Please Explain Real Estate Agent Exclusivity

March 27, 2011 7:04 AM

We are buying a home - what is the etiquette/law of forming a relationship with a real estate agent?

We've met with one agent, but it didn't go beyond her showing us listings on a computer, and we'll be meeting with one or two more to decide who we want to work with. How far can we go with one agent before we have to tell the other agents that we are not interested in working with them? Maybe the same question: when should we expect to sign a contract? Also, Am I right in my understanding that we must commit to a single agent - what if we want to work with two agents in totally separate areas?

We are looking in Washington, DC and Maryland, if that matters.

posted by Xalf to home & garden (10 answers total)

First thing to remember is that the agent is always working for the seller. The agent gets paid only by the seller. It is fine to try out a few agents but the sooner you settle down with one, the better. A few tips when you start the search. Always start with a price that is $25k or so below your budget because agents generally tend to push you to the higher end. I don't remember signing a contract with the agent - I think it was an understanding more than anything else. Be prepared to negotiate. Agents in general are interested in closing the deal than getting you the best deal. So you need to be prepared to negotiate which should not be too hard in this market.
posted by harigopal at 7:19 AM on March 27, 2011

Generally they really want you to stick with one agent. So that's the etiquette. We used red fin.com because they give you half of the commission back. My husband and I both felt comfortable with the process and thought no amount of handholding was worth the 5 figure check we got in the mail after we bought our house. And now, unless it's a tricky purchase (run down property, unknown area) we recommend red fin to all our friends. But that's just our opinion.
posted by bananafish at 7:25 AM on March 27, 2011

I will disagree with harigopal. As in any industry, there are people that do a good job and people that do a poor job, honest people and dishonest people.

I would recommend that you ask around and get recommendations as to a buyer's agent.

A good buyer's agent is going to work for YOU, not the seller, their reputation depends on doing a good job and meeting YOUR needs.

My experience is that at some point an agent is going to ask you to sign a contract, which, in my opinion is a reasonable request. Why should they continue to invest time and energy into finding you a house that, without a contract, you could go directly to the owner or selling agent and negotiate (saving the buyer agent's share of the fee) at a lower price. The contract is reasonable and fair.

It is reasonable for you to interview various agents, but once an agent has started to show you houses, your into a "really should have a contract" area. What if agent A finds a house you like, but you sign with B and tell them you want to buy that house... just not fair.. It's all about the Karma.
posted by tomswift at 7:27 AM on March 27, 2011 [1 favorite]

First thing to remember is that the agent is always working for the seller.

No, a buyer's agent works for you, though it's still true that their commission is a share of the sale price and this will ultimately come from the seller's money. However, the contract you sign will bind the agent to working in your interests. My real estate agent had never even met any of the sellers of homes that I looked at. What they know about the seller is from the listing and from talking to the sellers agent (in both cases, info that obviously may be more or less accurate). Sellers agents were not present when I viewed homes and I don't think I even met my seller's agent at any point in the home-buying process.

Also note that "saving the buyer's agent share of the fee" will vary by local law. For example, where I bought, the seller and seller's agent would have an agreed upon commission. The sellers agent would then include in the listing what proportion of the sale price they would give to the buyer's agent. This came from the seller's agent's commission. So for example, most sellers agents would receive a 5% commission. Then they would offer the buyer's agent 2.5% of the sale price or half their commission. In other words, you would not save any money by negotiating directly with the seller after an agent shows you a house, you'd just stiff your agent.

Really this business of how commissions work where you are is something that your agent should explain to you and that you should feel comfortable asking. Sign a contract before seeing any houses. The standard contracts generally have time limits (E.g. you will work exclusively with this agent for 6 months), however, mine added a rider to the standard contract saying I could terminate the contract at any time if I was dissatisfied with his work on my behalf.
posted by If only I had a penguin... at 7:43 AM on March 27, 2011

Whether the 'buyer's agent' works for the buyer Or the seller is a matter of state law and the specific contractual relationship. Look up the laws for your state. And yes, Redfin rocks.
posted by bq at 8:08 AM on March 27, 2011

If you do end up signing a contract with someone, you may want to make sure there's a clause in there that allows you to terminate the contract if you think the real estate agent is not doing a good job, or does not understand what you are looking for. Our agent when we were looking was amenable to this, and it is protection for you in case you end up just not getting along with the agent at all.

We had a really crappy experience with our real estate agent in MD and in hindsight we should have used something like redfin because she did NOTHING for us. We found the listings that we wanted to see, and she let us in to the houses, that was it. She didn't encourage us to negotiate prices or anything, every offer we made she suggested we just bid list price. I saw a taste of something better when we had to meet with one of her colleagues on a day she wasn't available and the colleague walked through the house with us and showed us good and bad things, provided listings of comps for the house and explained why she thought certain comparable houses were cheaper or more expensive, etc... Our agent NEVER did anything like that. We terminated our relationship with her shortly thereafter (we ended up not buying a house anyway).

All of that to say...make sure you pick someone that is actually going to work for you, and provide good advice and good input (after all they're making a lot of money off of you). You may have to wait until the person shows you a few houses before you find out what kind of an agent the person is, so personally I would not sign any agreement with someone until you've actually been out there and seen a few houses with them, otherwise if they're not a good agent, you are stuck with them.
posted by echo0720 at 8:26 AM on March 27, 2011

We interviewed four agents. But we told each when we met that we were meeting with several and when we'd make our decision (the next week). That way, we weren't setting any of them up and wasting their time. Two of the agents brought some suggested listings, and ultimately the one we chose was the one we felt was most familiar with the neighborhoods we'd already identified as liking and who suggested some other areas we didn't know about (including the one where we ultimately found the perfect home). Each told us if we worked with them as our buyer's agent, they wanted a commitment we'd only work with them and not drag them along. We got the various agent's names from Angie's List, a friend's referral and one who we knew through Twitter.

After we let the agent we settled on know we wanted to work with her, she sent us some information including a sheet explaining the process if we ended up wanting to buy one of her listings. But we didn't sign any exclusivity agreement. At that point, she set us up with online notifications of new listings and went through and identified several she thought we might like. We culled that list and our own research and gave her a list of about 15 homes we wanted to see. Ultimately, we saw 13 homes. But the home we chose was the first one she showed us.

I don't know how it is in D.C., but here, it was relatively informal and they had to trust us not to waste their time. You should be clear with each agent you meet with this is an interview and tell them explicitly when you will make a decision. Then, notify them if they aren't chosen as soon as possible. IMHO, before you get to the home touring process, you should have chosen an agent and you should stick with him/her until you close on the home.
posted by ilikemethisway at 8:57 AM on March 27, 2011

I would recommend that Xalf read the book Freakonomics by Steven Levitt and Stephen Dubner that talks about the economics of several daily activities. In that they have covered real estate in a separate chapter and they demonstrate how when agents sold their own homes they were always able to sell it at a better price than when they were selling on behalf of their clients. This is empirical data. I think in the current market, Xalf can use this to his/her advantage and get a great deal with a little preparation and patience. Regards and good luck with the house-hunting.
posted by harigopal at 10:38 AM on March 27, 2011

i have to disagree with harigopal as well. a good buyer's agent is there to represent you and your interests. it behooves them to do it well because their livelihoods depend on their reputation. they want to do a good job because when you might be asked to recommend an agent, you will recommend them for doing such a great job helping you buy your house. they want to do a good job because when it comes time to sell your house, they want you to remember what a great experience you had with them and call them up to do it. a good buyer's agent knows that if they do a good job for you now, you will most likely want them to do a good job for them (and/or your friends) in the future.

i was fortunate to have worked with good agents both times i bought property (in different states). both where thorough in their research as well as knowledgeable about the areas in which i was looking. both educated themselves about my tastes and advocated on my behalf. i recommend them whenever anyone asks if i know a good agent. and i used one of them when it came time to sell the property she helped me buy seven years before.

i don't know about d.c., but on the west coast, the buyer/agent relationship is informal. unlike with a seller/agent relationship, there is no formal contract. however, it is understood that you are only using one agent exclusively, and you are free to change agents if you are dissatisfied with the service you are receiving (tho i think a short note along the lines of "we really appreciate your help so far, but we don't think this relationship is as beneficial as we would like to to be…" is just standard courtesy). the best way to find a good agent? ask your family, friends, or colleagues for anyone they would recommend.
posted by violetk at 11:37 AM on March 27, 2011

As a follow-up: we met with Agent 2 who was eager to show us some houses. We told him that we were happy to see houses but had yet to interview Agent 3. He said that was fine. He showed us some houses, but we ultimately went with Agent 3. Obviously, Agent 2 was unhappy to not get our business, but, as far as we know, there were no especially hard feelings.
posted by Xalf at 4:21 PM on April 26, 2011