Buyer Representation Agreements: What San Jose Buyers Should Know
Before you sign any buyer representation agreement with a real estate agent, there are some crucial things you need to be aware of.
Starting in August 2024, these agreements will be required by local associations and will very likely be signed into law soon, at least here in California.
A buyer representation agreement is simply a contract between you and your agent that outlines the duties and responsibilities of each party during the home-buying process. It also determines how the agent will be paid for their services.
Think of it like an employment agreement. It’s meant to protect both you and your agent by clarifying expectations and ensuring that you receive the best possible service throughout the process of buying your home.
If your agent isn’t walking you through their processes around disclosures, inspections, and your contractual obligations before you start looking at properties, you might want to hold off on signing anything.
This step-by-step guidance before you even look at any homes is essential to avoid problems down the road.
Why Your Agent’s Process Matters
Did you know that not all agents take the time to explain the home-buying process thoroughly? Shocking, right?
I wish it were true, but unfortunately it isn’t. Many agents are out there just winging it without any real process in place.
I’ve been doing this for over 20 years. I’ve sat on our association’s ethics committees for 10 of those years, served on its board of directors, and managed an office here for the number one brokerage in the country. I’ve seen it all.
This basic shortcoming of many agents can lead to misunderstandings, costly mistakes, and even cause you to lose out on the home of your dreams.
Here’s a little story about why it’s so important to have an experienced agent who has a process and communicates well.
There was a first-time homebuyer named Sarah who found a house she absolutely loved. It was perfect for her, and she was eager to make her offer as strong as possible.
Her agent, who was only in the business a couple of years, suggested that she waive her investigation contingency to make the offer more appealing to the seller.
Her agent assured her that this would help secure the deal. Sarah trusted her agent’s advice, since he was the professional, and agreed. She waived the contingency without thoroughly reviewing the reports or disclosures.
Shortly after the contract was ratified, she decided to take a closer look at the inspection reports herself. To her horror, she discovered a disturbingly large crack in the foundation that had been noted in the reports.
When Sarah confronted her agent, it became clear that the agent hadn’t reviewed any of the disclosures himself before advising her to release that contingency.
Now Sarah had a big problem.
Without that investigation contingency, she couldn’t back out of the deal without risking her deposit, which was a significant amount of money. She felt stuck and betrayed, facing the prospect of either moving forward with a house that had serious structural issues or losing her hard-earned money.
This situation could have been entirely avoided if her agent had the experience and foresight to carefully review the reports and disclosures before making such a critical recommendation.
You would be shocked to know that this type of thing happens every day in real estate.
In my opinion, this agent failed in his fiduciary obligation to Sarah. Not only did he not meet the required standard of care, but he also fell short of his ethical obligations to her.
This experience highlights the importance of choosing an agent who not only knows the market but also understands the gravity of the decisions made during the home-buying process.
A true professional would have advised Sarah to keep her investigation contingency until all inspections were thoroughly reviewed, ensuring she was fully informed and protected.
What Your Agent Should Explain Before You Sign
Let’s dive into the key areas your agent should cover before you sign anything.
Disclosures
As I mentioned earlier, your agent should educate you about all of the necessary disclosures about any given home.
These documents reveal important information about a home’s condition, any past issues, and legal obligations. It’s better to know everything upfront than to discover problems later.
Make sure your agent walks you through the importance of disclosures and answers any questions you have.
Inspections
Inspections are critical to understanding the true condition of a home.
Your agent should explain the different types of inspections available, such as general home inspections, termite, roof, foundation, and chimney inspections, along with any others depending on the property in question.
They should also guide you on how to interpret the inspection reports and what steps to take if any issues are found.
Contractual Obligations
Real estate contracts are filled with complex terms and conditions.
Before you start looking at any properties, your agent should explain your contractual obligations in detail. This includes understanding contingencies, deadlines, and the implications if certain conditions aren’t met.
A true professional will ensure you are well informed and legally protected throughout the process.
The Overall Home-Buying Process
Finally, your agent should provide a clear road map of the entire journey, from getting pre-approved for a mortgage to making an offer, negotiating terms, and successfully closing the deal.
Knowing what to expect at each stage beforehand can help you feel more confident and prepared.
Remember, a good agent acts as your fiduciary, guide, and advocate. They need to ensure you are fully informed and comfortable with every step of the home-buying journey.
If your agent isn’t explaining these crucial aspects at the beginning, consider it a huge red flag and perhaps it’s time to start finding another agent who does have a proper process.
They are getting paid a lot of money, and if you aren’t feeling protected, then they aren’t providing an acceptable level of service or standard of care.
10 Questions to Ask Your Real Estate Agent
Here are some important questions you should ask your agent during your initial consultation to ensure they are the right fit for you.
1. How do I know I will be seeing all of the properties available, both on and off market?
For example, do they have access to private listings, and how is their professional network? Great agents are well connected and always hearing about off-market opportunities long before they hit the market.
2. How will you ensure that I am not overpaying for a property?
Find out what their process is for determining the value of a home. What metrics are they using to help with pricing? Does that include calling the agents with properties under contract or investigating recent sales?
3. How do we write the best offer?
This is especially important in a seller’s market when you are likely competing with a bunch of other potential buyers.
4. How do we know that a home is in good condition and that I won’t have problems in the future?
Will they conduct a thorough review of the disclosures with you prior to writing any offers?
5. How do we find the best lender if I need a loan?
Do they have lenders that they recommend? If so, specifically why do they recommend them?
Is it because it’s their cousin’s best friend, or is it because this lender is an absolute rock star?
6. How do I cancel the contract if I don’t like something?
Make them really explain the process.
You would be surprised how often agents don’t really know the right way to do it, and doing it wrong can jeopardize your deposit.
7. What are the seller’s obligations and what are mine?
The contract is filled with contractual obligations. Ask your agent to walk you through them.
You can even ask them how disputes are resolved according to the contract.
8. Who pays which costs, and how do real estate agents get paid and how much is their fee?
Very often, the seller is willing to pay your agent’s fee, but it’s not guaranteed.
And remember, no real professional works for free.
9. What strategies do you use to negotiate the best deal for your clients?
I’ve found that negotiations often begin before the offer is even written and can be a complex process with many variables.
10. Can you provide references or testimonials from past clients?
I’ve found frequently that past experience is a great indicator of one’s future performance.
Before You Sign the Buyer Representation Agreement
Before you sign that buyer representation agreement, make sure you are confident in your agent’s ability to guide you through the process from start to finish.
Don’t hesitate to ask questions and demand clear answers. Your peace of mind and your investment are worth it.
Thanks for watching. I hope you found this video helpful. If you have any questions or topics you’d like me to cover, shoot me an email or text anytime.
Happy house hunting, and I’ll see you in the next one.
