There’s a new law that requires real estate agents to enter into a contract with anyone they are working with, not just people interested in listing their property for sale. I know I’ve talked about this before, but given how many questions I continue to get, I thought I’d cover it in more detail.
REALTORs are now legally obligated to have you sign a buyer-broker agreement before showing you a property. This means that if you’re not careful, a casual interaction with a REALTOR who offers to walk you around an open house can end with you inadvertently signing an exclusive contract whereby you must pay this person a commission should you buy any property for as long as three months (depending on what is outlined in the agreement).
There are three types of buyer-broker agreements. The first is an exclusive contract in which you agree to be represented by a given REALTOR for a certain length of time to find any property that meets your needs. The second is an exclusive contract in which you agree to be represented for a certain length of time solely for the property in question (as in the example of an open house). The third is a contract that specifies that the REALTOR may show you a property, but that there is no ongoing or contractual obligation between the two of you.
It is critical that you understand what you’re signing. If you commit to an exclusive contract with a specific REALTOR, you’re on the hook. It doesn’t matter if you work with someone else who does all the legwork, you will still owe the first REALTOR a fee if you purchase property during the term of the contract. Worst case scenario, you end up paying two REALTORs.
Before the law changed, REALTORs who worked with buyers often did so in good faith, because there was no requirement for a contract. That meant a REALTOR could do all the legwork and support, but when it came to opening an escrow, buyers could choose to have their brother-in-law represent them and thus, get the commission. It’s good that REALTORs are protected, but it’s equally important that they and the buyers both understand the new legal requirement.
Before you sign an agreement with any REALTOR, discuss your needs with them to be sure they’re a good fit. Tell them the type of property you’re looking for and your expectations for communication and service.
Be clear about whether you want to downsize as you prepare for retirement or find a bigger place for your growing family. Let your REALTOR know which amenities are non-negotiable. How much space do you need and in what configuration? Do you want to be in a certain school district? Are you trying to minimize your commute? Are you handy enough with a hammer to buy a fixer-upper or, like me, do you need the property to be in turn-key condition?
Also be clear about how often and what type of communication you prefer. Do you want to meet in person, talk on the phone, read emails, or connect via text? What do you consider a reasonable response time? A good REALTOR will follow any face-to-face discussions with a written summary that starts something like, “To confirm our conversation, here’s what we agreed to…” Read the email. If anything is misstated, missing, or misrepresented, respond with corrections right away.
Your REALTOR has a fiduciary responsibility to you. That means they have a legal and ethical obligation to put your needs above their own, including advocating for you and keeping your private information confidential.
Your REALTOR should not only help you understand the home-buying process, but also coordinate appointments with inspectors, contractors, government officials, legal and financial professionals, escrow and title officers, as well as others. They’ll go to bat for you as you negotiate the contract, and they’ll walk you through the escrow process. Hopefully, they’ll mention that the sale price you ultimately agree upon should be based on the property’s value to you, not solely what the market dictates. (If it’s worth more to you, pay it! If it’s not worth market value to you, skip it.).
At the end of it all, your REALTOR will provide you with copy of all the documents related to the transaction, which at this point will be measured in pounds rather than pages—all of which you should have read (the big print giveth and the small print taketh away).
If you have questions about property management or real estate, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.