Real Estate Investing: Buyer's Agent Versus Seller's Agent
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Real Estate Investing: Buyer's Agent Versus Seller's Agent

Be sure you know the difference between a "buyer's agent" versus a "seller's agent." An agent must declare who she or he works for. There are three options: the seller, the buyer, or both (called a "dual" agency).
                 buyer agent vs. seller agent

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Should I work with a "buyer's agent"?

This is almost essential if you're going to be successful as an investor. However, be sure you know the difference between a "buyer's agent" versus a "seller's agent." An agent must declare who she or he works for. There are three options: the seller, the buyer, or both (called a "dual" agency). This has nothing to do with who pays the agent. It is perfectly acceptable for the seller to pay an agent who works for the buyer. In fact, it's done all the time. The reason it's important or you to use a buyer's agent (when you're purchasing property) is because there are issues involved. If the agent declares for you, then he or she has a fiduciary responsibility to you. This agent is supposed to look out for your interests. Sometimes, agents will declare that they are dual, that is, that they work for both parties. Most buyers will accept this. A dual agent is neither fish nor fowl. He or she often can't fully represent you without hurting the seller and vice-versa. Thus, the dual agent often ends up trying to shepherd a deal through without anyone's really getting hurt. The unfortunate result for you, the buyer, is that you're not likely to get what you want - a bargain. In almost all states, an agent must declare whome he or she represents in writing. While this can be done at any time before an offer is made, it most certainly should be done at the time you decide to fill out a purchase agreement. And it must be done in writing. (Be sure you save the document. It could come in handy later on if the agent does something harmful to your cause.) Some excellent agents are able to handle the dual role.

Do I have to pay the buyer's agent?

It depends. Usually a buyer's agent splits the commission with the seller's agent. This happens when the selling agent co-brokers or cooperates on the listing. Sometimes, however, the seller's agent will refuse to co-broker. As noted, this occasionally happens in bigger investments such as apartment buildings, commercial, or industrial properties. This means that the seller's agent will want the entire commission, or at least a bigger share on it. In that case, you might, indeed, need to pay your buyer's agent a commission, or a portion of it. However, in this circumstance the deal will, hopefully, be big enough and with enough profit for you that you won't mind. Be wary when a buyer's agent asks you to sign an agency agreement. Be sure it does not lock you into paying a commission if the agent can get it from the other side. (You don't want the agent to collect twice, once from the seller and again from you.) You also don't want to make it too easy to get the commission from you (easier than arguing with the seller's agent for it). Also, be sure you're not liable for a commission or fee if you don't buy and that the agreement has a definite termination date. And, check to see whether it allows you to work with other agents, or requires you to work exclusively with one.

Related keywords: fannie mae properties
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