Monday, February 24, 2014

New Series - Agency (Both as Buyer and Seller)

In every market, agents will offer to work on your behalf as a Buyer’s Agent (BA).  The principal of being a Buyer Agent, revolves around the concept of the Agent, REPRESENTING YOUR INTERESTS. In the commercial market, their role and level of service (A.K.A.- expertise) are significant if you are to successfully Buy or Lease a property. 

A true BA agreement is a written contract, between yourself and the agent. It is typically exclusive (meaning you’re committed to the agent), runs for a set time period, includes a brief description of the property sought (ie. search area, building size), and sets out how fees are to be paid. Contracts will vary depending on your jurisdiction, but should include the above points – and of course, can be customized if necessary depending on your specific arrangement.

One of the most common ways a BA agreement is amended, is with respect to the payment of fees. Typically an agreement will set out what the fee amount is and that it may be paid by the Seller -  but if there is a deficiency for any reason, this obligation would fall back to the client (Buyer). This is a pure out-of-pocket expense to any Buyer, in addition to all other closing costs, and one they may not wish to face. The fee provision in the agreement then may be amended such that, the agent must receive full compensation from the Seller and that any deficiency will not be the responsibility of the Buyer. Keep in mind that typically on MLS listings, there is a provision for a selling broker share on the commission being paid – meaning it should not be an issue on an MLS generated sale.   

Other exceptions might include:

·         Can the Buyer buy out of the search area, without affecting the BA agreement

·         Can the agreement only apply to MLS properties (and not Private Sales)

·         Removal of a holdover clause applying at the expiration of the contract period
    (meaning – no obligation after contract expires)

Are non-exclusive agreements available and can they suit your purposes? Perhaps – but
in most competitive markets probably will not serve you well.  Most successful agents will not work in this capacity, and are unlikely to devote the time and energy if you are not fully committed to the relationship.

Even in its simplest form a BA agreement is a contract and must be viewed as such. Best
practice here is to have your lawyer review the agreement before signing it.

Next up – how to find the right Buyer Agent candidate(s) in your market.

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