your needs and an opening offer far below the list price.

■ You know who to trust. Because you establish a con-


Ask these questions when interviewing a prospective buyer's broker. The compensation plan you agree on with him or her should be spelled out in the brokerage contract.

■ What kinds of services and advice will the broker provide?

■ Will you pay the agent: an hourly rate, a set fee, or a percentage of the purchase price?

■ Will there be an incentive commission? This applies if the agent negotiates a price lower than the asking price— say, 10% of the savings.

■ Will you pay an initial retainer?

If yes, how much and will it be applied against the total fee due?

■ Is there a cap on total cost? If yes, how much? This is especially important if you are paying by the hour.

■ How will conflicts of interest be handled?

■ What will happen if you buy a property shortly after the brokerage agreement ends? Will the broker get a commission? If so, under what conditions?

■ How will disagreements be handled? For example, both parties could agree to submit to binding arbitration, using a neutral third party.

tractual relationship with the buyer's agent by signing a buyer's agency agreement, the agent is legally accountable to you and not to any seller. ■ You can also remain anonymous if it suits your purposes. A buyer's broker can act as an agent for an undisclosed principal.

Unfortunately, things rarely stay so neat and clean. Some agents who call themselves buyer's brokers engage in such activities as fee splitting. In this case, your agent will be paid by the seller. Because compensation is tied to the sale price of the home, it raises the very conflict-of-interest issue most buyers were seeking to avoid by hiring a buyer's broker. If you use an agent operating this way, hash out and address your concerns in writing in any contract you sign.


Ask your local board of Realtors and large real estate firms for names of buyer's brokers. Professors of real estate at local colleges and universities may also be willing to help you.

The Buyer's Agent Inc.

(1255 Lynnfield Rd., Suite 273, Memphis, TN 38119; 800-766-8728; represents real estate buyers on either a fee or commission basis. This franchiser has 70 franchises in 28 states. Call or write for the number of the office in your area.

Buyers Resource Real Estate

(393 Hanover Center Rd., Etna, NH 03750; 800-359-4092; has several dozen offices nationwide.

Most transactions are conducted on a commission basis. If Buyers Resource does not have a franchise in your area, they can probably still put you in touch with a buyer's agent who can help you.

The National Association of Exclusive Buyer Agents

(NAEBA, National Headquarters, 320 W. Sabal Palm Pl., Suite 150, Longwood, FL 32779; 407-767-7700 or 800-500-3569; can provide you with information on the role of exclusive buyer's agents and the names of agents in your area. The members of this newly formed consumer-advocacy and professional training organization must sign an affidavit stating that not only the agent, but also the agent's office, represents only buyers in real estate transactions.

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