Buyer Agency Agreements Becoming More Prevalent?

Most brokers I’ve talked to prefer to avoid seeking a buyer agency agreement with their clients.  Such agreements generally require the buyer to pay a certain commission to his broker to the extent the seller doesn’t.  Fee arrangements are rarely an easy conversation topic and, in any case, the commission is expected to be paid by the seller and shared between the seller and buyer brokers.

But a Seattle Times article today suggests that discount listing brokers, who charge commissions well below the heretofore common 6% of the purchase price, may be forcing buyer’s brokers into seeking written agency agreements with their clients if the buyer’s brokers wants to be paid more than half of what the discount broker is charging.

While this may be a disruptive development, buyer agency agreements can be helpful.  Unlike the situation described in the article, the agreement should be presented upfront so there can be a thoughtful discussion of the terms and the buyer can evaluate the broker’s experience and knowledge.  Presumably a prospective buyer who signs an agency agreement will carefully consider who to hire and, having done so, will feel more committed to working with that broker.  And the buyer agreement should overcome a broker’s reluctance to show his client properties listed with discount brokers.  The economics for the buyer shouldn’t change much since a seller paying less than a 6% commission shouldn’t expect as high a purchase price.  On the other hand, this seems almost certain to open a discussion as to how much a buyer’s broker’s services are worth, though experienced brokers should fare relatively well.

But I’m reminded of Yogi Berra’s quip — “In theory, there’s no difference between theory and practice.  In practice, there is.”  We’ll see what happens.


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