What is a Buyer’s Agent?

In a typical residential real estate transaction there is a Listing Agent; whom represents the seller and then there is a Buyer’s Agent; respresenting the buyer.  This is very important to understand as each agent represents the interests of their client, even over their own interests.  In other words, whether you are buying or selling, a licensed real estate agent has a fiduciary relationship with their client.  If the agent is also a REALTOR®,  they also have a code of ethics to follow.  Just because someone has a real estate license does not mean they are a REALTOR®.  The client’s situation and intentions are confidential and protected by their agent.  There is a scenario called Dual Agency and there are different forms.  Dual agency is essentially when the agent (or Firm) represents both the buyer and the seller.  It is totally legal in North Carolina and in a nutshell can be explained by; your agent is now the referee vs. the coach.

Why Does This Matter?

When an agent first meets with a potential buyer there are many scenarios and situations, some very in depth.  The most important is location.  There are talks of price point, financing qualifications, size of home, school zones, walk score, the list goes on.  But, an initial conversation with an agent is all about the buyer and their needs.

When discussing a buyer’s needs, this information is confidential.  This comes into play when looking at a home and it becomes a contender for an offer.  A buyer’s agent is not going to tell the listing agent that this is their dream home and they would pay way over list price to get the house.  The buyer’s agent is also not going to push any house on their buyers….or they shouldn’t anyways.  When touring a home there are many red flags an experienced agent is going to be able to pick up on.  There are way too many to discuss, but if there is a crack in the foundation, mold on walls, moisture when looking at a crawlspace; your agent should pick up on these.  And if it is on public record that a prison is being built behind the home, the agent better know or should take reasonable steps to find out.  Some items are very hard to identify until a home inspection, but the point is; your agent represents you and is trying to protect your interests.

Compensation

Real estate is one of those professions where an agent may do a lot of upfront work and never be compensated.  One of the biggest misconceptions is an agent will meet a buyer at a house, write an offer, and get paid a month later once the house closes.  The general public does not necessarily understand that a buyer’s agent may be working with a buyer for a year or more.  That means showing houses every week.  Background research on properties, and constant monitoring of the current market.  Then plans may change.  The buyer may not have gotten that job, they may have decided to stay put in their current house, they may decided to use their first cousin’s hairdresser’s husband that just got their license.  Many scenarios that are just overlooked.

*Some Firms now charge a non-refundable retainer to begin working with a buyer…..or a seller.

So, is a buyer’s agent’s compensation justified?  Yes….indeed.

“Without a buyer’s agent, no one would be legally required to help buyers understand their risks and options”.

Commissions are 100% negotiable and not required.  However, there a very few agents, if any, that are going to work for free.  The question is how much should they be compensated?  There is no set rate or fee set in place.  Some Firms may have a company policy to charge a certain amount, however, the consumer does not have to agree to those terms; they can shop around.

In North Carolina, our forms (prepared by the NC Bar Association with the help of a ‘Forms Committee’) have always outlined the duties of the agent to their client and duties from clients to their agent.  The forms have always outlined in very clear and decisive language how much commission has been agreed to and who pays it.

Below is the language used in the NC Exclusive Buyer Agency Agreement:

a.

Fee Earned; Due and Payable: Except for any non-refundable retainer, the fee in this section will be earned by Firm when Buyer enters into a written contract (“Contract”) during the term of this Agreement to buy real property as described in section 1. The fee will be due and payable to Firm when Buyer, any authorized assignee of Buyer, or any party authorized by Buyer in the Contract, closes or defaults on the Contract.

b.

Seller or Listing Firm Assistance: Firm may seek compensation from the seller or listing firm to pay some or all of the fee due in this Agreement. However, Buyer understands that neither a seller nor a listing firm has a duty to pay Firm’s fee.

It is strongly suggested to have a conversation with your agent about compensation.  In my 20 plus years as a licensed agent and REALTOR®, I can say with confidence that a buyer’s agent is well worth their time and effort in getting you the best terms on a home in any “given” market condition.  There are always factors that may make a home purchase difficult, ie; the COVID days, but a good, experienced agent will be able to guide you to the best possible outcomes.