As the Executive Director of NAEBA, I often get asked, “What is the difference between an exclusive buyers agent and a regular buyers agent?” The answer to that question is relatively simple. An exclusive buyers agent works in a brokerage where no one works for sellers or takes listings where as a buyers agent works in a traditional brokerage where they help consumers both buy and sell their homes.
A more important and perhaps more complex question is, “Why does it matter?”
Before taking this job 3.5 years ago, I knew very little about real estate. If only I knew then what I know now. The first thing I learned is that real estate buyers may as well hire a real estate agent to represent them. Usually, it’s already included in the price of the house anyway. The seller has already agreed that the listing agent (the one who is marketing the house for sale) is getting a commission for selling the house. That agent usually splits the commission with the buyer’s agent. If you, the buyer, don’t have an agent, what happens? The seller’s agent keeps it all. With few exceptions, you won’t see a penny of it.
So, now that we’ve established that there’s money for a buyer’s agent anyway, you may as well get one that represents you, right? Here’s where the difference comes in. A traditional buyers agent works in a firm that has houses for sale so they may try to steer you toward one of those houses instead of your dream house. They have a vested interest in getting buyers for those. Of course, many buyers agents wouldn’t do that, but what happens if you aren’t steered into one of their listings but really do fall in love with one listed with their brokerage? In most states, you now fall into some sort of dual or designated agency situation. The real estate agent you hired to represent you, in most cases, now represents no one and essentially just becomes someone to complete the paperwork. Since one of the main reasons you should hire an agent is for their expertise in negotiations and getting you the lowest price and best terms for your new home, you are no longer getting what you paid for. Since you realize that, you tell the agent you want to hire a new agent who will just represent you. That’d work except at this point, your current agent probably knows so much about you and your finances that you’ve still lost most if not all of your negotiating power. You are now stuck either buying this house and possibly not getting the best price or terms or starting the process over.
Now let’s say your agent doesn’t take listings but the brokerage does. It still can have a similar effect. Some brokerages offer their buyers agents incentives to sell in-house listings. In many cases, even if you have a different agent than the seller, the entire deal is overseen by the broker so you still have one person negotiating with himself. In addition, having worked in an office, I know how people can accidentally overhear conversations, see faxes or printouts, etc. Your interests may still be at risk and you may pay more than you should for your home.
Enter the exclusive buyers agent. Neither the agent nor the brokerage takes listings. They don’t have any interest over which house you buy. Their brokerage has little or no connection to the seller. They are just there to be on your side, serving as your guide through the complex real estate process, managing potential pitfalls, and negotiating on your behalf.
So, why does it matter? Not knowing the answer to that question could cost you thousands on your next home.
-Kimberly Kahl, CAE
NAEBA Executive Director