The beginning of a Realtor/Client relationship can sometimes be awkward – it’s important for everyone to understand expectations in order to make these first few encounters a little more fun and less stressful. There are a number of steps you should take before actually going out to see houses – (see Myth #4 – The First Step Is Looking For A House). In many states, Maryland included, if a Realtor takes clients out to see houses before they have a signed contract officially creating the client-realtor relationship, their loyalty is with the seller of the house, not you. Basically, anything you say they could discuss with the seller, which wouldn’t be any benefit to you as a buyer.
In my opinion, this first potential client/agent encounter is only awkward if the agent doesn’t explain everything properly. Signing up with a realtor is a business decision – you can’t (and shouldn’t expect to) get anything from them until you have signed a contract. There’s often a negative stigma associated with this initial meeting – but there’s nothing to be scared of. Buyer-Agent Agreements (and listing agreements – these we’ll discuss in a separate post so it doesn’t get too confusing) are quite similar, they do vary slightly by broker and agent, but for the most part, the bones are the same. Typically, you can expect to see these main points:
- Buyer and Broker Responsibilities – Broker/Agent agrees to use everything available to them to help the buyer find a house, buyer agrees to exclusively work with this one broker/agent.
- Broker’s Fee/Admin Fee – All brokers have an admin or broker fee that is paid by the buyer at settlement, they can range from $150-500, sometimes they may be even higher. This is completely separate from the agent’s commission (which is typically paid by the seller).
- Commission – Realtor’s commission is most commonly 3% of the sale price of the house, and is usually covered by the seller. Sometimes, sellers may only offer 2.5% in which case many agents include that additional 1/2% in their agreement with their clients – in the case that you find and love a house that offers less than 3% to your agent, you may be responsible for paying that difference at closing.
- Protection Period – There’s a clause in there protecting brokers/agents from clients jumping ship and buying a house (found by the original agent) with someone else – unless you have a huge issue with your agent, this is obviously not recommended.
- Agreement Term – This states the end date of the agreement with your agent and if there is a fee associated with getting out early (and how much notice you’d need to give). I personally adjust this date based on my clients needs – if they are currently renting and their lease is up in 3 months, then typically there’s no need to sign an agreement longer than 3 months. Alternatively, if someone is living at Mom and Dad’s and looking for their first house, they might have a less strict timeline and could go up to a year or more – these agreements can be as short or long as needed, feel free to discuss adjusting this if you don’t feel comfortable.
That’s the bulk of it – if anything doesn’t make sense, or if you see an insanely high admin fee, question it! Remember, it’s a business decision and meeting – don’t be afraid to ask questions, make sure you understand everything you’re signing, and let’s try to get rid of that negative stigma ✌🏼