Who Benefits from a Buyer's Agreement?

(Editor’s Note: I’m happy to introduce Russ Cofano as a new contributor on Rain City Guide. He is a practicing real estate lawyer in Seattle with a tremendous amount of legal and business experience. Among his many roles and accomplishments, Russ is the former retained General Counsel for the Washington Assn of REALTORS (“WAR”), Seattle-King County Assn of REALTORS and Tacoma-Pierce County Assn of REALTORS; he was a key contributor/drafter of important real estate legislation in the State of Washington such as the Real Estate Brokerage Relationships Act and the Residential Transfer Disclosure Act; and he is an expert on MLS and Intellectual Property issues having been invited to speak at national real estate conferences including Inman’s Connect in San Francisco and MLS Connection. Russ can be reached at Russ@cofanolaw.com)

In the 90’s (sounds so long ago, doesn’t it), the concept of buyer agency entered the real estate brokerage world. For years, buyers working with agents were always surprised to find out that the agent typically was a sub-agent of the listing agent and legally represented the seller, not the buyer. This was true even though that agent almost never had any contact with the seller and usually had a much more significant relationship with the buyer. For a variety of reason (mostly because it made sense), the historical concept of sub-agency went away and agents working with buyers actually started representing those buyers.

As this concept took hold, folks like me would tour around far and wide and talk about the virtues of getting an agreement in place with buyers. This seemed to make sense because, heck, listing agents got sellers to sign listing agreements so why wouldn’t a buyer sign something similar. Well, if it wasn’t for my quick feet and years on the basketball court, I would have had many a projectile hit me in the head when I would suggest to agents this new way of dealing with buyers. The response was usually based on the fact that most agents felt that buyer’s would never be willing to commit themselves to a single agent like seller’s do in the listing agreement. In the same breath, those same agents would curse about those cheating buyers who would use them for days, weeks and months and then leave them at the last minute to work with someone else or (egads!) work without representation.

Fast forward to 2006. In Washington (as well as many states around the country), we have agency laws that define both seller and buyer agency roles. In Washington, if an agent is working with a buyer and is not the listing agent on the property that buyer wants to purchase, that agent will be the buyer’s agent (unless they have an agreement otherwise).

So what do buyers legally get from buyer agents. Well, look behind door number 2, and you will see the following duties:

  1. To be loyal to the buyer by taking no action that is adverse or detrimental to the buyer’s interest in a transaction;
  2. To timely disclose to the buyer any conflicts of interest;
  3. To advise the buyer to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise;
  4. Not to disclose any confidential information from or about the buyer, except under subpoena or court order, even after termination of the agency relationship; and
  5. Unless otherwise agreed to in writing after the buyer’s agent has delivered the Agency Law Pamphlet, to make a good faith and continuous effort to find a property for the buyer; except that a buyer’s agent is not obligated to: (i) Seek additional properties to purchase while the buyer is a party to an existing contract to purchase; or (ii) show properties as to which there is no written agreement to pay compensation to the buyer’s agent.

My question is this: Doesn’t a good buyer’s agent deliver significantly more value to a buyer than those measly duties outlined above? If so, why would a buyer not be willing to sign an agreement that requires the agent to deliver all those “extras

20 thoughts on “Who Benefits from a Buyer's Agreement?

  1. First, I am very glad that you decided to join Rain City Guide as a “Frequent Contributor”. Welcome!

    With regard to Buyer Agency Agreements; sellers are like dogs and buyers are like cats. I have a long history of debating on this topic with Tom Early (President of NAEBA) and Tom Hathaway (Owner/Founder-“The Buyer’s Agent” franchise). “The Toms”, like you, try to equate the idea of sellers signing listing contracts with buyers doing the same.

    The fact that sellers sign agreements is not a valid argument for buyers doing the same. A seller can have his home shown day and night, even if the seller’s agent is sitting by a pool drinking rum fizzies in Hawaii. As long as the seller’s agent has access to a fax machine, the home can be sold while the agent is out of town.

    The same is not true for a buyer who signs an agreement. The buyer, theoretically, cannot make a move to go see houses if his agent is “unavailable”.

    Buyer Agency Agreements must stand on their own merits. Using the argument that sellers sign agreements, doesn’t hold water. Sellers are more like dogs, content to sit in their own back yards and wait for an offer to come to them. Easier to put “on a short leash”.

    Buyers however are more like cats, they need to wander and roam free and unleashed, free to change their minds at whim.

    The seller knows exactly what they want from the get-go and it doesn’t change. They want to sell THIS house in THIS spot, and so can sign a contract with an agent to do that.

    Buyers on the other hand may start out thinking they want to buy in Ballard, switch to wanting to buy in Kirkland and eventually end up buying in North Bend. Consequently, they need the option to choose different agents as they explore the myriad of options available in the marketplace. No leashes for cats!

    That being said, there are a few examples of when a buyer should sign a buyer agency agreement and when an agent should insist on a buyer doing so. But those cases are few and far between and have nothing to do with the fact that sellers sign agreements.

  2. Ardell,

    Your analogy of sellers and buyers to dogs and cats is interesting and may be true. If this is true, however, it is not one of natural selection but because the industry has conditioned sellers and buyers to act differently with respect to their agents.

    Buyers and sellers are people who receive services. Agents have conditioned sellers that if they want access to the MLS (aka the market), they must list their property and that listing must be exclusive (Agent Argument: why would I spend all the time and resources on marketing your house if I was not guaranteed payment if it sold). Because selling agency was rooted in sub-agency, buyers were conditioned that the selling agent did not really work for them and that there was no out of pocket expense incurred by the buyer to use the agent (Agent Argument: Don’t worry about paying me, I get paid by the Seller)

    Selling consumer goods and services is to a great degree a function of marketing. Whether something is of true value is usually not the question. Rather, the question is whether consumers perceive something to be of value. Most people are conditioned that the cost of something has a direct correlation to its value. There is a long list consumer goods and services that are successful BECAUSE OF their high price (Mercedes, Ritz-Carlton, Nordstrom and the list could go on and on). The converse is true, too. Things that are delivered for low or no cost are perceived accordingly.

    If buyers can flit from one agent to another agent as they please, use their services and then discard them at their whim, all at no PERCEIVED cost, what does the industry expect buyers to believe those services to be worth?

  3. Without playing the chicken and the egg game ad nauseum, let us not forget that it is the seller, and not the buyer, who places the value on the service, and a seller perceives that value quite differently.

    By and large and historically, I determine the amount of the Buyer Agent Fee for service with the seller as the seller’s agent, and not with the buyer at all.

    Until the mls offering is zero and the Buyer Agent fee is established by the Buyer, we do not yet have a reversal of whom needs to perceive a buyer agent’s value. Until the powers that be let the HUD 1 show the Listing Agent Fee on the seller’s side of the HUD 1 and the Buyer Agent Fee on the buyer’s side of the HUD 1, we are where we always were.

    Buyers act differently than sellers because for sellers the product is a foregone conclusion and has a known address. I have seen buyers thinking about moving from Seattle to Eastside and end up living in Chicago! That has nothing to do with agents conditioning the buyers.

    It is a fact that the day a person decides to own a property, or move from their current property, they don’t necessarily know where they want to go. Sometimes they use the desire to move…to really move! Far, far away. It can and often does take a “buyer” months or even years to know what they want and where it exists. That clearly isn’t because any agent “told” them to act that way or “conditioned” them to act that way, as you propose.

    People do have minds of their own 🙂

  4. If my wife is a real estate agent in the state of Washington do I have to disclose that If I buy a fsbo from somebody? I am not an agent myself.

  5. Matt

    If you are buying the property as community property, then you must disclose that your wife is a licensed real estate salesperson. If you are buying the property as your separate property, then I believe you do not need to disclose the licensed status of your wife as she has no legal involvement to the deal (provided there is no plan to transfer the property into community property after the sale).


  6. Russ, So buyer agent owes duties to buyer similar to a CEO/employee owes similar duties to the corporation/employer.
    What if a buyer agent failed the buyer and caused the buyer to miss an opportunity to review and disapprove a conditional document on time? Generally speaking, can the buyer still disapprove that document when his agent finally provide it to him, only a few days later than the deadline when he was supposed to respond?
    What about the seller? Can the seller make the buyer to apply financing regardless whether buyer has a chance to review or disapprove that document because the deadline had passed? Does it mean buyer will lose the earnest money if he does not apply financing? May the buyer hold his agent responsible for the mistake?

  7. Leo

    Every state is different when it comes to the specific duites of an agent to their principal. Most states have created new laws that define the responsibility.

    In Washington, a buyer’s agent who “caused the buyer to miss an opportunity to review and disapprove a conditional document on time” may be liable to the buyer for the damage caused by such failure. This may fall in the negligence category. However, the buyer would have no right vis a vis the seller to respond late just because the agent screwed up. I am not sure I understand the second part of your question.

    Every case like this will depend upon the specific facts. For example, how did the buyer’s agent “cause” the buyer to miss the deadline. Didn’t the buyer read the purchase and sale agreement and understand what it said? Parties to a contract are generally presumed to know the contents of the contract.

    This is not legal advice and you should get an attorney to review your case to help you determine your legal rights.


  8. Russ,
    Thanks for explaining some concepts about agent duties for me. They are helpful. I just want to clarify something with you. When you said “buyer would have no right vis a vis the seller to respond late just because the agent screwed up,” does it mean buyer still have to try to get a loan to buy the property or lose his earnest money even when buyer never get to disapprove that condition document?

  9. Leo

    The buyer will have whatever rights and duties that are defined in the purchase and sale agreement. Since I don’t have the documents, I cannot tell you what rights and duties those might be. My point was that no matter what the buyer’s agent might have done, this will not impact the buyer’s rights and responsibilities to the seller.

    Again, this is very general and you should seek legal counsel who can specifically address your issues.


  10. There has been a lot of confusion lately regarding the cancel timeframe of a resale certificate. Does the “right to cancel” date start the day the seller’s agent delivers it to the buyer’s agent even if the buyer doesn’t get it for several days?

    Some agents say the time starts as soon as the resale certificate is known to be available at the property management company, even if no one picks it up. That makes no sense to me whatsoever.

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