From: ben@bailey.UUCP (Ben Bailey)
Subject: Re: is buyer - agent agreement necessary?
Newsgroups: misc.invest.real-estate
Date: 21 Jul 92 02:27:48 GMT
Distribution: usa
Organization: Ben Bailey's Home..Tampa Fl.

sutter@calvin.usc.edu (Carl Sutter) writes:
> I am shopping for a house in LA, and am working with an agent at Prudential.
> After a couple of weeks of looking, he asked me to fill out a form which
> is essentially an agreement between us that he will be my exclusive agent,
> will work in my interest, and guarantees his 3% commission.  I think this
> is similar to a usual seller-agent agreement.  I'm wondering if this is
> normal, or even necessary.

Is he going to also get the 3.5% selling agent's fee for a non-listing
agent?  If so, that sounds like a mighty sweet deal for him to me!  Seems
that he might have an incentive to push you into something you don't want
or shouldn't buy in order to get that commission.  

Those agents are also known as buyer's agents.  There is a professional group
(sorry, don't remember name...Prodigy expert Bruss has talked about this)
that attempts to set guidlines and monitor this type of agent.  I would
suggest trying to look into buyer's agents in general if that is your intent.
Seems like I remember that they want an up front fee (~1/2), then balance when
you buy.  This would help avoid pressure to buy, but your money could walk too! 

Since the seller is going to pay ~7% commission, and your agent is going to 
split this with a listing agent, why would he deserve another 3% from you?

With the market so soft, I think I'd tell him to take a hike.

> I'm happy with his performance so far, and would be glad to assure him that
> I won't run off with some other agent, but I'm concerned that this added
  ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
That's a standard business risk for him.  His ability and willingness to work
is what will keep you next to him.  You really do want to be able to walk
away from him if he ends up on the beach, don't you?

> Is the 3% commission standard?  I'd hate to be in a situation where I had to
> pay part of that.

Nothing is standard in a soft market.  Negotiate STRONGLY.  Don't give money
away easily.

> 
> If I just tell him to trust me without signing anything, will he work as hard
> in finding a good home, and getting the lowest price possible?

What other choice has he got?  Sounds like he's got you thinking of his best
interest instead of him thinking of yours.  Realtors will beat a path to your
door to show/sell you something.  Times are VERY SOFT!  You are in the 
driver's seat, and it's your money he's after; not your good will.  

As to getting the lowest price possible, as a buyer's agent, he's obligated
to do so for you.  This, however, is an argument for a flat fee as opposed
to a percentage.  If percentage, he has an incentive (but the obligation is
contrary) to sell you a house at the highest possible price.

As any other type of agent, HE WORKS FOR THE SELLER!  He's 
obligated BY LAW to get the best price FOR THE SELLER that he can!  Anything
and everything that you say is repeated to the SELLER.

> 
> Thanks for any advice.
> 
> - Carl Sutter
> sutter@usc.edu

--
Ben Bailey                 ben@bailey.uucp -- bailey!ben@uunet.uu.net
12210 Shady Forest Dr.     ben@bailey.tscs.com
Riverview, Fl. 33569       -- A programmer without his computer is like a 
813-677-5021                  boy without his dog.
Newsgroups: misc.invest.real-estate