Buyer's Brokerage
What is a Buyer's Broker?
A "Buyer's Broker" or "Buyer's Agent" is an agent who works exclusively on behalf of a buyer in a given transaction.
An "Exclusive Buyer's Brokerage" represent only buyers and accepts no listings. The Broker of any real estate firm that accepts listings must represent the seller, by law. Agents that work within the firm work for the broker, that represents the seller. While an individual agents may be designated as a "buyer's agent" for a specific buyer or transaction, that agent may have to change "agency" to a "dual agent" if the buyer should happen to be interested in one of the properties listed by that agent. The potential conflicts are numerous. Only an "Exclusive Buyer's Brokerage" has no such conflicts, because they accept no listings and never represent sellers.
Listing agents typically earn twice as much money if they can get you to buy one of their personal listings, and they often earn bonuses for selling "in house" listings. This works to the obvious disadvantage of a buyer who should be (but may not be) shown all the best homes within the buyer's category, regardless of who the listing agent is.
As an Exclusive Buyer's Broker, we show our Buyers "MLS" listed properties, as well as any "For Sale By Owner" properties that meet the buyer's requirements. Meeting your needs is our only objective when selecting the "best available" homes to show.
As an Exclusive Buyers Broker, we are completely objective when advising our buyer about the value and resale potential of a property.
As an Exclusive Buyer's Broker, our fees are negotiated with you the Buyer, not the Seller. We represent you exclusively. In most transactions we can save you money by successfully representing you in contract negotiations. In addition we can tailor our compensation agreement to suit your requirements, also usually saving you both time and money.
A home purchase is usually the largest investment of a lifetime. Homebuyers should always be represented by a broker who will pledge total and undivided loyalty. No listing agent can offer this service on their own listings. Any such pledge from a listing agent would be illegal under Florida law. Only an "Exclusive Buyer's Broker" can offer this service.
Why use a Buyer's Broker?
The seller is represented by the listing broker and the listing agent. Shouldn't you, as a buyer, also have representation? You wouldn't go to court as a defendant and use the plaintiff's attorney. How could one lawyer handle both sides of a divorce and represent both parties fairly and watch out for the interests of each party. Often the purchase of a home or other real estate really involves significantly more money, risk and exposure than a divorce. Doesn't it make sense to have personal, professional representation without any possibility of a conflict of interest?
Realty firms that represent both sellers and buyers, have many hats to juggle. Sometimes agents will show a property to one "prospect" while representing the seller and then show the same property to a different prospect as a "buyer's agent". It is very difficult to remember which hat the agent is wearing, not only for the agent but also for the seller.
An agent, or broker, who only represents buyers never creates this confusion. All parties know where they and the agent stands. Simple, precise and clear communication is an essential ingredient to successful and stress free transactions.
How much does it cost to use a Buyer's Broker?
In a typical real estate listing the seller agrees to pay the listing brokerage firm a commission upon the successful sale and closing of the property. That commission is usually a percentage of the sales price. That way both the seller and the agency have an incentive to obtain for the seller the highest price for the property. They both make more the higher the price is. To facilitate the sale, the listing agency typically employs the assistance of other agnencies, brokers and associates, who help sell the property by offering to split or share the commission with any agent or broker who produces a buyer willing and able to buy the property. Again, the selling agent, maximizes his or her income by obtaining the highest possible price for the seller. Additionally the seller may authorize "bonuses" to be paid to the selling agent or broker who sells the property subject to seller specified conditions. These shared commissions and bonuses are typically offered to "buyer's agents" or any type of real estate agent who brings an acceptable offer to the seller.
In a transaction where the property is listed for sale with a Brokerage Agency, the buyer's broker or agent, usually is paid from that portion of the commission, paid by the seller, offered to participating brokers and agents. In that scenario, there is no additional cost to use a "buyer's broker". Properties which are not listed with an agency but are offered for saly by owner, have no commission agreement in effect. In most cases, any real estate agent will contact the property owner prior to showing the property and arrange a commission agreement if a successful sale should ensue.
No commission - Professional Service fee! An alternative form of compensation is a professional service fee. Rther than a commission based as a percantage of the selling price, most customer prefer to pay us a professional service fee based on the amount of time, travel and expense in putting a sale together structured in the best interests of the buyer. This is a faily new concept in real estate, but take a moment to think about it. Would you feel comfortable going to a physician who got paid a percantage of the drugs he prescribed or a split with the laboratory on the tests ordered? Usually we are confortable paying the physician his "fee for professional services" and pay the labs for the tests they perform and purchase our prescriptions at the pharmacy of our choice.
With a professional service fee, the buyer's agent will get paid for the amount of time and effort expended on behalf of the buyer. Those commissions and/or bonuses offered by the seller through the listing broker are returned to the buyer either in cash at closing or as a reduction in the selling price. Lets look at an example. (There are other closing costs, mortgage fees, title insurance, inspections, etc. which will remain approxiamtely the same regardless of the type of representation or compensation agreement.)
| Example 1, Typical transaction with Selling Broker and Buyer's Broker sharing commision |
| Selling Price |
$1,000,000 |
Listing Comm |
Selling Comm |
| *Commission @ 6% |
$60,000 |
$30,000 |
$30,000 |
| Net to Seller |
$940,000 |
|
|
| |
|
|
|
| |
|
|
|
| Total Cost to Buyer |
$1,000,000 |
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| Example 2, Transaction with Buyer's Broker refunding commission to Buyer |
| Selling Price |
$1,000,000 |
Listing Comm |
Selling Comm |
| * Commission @ 6% |
$60,000 |
$30,000 |
$30,000 |
| Net to Seller |
$940,000 |
|
|
| Refund to Buyer |
$30,000 |
|
|
| *Professional Svc Fee |
$10,000 |
|
|
| Total Cost to Buyer |
$980,000 |
|
|
| Example 3, Net Transaction with no Buyer's Broker Commission |
| Selling Price |
$970,000 |
Listing Comm |
Selling Comm |
| *Commission @ 3% |
$29,100 |
$29,100 |
$0 |
| Net to Seller |
$940,900 |
|
|
| Refund to Buyer |
$0 |
|
|
| *Professional Svc Fee |
$10,000 |
|
|
| Total Cost to Buyer |
$980,000 |
|
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* Commissions and professional fees are negotiated separately for each transaction based on a variety of factors.
What others say about Buyer's Brokerage
These are excerpts from various magazines and other real estate and financial publications.
"To Buyers: If you want representation, work with a Buyer Broker. They are legally obligated to represent your interests in any negotiations with sellers."
The Consumer Federation of America
"Groups such as the Consumer Federation of America and AARP recommend using Buyer's Agents.
SmartMoney Magazine, June 1995
"Many people don't realize that, unless specifically stated otherwise, brokers are legal representatives of sellers. A Buyer Broker, representing only the buyer, may be able to secure a better price and better terms."
Good Housekeeping
"When one salesperson has a home listed for sale, and another salesperson working for the same brokerage locates a buyer, the second salesperson can't be a true Buyer's Agent. Why? Because both people work for the same brokerage. A "dual agency" with both buyer and seller is the usual solution. To solve this problem, a few states are experimenting with laws allowing the agent who finds a buyer for a home listed with the same brokerage to be a fully-disclosed Buyer's Agent for the buyer. This "legal fiction" enables the buyer to work with his own agent who, by law, doesn't also represent the seller."
Robert J. Bruss - Real Estate Weekly
"Unlike the traditional agent who looks out for the seller, a Buyer Broker acts as your advocate, helping you find the home you want and then negotiating the lowest possible price. The best Buyer Brokers are so-called exclusive agents - that is they represent only buyers, never sellers, and thus are not tempted to push a house on which they stand to earn a commission.
Money Magazine May 1995
"Exclusive agencies are the best. They remove any conflict of interest, which is the main reason for considering a buyer broker in the first place."
Kiplinger's CHANGING TIMES
"Buyer Brokers have the buyer's interests in mind. They act as a personal advocate, hunting for the right house and haggling with the seller's agent. In fact, a 1992 study by a national long distance phone company, found that 200 relocating workers who used buyer brokers paid an average of 91% of the offering price, whereas those using traditional brokers paid 96%."
Diversion Magazine for Physicians
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