Should I Sign "Exclusive Right to Represent Buyer Agreement"?

22 Replies

Newbie Here,

Just got off the phone with an agent who says that in the state of Virginia it is required to have a signed "Exclusive Right to Represent Buyer Agreement" before he shows me any homes. Now I have no problem with loyalty, but this doesn't sound like either a true statement or a good idea if I'm looking at properties from all sources including non MLS.

Any words of advice or experience with realtors in this type of situation.  I looked, but didn't find anything that said they are required in Virginia either?  Anybody know how this would work if I were to sign and then buy from a wholesaler or private owner? 

It's up to you if you want to sign or not. Don't be surprised if a broker does not want to work with you, though. Their (the broker's) model is to show listed homes. As you know, they are trying to protect their time in you. If you buy an unlisted property, you will want an exemption from the broker's contract... not sure if their form allows for such thing, but the VAR form has an "Other Provisions" section where you can define your common ground for working together (e.g. only listed property).  

That sounds a little fishy to me.

I don't work with clients that use multiple Realtors but I would never make a buyer client sign one of those things. I think that exclusive Realtor/Client relationship should be built on trust.

@Chase Schmidt As to whether it is required by law, it is actually a gray area.  I am a licensed agent in Maryland, DC, Virginia (And Massachusetts). In the DMV jurisdictions, there are some that believe that it is actually required by law.  I disagree with those that assert it, but there are very legitimate people whose reading of the law say it is required.

I will tell you what is required by law though....if you want to see a property that is listed from my brokerage, and you want me to represent you...then I must have a written buyer/agency agreement with you.  If I do not, then I de facto represent the seller.  Now this is a real issue if you work for a large brokerage.  My brokerage Long & Foster has something like 20% of all listings in the DC metro area.  So if you want to see one of those properties, and I have no agreement, then I am representing the seller because they have a  written agreement with my brokerage. Furthermore, I would not actually be entitled to any compensation since I do not have any sort of relationship with the seller.  Some people get around this by backdating their buyer/agency agreements to a date prior to when the property is shown. 

Also it is required by law that we do have the buyer/agency agreement as part of a submitted contract.

Anyways...I would not be afraid of signing the agreement. The way I set my agreements up so that people are less leary of these agreements...is that there is a section in it that defines how to terminate the agreement. I just insert "1 days notice" in order to terminate the agreement.  Usually the one days notice part eases anyones qualms.

@James Wise   The "first substantial contact" rule in NC requires brokers to 'give prospective buyers or sellers a written document which explains agency concepts of principal and agent and resulting fiduciary duties... with the buyer or seller'. I've paraphrased the way NC sees the interface between brokers and the public. You don't need an exclusive representation. Brokers will tend to push (or require) it, based on their business model/needs. I believe some VA brokers operate in a similar fashion.

@James Wiseundefined

But just go ahead and try to get the broker to agree to exclusively represent only you...

Presenting someone with a disclosure agreement is different than requiring someone to sign an exclusive right agreement.  

Was this a first date @Chase Schmidt?  I wouldn't sign something like that right off. I wouldn't ask an agent to drive me to several properties for several weeks without it, either.  Gotta be a happy medium in there somewhere.  

I would NEVER work with an agent that wanted me to sign an exclusive  agreement

you're not "required" to sign anything.  Whether the agent wants to work with you is his/her decision. 

You can suggest exclusive agency agreements on a property to property basis, or a time fram of your choosing (1 day, 3 months, etc). 

You can make the agreement specific to certain price ranges, property types, MLS-only. etc. At one point I was working with two agents. One agreement was set up for properties on the MLS under $40,000 and any that were on the hudhomestore site (any price). Then with the other agent it was non-HUD homes or anything on MLS over $40k. What I would suggest is that you ask the agent up front what would happen if you found a house through a wholeseller that you wanted to buy. I was starting to work with an agent a while back who didn't want to have anything to do with me after he found out I was also working with a wholeseller. But another agent in the same office was fine with that and actually wound up listing a flip that we bought from a wholeseller.

That agreement is for the Realtors protection. He/She starts giving you guidance and information regarding the home buying process and sometimes spends a ton of time showing you properties. He is thinking he's going to earn a commission when he helps you negotiate and close on a house. If you are going to jump ship and leave him hanging by finding a FSBO on your own or walking into a new build sales office, just let him know upfront. If you don't actually want someone to represent you and you can't commit to a level of loyalty (for the person who is working FOR you but being paid by the seller) then I'm sure he would like to know this before he invests any time in you.

@Carson Sweezy I agree with this approach, I will not sign an open ended or time based exclusive agreement, it must be property by property.  I am getting my RE license so I can have unrestricted access to properties and not have to use a realtor to show me properties.

If a realtor feeds me a property that I end up buying I have no problem signing a property specific agreement that is required for inclusion in the offer they submit on my behalf.

In my short time trying to enter the RE business I have met several realtors who what you to commit to them and then just want to feed you automated listings without ever providing any property/area analysis, comps or anything else.

They want me to screen the automated emails for them and they just submit the offer....that is not what I need a realtor for, if a realtor has no time or willingness to earn my business by actually demonstrating what value they can bring to the table by screening properties with actual details/analysis & numbers and forwarding those to me so I can determine if they really do understand my needs or if they just want to be an administrative paper processor submitting the offer and contract paperwork after I do all the research...not interested.  My role is to do the due diligence on the deals they bring me.

I am kind of hardcore with realtors, I have no issues paying for services rendered but they are not getting 3, 5 or 6% from me without screening a single deal but just waiting on me to do all the research and tell them which property I want.  

I actually had one tell me that she "couldn't tell me which market was better than another, if the numbers work the numbers work"  excuse me but don't we go to realtors for their expertise and knowledge of a certain market.  

Sorry for my long answer to a short question....I'll sign exclusive for the deal realtor brings me only, if we build a relationship of trust I might consider time based, but will never sign one that restricts me from deals from other sources and/or requires me to compensation someone for a deal they had absolutely nothing to do with.


They want me to screen the automated emails for them and they just submit the offer....that is not what I need a realtor for, if a realtor has no time or willingness to earn my business by actually demonstrating what value they can bring to table by screening properties with actual details/analysis & numbers and forwarding those to me so I can determine if they really do understand my needs or if they just want to be an administrative paper processor submitting the offer and contract paperwork after I do all the research...not interested.  My role is do the due diligence on the deals they bring me.

I am kind of hardcore with realtors, I have no issues paying for services rendered but they are not getting 3, 5 or 6% from me without screening a single deal but just waiting on me do all the research and tell them which property I want.  

I actually had one tell me that she "couldn't tell me which market was better than another, if the numbers work the numbers work"  excuse me but don't we go to realtors for their expertise and knowledge of a certain market.  

 @Cheryl Pepper  I think you are misunderstanding the role of an agent and what they are legally allowed to do.  An agent is not licensed to give investment advice.  They are licensed to assist in the purchase and selling of real estate.  An agent who does an analysis as you have suggested could easily have a complaint filed against them with the real estate commission.  In other jurisdictions that may be perfectly acceptable, but not in the DMV locations.  Also when an agent says that market X is better than market Y, that often leads specifically to a fair housing complaint.  Agents are coached by their local Realtor boards specifically not to recommend place X over place Y, because of the fair housing issue.

Now will some agents give you this information, yes ...but likely only if they are a newbie who does not know the laws, or they have a working relationship with you and trust that there will be no complaints made against them for such violations.

@Russell Brazil I am not looking for investment advise from realtor, I am looking for  information on the property, the market that they should be familiar with, i.e., comps, DOM, trends for the area, etc.  Knowing what markets are selling/trending, which are not and advising your client of such does not violate fair housing laws.  Market analysis happens all the time by both government and commercial agencies.   

Isn't it just as irresponsible and violate their fiduciary responsibility to knowingly advise your client to purchase in a depressed area without disclosing that?

I will determine if the price, rehab costs, etc. meet my MAO criteria. But if the realtor does not understand that I am an investor and that I must purchase below market value and cannot feed me properties within my criteria, they are not the realtor for me.

Originally posted by :

  Market analysis happens all the time by both government and commercial agencies.   

Isn't it just as irresponsible and violate their fiduciary responsibility to knowingly advise your client to purchase in a depressed area without disclosing that?

 There is lots of information you can get from the government that is illegal for a Realtor to give you.  As a Realtor whether we can say if the area is depressed is a judgement call, and in making that judgement call will often lead to an assertion of a fair housing violation.  You said you are going to be getting your license....as you sit through our fair housing classes here this is going to be drilled into you over and over and over.  Most of the complaints and lawsuits against Realtors are for fair housing violations and you would not believe how low the bar is set for these violations.  If you say an area has "bad schools", that is a fair housing violation. If you say the neighborhood is "bad", and it happens to be a minority community, fair housing violation. It is illegal for us to steer you away from a community that is bad.  We can give you trends on DOM, prices....but we can not give you information on something as simple as crime. We can not give you information on schools.  There is a plethora of other information we are not allowed to give our clients.

As agents we are coached by our brokers and local Realtor boards to be very ambiguous about this information.  Often the response we are recommended to give is "If X is important to you, then you need to research that on your own."

If you have a working relationship with a Realtor they are going to be likely be more honest with you. But if you do not have a working relationship with one, then they could easily believe they are being set up for either a lawsuit or maybe being tested by a government agency.  And believe me there are local governments and other non government agencies that call around and try to get you to say something illegal to them.

@Russell Brazil You couldn't be more correct in your comments above.  There are Realtors here in the Memphis, TN area who give out all kinds of advice about neighborhoods, crime, schools, etc., and while they think they are being helpful and doing their jobs, they are breaking Fair Housing Laws.

@Chase SchmidtI would recommend having a very open and honest discussion about your expectations and wants with the Realtor; and get them to be clear about their duties to you as a client.  If you do not like what you hear, walk away.  On the other hand, it could be the start of a great partnership.  Signing the Exclusive Buyers Representation Agreement should be entirely your call(at least it is in TN), but as @Chris Martin stated above, "they are trying to protect their time".  I personally do not ask clients to sign an Exclusive Buyers Representation Agreement.  Hopefully I do my job well enough that the client will continue to use my services.  I've heard my father say for years "that a person is only as good as their word", and I try to live by that.  But, it is a tough business world, and not all people follow that rule.

-Patrick Scifres  

@Russell Brazil  there is so much that you just wrote that I disagree with, that we'll have to just agree to disagree because as a customer I am looking to a realtor for their best judgement based on their experience to assist me with the best possible purchase taking in all the relevant considerations tied to the ever popular location, location, location mantra and financial criteria important to the client.  In essence you are saying they are trained "not" to give me accurate advise that would aid in my purchasing decision, which explains why I had such a hard time finding a realtor of any value.

I do not think you are appropriately applying how the fair housing law applies as it relates to a realtors role with their clients.  I am not asking the realtor to steel me one way or the other, but I do expect full disclosure about an area.  It is not discriminatory to disclose that an area is high crime or has low rated schools regardless of the racial make up of the community, that is just measurable fact about the area.

And sorry, knowing whether an area is depressed or not is not a judgement call it should be  and is easily identifiable by area statistics.  

Luckily I believe I have found two realtors who understand my needs, have identified areas were they operate in/focus, have given me valid evaluations on properties that I have asked them to review and have identified several properties for me to review that are within the criteria we have discussed.  So I know there are quality realtors who use their experience and expertise in a certain market to serve as true professional consultants for their clients in the real estate evaluation process who are not breaking the law to do so. 

I always appreciate a good debate and differing opinions, so thank you for the exchange. I am at beginning stages of studying for my VA license and will pay close attention to the fair housing section of the course.

Have a goodnight.

Originally posted by :

I do not think you are appropriately applying how the fair housing law applies as it relates to a realtors role with their clients.  I am not asking the realtor to steel me one way or the other, but I do expect full disclosure about an area.  It is not discriminatory to disclose that an area is high crime or has low rated schools regardless of the racial make up of the community, that is just measurable fact about the area.

 I am not trying to pick a fight here, but I do seriously think you need to consider taking Fair Housing class. If you are a landlord you are liable for many of the same laws as real estate agents, and ignorance of the law is not a defense that will hold up in housing court.  I have to take 4 fair housing classes each renewal period as I am licensed in 4 states. I am pretty sure that the all the instructors Ive taken classes with, all the brokers Ive worked for and the National Association of Realtors are correct. If you want to be an agent or landlord, there is a good chance that over a course of a career you will be accused of a fair housing violation whether you commit one or not.

I will point you to the NAR's pamphlet called "Steering, Schools and Equal Professional Service." This pamphlet discusses how detailing whether indicating something has a good or bad school is a fair housing violation. You may also feel free to contact the Real Estate Commission of most any state, and they are likely to tell you the same. (I know Maryland, DC and Virginia will).

To quote from NAR "Discussions about schools can raise questions about steering if there is a correlation between the quality of the schools and neighborhood racial composition--or if characterizations such as "a school with low test scores" or "a community with declining schools" become code words for racial or other differences in the community. Similarly, making unspoken distinctions by promoting a school in one district while keeping silent about the quality of another school can have the same effect. These become fair housing issues."

In Massachusetts, which has even stricter fair housing laws than we do, if a realtor or landlord even asks the simple question of "Where are you from?", that constitutes a fair housing violation. In Maryland previously putting the term "walking distance" in your ad constituted a fair housing violation. Today some people contend it still does, and others say it is no longer the case.

And remember you can do everything 100% legally with the best intentions, and that does not insulate you from a fair housing complaint.

Also here is a great little article from the NAR. If asked about crime, direct your client to the police department. If asked about schools direct them to the school board. I will have more frank conversations with people I have a working relationship with...but Ive seen too many colleagues accused of fair housing violations for the stupidest things, and frankly I dont want to pay the $5,000 deductible on my E&O insurance to settle the claim.

http://realtormag.realtor.org/law-and-ethics/law/article/2009/04/6-ways-avoid-illegal-steering

@Russell Brazil The below NAR quote does not prohibit realtors from discussing quality of schools, it prohibits them from assuming and asserting that quality of schools equates to a form of identifying a racial composition or using code words for racial profiling an area.

Simply advising that an area has low school scores a fact that is a known and legal measure of school systems does not equal a realtor being guilty of below:

"To quote from NAR "Discussions about schools can raise questions about steering if there is a correlation between the quality of the schools and neighborhood racial composition--or if characterizations such as “a school with low test scores” or “a community with declining schools” become code words for racial or other differences in the community."

There is a major difference between realtor saying one of the two statements below:

1.  The State rates schools on a scale of 1 - 10 with 10 being best.  This home is located in a school district with a 4 rating. (Legal published fact)

2. The State rates schools on a scale of 1 -10 with 10 being best.  This area is predominately XYZ with really poor performing schools with a low rating of 4. (Racial correlation)

I really don't know how a conversation about signing an exclusive agreement jumped the shark so badly that we so far off point.  So I'll end where I started, I still contend that a realtor can be a trusted advisor and provide legal demographic facts about an area to serve as a true advocate/consultant for their clients.

"Also here is a great little article from the NAR. If asked about crime, direct your client to the police department. If asked about schools direct them to the school board."

Why do I need a realtor if I am doing my own market research?  People come to realtors with the assumption they advisors with specific market knowledge and my personal experience has show that level of service is far and few.  

I'm an HR manager and none of our employees get paid until they perform and all employment agreements are "at will".  

I have the same expectation of my realtor. 

@Russell Brazil

all the points you made, Russell, are very valid.  

Some things need to be learned by experience.

Also, caveat emptor..,. the onus is on the buyer to do their due diligence regarding ANYTHING that could be misconstrued as steering, redlining, etc.  

Buggerpockets is getting very complicated.... 

@Russell Brazil

"I am not trying to pick a fight here, but I do seriously think you need to consider taking Fair Housing class."

Somebody will be taking a very expensive "Fair Housing Class" soon enough!

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