Newsweek Article - Find An Exclusive Buyer Agent if Possible - When Purchasing Real Estate
There's a new article in Newsweek about the advantages of using an Exclusive Buyer Agent - as opposed to a "Buyer Agent." Now - if you are in the Chicago Illinois area - there is one near you -- Relocation Advisors Group - an Exclusive Buyer Brokerage
The article references - "If there isn't one in your neighborhood, you can use a selling agent as a buyer agent, but do some screening." I'd have to agree with that... If you can't find an Exclusive Buyer Agent - the next best thing is a so-called Buyer Agent - preferably one with the ABR designation.
But you need to ask them what percentage of their time they spend with buyers versus trying to obtain and market listings. Obviously - the agents who spend more of their time with buyers are the better bet.
In contrast - Exclusive Buyer Agents are specialists - spending 100% of their time serving home buyers - so they are very good at what they do. The analogy is - if you need heart surgery - do you want a general practitioner or a specialist? A purchase of your home is just as important (well almost!)
The problem with buyer agents is their home showing biases (perhaps showing more of their own company's listings or "selling" higher co-op payout properties), and that they can get into dual-agency conflict of interest situations where they may be representing the seller equally with you - which is really non-representation. They may also be reluctant to show for-sale-by-owner (FSBO) properties to you.
An Exclusive Buyer Agent can never get into those types of situations - and many of them actually align their compensation to be in your best interests - instead of the other way around. They show you all FSBO properties meeting your criteria.
The article states, "What about the fear that listing agents won't want to work with you if they know they have to split a commission with your buyer agent?"
In Illinois - every listing in the MLS has a certain payout (called the co-op - which doesn't mean that the agent with the buyer has to "cooperate" (as in give in) to the listing agent) - to someone who brings a buyer - so that is a non-issue.
Also - the payout is not necessarily a split of the total listing agent commission to the seller. Say the listing agent negotiated a 5.5% commission with the seller. The co-op may be 2.5% and the listing agent and their broker would then be keeping 3% (split between them based on whatever split the agent is on.) The seller can choose the payout to be whatever they want - and in fact - negotiate with a listing agent - to pay out more to someone bringing the buyer - than their listing agent - which may be beneficial in the current "buyers market."
Why? Some agents may "sell" the higher payout property to their buyer client - especially if the client isn't under contract with them. When the buyer has no contract with their agent - their agent can pocket the entire co-op payout.
The public thinks that the listing commission is "split" with the buy-side - which is not necessarily the case.
If you contract for a specific rate with your Exclusive Buyer Agent or Buyer Agent in writing - you are reimbursed for what you contract for - by the co-op payout. If the co-op payout is higher than your contract rate - you - the buyer - pocket the difference.
When you contract for a rate - there are no home showing biases - because your agent isn't going to push a higher commission property on you. They have no reason to - because you know your agent will get paid the fixed rate that you contracted for.
If the co-op is less than your fixed rate - your agent can negotiate to have the seller pay the difference - so you are nothing out of pocket to your Exclusive Buyer agent or Buyer Agent. Everything is always built into the price anyway - including the listing agent's cut. Agent's commissions are usually built into the purchase price.
Just as an Exclusive Buyer Agent or Buyer Agent does not dictate to the listing agent what they are going to get paid - neither should the listing agent dictate to the agent bringing the buyer - what they are to be paid. So - the "co-op" payout is really just a proposed payout by the seller / listing firm. The agent representing the buyer - may be worth more or less than that - so by having their buyer decide what they are worth - in writing - the co-op payout may or may not be acceptable to the buyer. If not - they can ask for closing cost credits as part of the negotiation.
HUD considers buyer broker fees to be an allowable closing cost.
We have found that buyers enjoy performance-based compensation for agents - in addition to just a flat fee. But very few agents structure their compensation to be performance based. In fact - a traditional buyer agent usually makes more when their buyer's price goes up. We believe that the opposite makes more sense. So do our clients.
If you want to learn more -- call an Exclusive Buyer Agent in your area.
The article references - "If there isn't one in your neighborhood, you can use a selling agent as a buyer agent, but do some screening." I'd have to agree with that... If you can't find an Exclusive Buyer Agent - the next best thing is a so-called Buyer Agent - preferably one with the ABR designation.
But you need to ask them what percentage of their time they spend with buyers versus trying to obtain and market listings. Obviously - the agents who spend more of their time with buyers are the better bet.
In contrast - Exclusive Buyer Agents are specialists - spending 100% of their time serving home buyers - so they are very good at what they do. The analogy is - if you need heart surgery - do you want a general practitioner or a specialist? A purchase of your home is just as important (well almost!)
The problem with buyer agents is their home showing biases (perhaps showing more of their own company's listings or "selling" higher co-op payout properties), and that they can get into dual-agency conflict of interest situations where they may be representing the seller equally with you - which is really non-representation. They may also be reluctant to show for-sale-by-owner (FSBO) properties to you.
An Exclusive Buyer Agent can never get into those types of situations - and many of them actually align their compensation to be in your best interests - instead of the other way around. They show you all FSBO properties meeting your criteria.
The article states, "What about the fear that listing agents won't want to work with you if they know they have to split a commission with your buyer agent?"
In Illinois - every listing in the MLS has a certain payout (called the co-op - which doesn't mean that the agent with the buyer has to "cooperate" (as in give in) to the listing agent) - to someone who brings a buyer - so that is a non-issue.
Also - the payout is not necessarily a split of the total listing agent commission to the seller. Say the listing agent negotiated a 5.5% commission with the seller. The co-op may be 2.5% and the listing agent and their broker would then be keeping 3% (split between them based on whatever split the agent is on.) The seller can choose the payout to be whatever they want - and in fact - negotiate with a listing agent - to pay out more to someone bringing the buyer - than their listing agent - which may be beneficial in the current "buyers market."
Why? Some agents may "sell" the higher payout property to their buyer client - especially if the client isn't under contract with them. When the buyer has no contract with their agent - their agent can pocket the entire co-op payout.
The public thinks that the listing commission is "split" with the buy-side - which is not necessarily the case.
If you contract for a specific rate with your Exclusive Buyer Agent or Buyer Agent in writing - you are reimbursed for what you contract for - by the co-op payout. If the co-op payout is higher than your contract rate - you - the buyer - pocket the difference.
When you contract for a rate - there are no home showing biases - because your agent isn't going to push a higher commission property on you. They have no reason to - because you know your agent will get paid the fixed rate that you contracted for.
If the co-op is less than your fixed rate - your agent can negotiate to have the seller pay the difference - so you are nothing out of pocket to your Exclusive Buyer agent or Buyer Agent. Everything is always built into the price anyway - including the listing agent's cut. Agent's commissions are usually built into the purchase price.
Just as an Exclusive Buyer Agent or Buyer Agent does not dictate to the listing agent what they are going to get paid - neither should the listing agent dictate to the agent bringing the buyer - what they are to be paid. So - the "co-op" payout is really just a proposed payout by the seller / listing firm. The agent representing the buyer - may be worth more or less than that - so by having their buyer decide what they are worth - in writing - the co-op payout may or may not be acceptable to the buyer. If not - they can ask for closing cost credits as part of the negotiation.
HUD considers buyer broker fees to be an allowable closing cost.
We have found that buyers enjoy performance-based compensation for agents - in addition to just a flat fee. But very few agents structure their compensation to be performance based. In fact - a traditional buyer agent usually makes more when their buyer's price goes up. We believe that the opposite makes more sense. So do our clients.
If you want to learn more -- call an Exclusive Buyer Agent in your area.
Labels: biased home showing, biases, buyers market, chicago, commission, exclusive buyer agent, exclusive buyer broker, for sale by owner, FSBO, in-house listing, newsweek, real estate
posted by Rick Hauser at
7:55 AM
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