Many prospective homebuyers find real estate agents before they start looking for homes. As the name implies, a buyer’s agent represents the buyer’s interests and will negotiate on the buyer’s behalf during the transaction.
Although that sounds simple enough, buyers and sellers sometimes are confused by the relationships among the real estate agent, the buyer and the seller. To offer some clarity and greater protection for homebuyers, Virginia has enacted a law that requires a written agreement between the real estate agent and the buyer.
Beginning July 1, buyers in Virginia will need to sign buyer agreements if they choose to work with real estate agents. Buyers are not obligated to work with real estate agents and can negotiate the terms of agreements with their agents, even to just a one-day contract so that the agent can show some properties before both sides decide to work together for a longer term.
“All three jurisdictions have different rules governing buyer agency,” said Greg Ford, an associate broker with Keller Williams Capital Properties in the District who also is licensed in Maryland and Virginia. “In Virginia, the new law will protect buyers from mistakenly believing they are being represented by a Realtor they have met in an open house or who they have called to ask about seeing a home. Under Virginia law prior to this, Realtors without a signed buyer agreement were by default representing the seller.”
Mr. Ford said that while he recommends having a written buyer-agent agreement early in the relationship between a real estate agent and a buyer, Maryland and D.C. laws do not require written agreements.
Kelly Normand, an associate broker with Century 21 New Millennium in Gainesville, Va., said Virginia is a caveat emptor state, so buyers without representation are expected to do significant research on their own.
“In the past, Realtors who did not have a signed buyer agreement with their buyers would not be allowed to share information they learned from the seller, such as the potential for a price reduction,” Ms. Normand said.
“As of July 1st, buyers will have agency fully explained to them at the first meeting with a prospective Realtor and [be] given an opportunity to sign a buyer-agent agreement,” she said. “Buyers can decide instead to sign a non-agency agreement, which allows the Realtor to do ministerial acts but not to offer advice or negotiating assistance.”
John Lesniewski, a broker with Re/Max United Real Estate in Upper Marlboro, said Maryland real estate agents must present the “Understanding Whom an Agent Represents” form to potential clients, but buyers are not required to sign agreements.
Greater confusion can arise in instances of dual agency, when one agent represents both the buyer and the seller. A dual-agency situation can arise when an agent has a listing and then works with a buyer who is interested in making an offer on that listing.
Maryland law does not allow dual agency, Mr. Lesniewski said, but in the District and Virginia, dual agency is allowed as long as all parties sign a written agreement.
“In Virginia and D.C., buyers can agree to dual agency if they want to buy a home listed by their Realtor or they can opt for designated agency, which is when two different agents from the same brokerage represent the buyer and the seller,” Mr. Ford said.
Mr. Lesniewski said Maryland law, while it does not allow dual agency, does allow designated agency.
One option to consider that avoids the complications of dual agency and designated agency is to work with an exclusive buyer agent, who works in a brokerage, represents only buyers and never accepts listings.
Some agents, even if they work for a brokerage that works with both buyers and sellers, refuse to do dual agency and instead will suggest using a designated agent to handle one side of the transaction.
Some buyers are reluctant to sign a buyer-agent agreement, particularly if they are just exploring the idea of buying a home.
“Some people are just naturally commitment-phobic, but other people worry about paying a fee to the buyer agent regardless of whether they find a home or not,” Ms. Normand said. “The buyer-agent agreement must show what the Realtor’s fees are, but the Realtor is paid at settlement from the proceeds of the sale. Technically, the seller pays the Realtor’s fees, but in reality, that fee is built into the price so the buyer is really paying as part of the home purchase.”
Some buyer-agent agreements also include a retainer fee for a real estate agent that would be returned to the buyer at settlement, but all fees are negotiable and Ms. Normand said retainer fees are rare.
“This is the only business in which you don’t get paid unless you’re successful and get to settlement,” Ms. Normand said.
Mr. Lesniewski said that if a buyer-agent agreement states that the buyer’s agent will receive a 3 percent commission at settlement and the seller pays only a 2.5 percent commission, the buyer’s agent could request that the buyer pay the additional 0.5 percent of the fee.
“In reality, though, Realtors almost never do this because they want referral business that they won’t get if they upset the client,” Mr. Lesniewski said. “Sometimes a buyer-agent agreement will specify a small fee for services to be paid by the buyer at settlement, such as $395. Buyers can always negotiate about the fee and everything else in the buyer-agent agreement.”
Mr. Ford said buyer-agent agreements also provide a description of the responsibilities of both the buyers and the agent.
“Buyers have to acknowledge that they will let the Realtor know if they are looking at properties on their own and they need to acknowledge that they will share all financial information if they are making an offer,” Mr. Ford said.
The buyer should carefully read buyer-agent agreement before signing and pay particular attention to the issues of compensation and termination of the agreement. If the buyer wants to end the agreement early, there should be rules for how to do so in the contract. This typically requires a mutual written agreement by the buyer and the agent.
Copyright © 2016 The Washington Times, LLC.