Profile picture for SoCal Engr

Buyer Agency Agreement: "Failed Transaction" Escape Clause

A bit conflicted on whether this would be a good idea or not. Essentially, an option for the buyer to terminate the agreement after a failed negotiation to buy.

Cons
- Concern about the clause may cause REAs to cherry-pick listings, showing ony those with a high probability of closing and avoiding properties on the margins (which may, or may not, end up being a great deal for the buyer).
- Buyers can get too emotionally involved in a property. A role of the REA is to remain emotionally un-invested and provide rational input. This could be perceived by an emotional buyer as lack of support.
- The "problem" in the transaction may be an unreasonable buyer.


Pros
- Concern about the clause may cause REAs to cherry-pick listings, showing ony those with a high probability of closing and avoiding properties on the margins (which may, or may not, end up being a great deal for the buyer).
- "Skin in the game" may increase the sense of urgency in the REA's representation of the buyer's interests. I have heard from others, and personally experienced, the "well, let's just move on" approach from REAs well before the consumer is ready to throw in the towel.
- I believe, and have heard from some REAs, that maintaining working relationships with other REAs can preclude a no-holding-back approach to negotiations. Unlike the REA, a consumer has no need to consider the longer-term consequences of positions taken during negotiations.
- It provides the REA with at least one opportunity to present/close a transaction, while giving the consumer an explicit out if they are unhappy with the REAs performance.

  • July 04 2012 - US
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Answers (11)

Profile picture for SoCal Engr
Just curious about others' opinions. Buyers who wish they'd had an escape clause in their buyer agency agreement. REAs who may or may not agree (or, maybe don't use buyer agency agreements?). Any other pros/cons to the concept?
  • July 05 2012
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Profile picture for sunnyview
I think it would be helpful for clients to have an escape clause. Often if they have been through one negotiation with their agent on a house, they have a much better idea of who is really representing them for better or worse.

It is hard to choose an agent in the first place and even harder to terminate if you are tied into a exclusive buyers agreement. An escape clause at specified points would help keep the professional relationship on track in some cases.

Happy clients do not bail out on their agent in the middle of looking for a house.
  • July 05 2012
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Profile picture for Blue Nile
I haven't seen any good reason to sign an "exclusive buyer's agent agreement" yet in the first place.

Nor have I seen anything that demonstrates that any buyer's agent is really any different than the "selling" agent that they are referred to in the MLS's.

So, if the agent shows 15 houses, and the first one that one offers on falls through, then the buyer should be able to select a different agent to write the offer on one of the other 15 houses seen with the first agent, regardless of "procuring clause"?

Doesn't seem quite right.  But I say a buyer should be able to walk anytime if the representation is not what one wants.  Still, giving someone else the commission after one agent did all the work is "not right", and likely could cause issues between the agents after the sale is completed.
  • July 05 2012
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I'm not sure what problem this is intended to solve.

-  then the buyer should be able to select a different agent to write the offer on one of the other 15 houses seen with the first agent, regardless of "procuring clause"?

They can do that now. I think it'd be difficult for an agent to demonstrate "procuring cause" when they had their client writing on another property AFTER showing the other 14 properties.


  • July 05 2012
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I've been told by my company that they rarely (if ever) go after buyers under procuring cause. The necessary proof combined with the bad P.R. is not worth the money.
  • July 05 2012
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Profile picture for SoCal Engr
The "problem" being addressed is a simple one...

 - Buyer signs a buyer-agency agreement
 - Buyer subsequently is unhappy about the REAs performance
 - Buyer has no options built into the agreement to unilaterally cancel

Really? Just a carryover of prior discussions about EBAs or whatever the name-de-jeur is, resulting from seeing some comments from unhappy buyers.

Personally, I feel a bit of sympathy for a REA who is so desparate that they need to hog-tie consumers to keep them from walking out the door.  ;-)
  • July 06 2012
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It depends on the contract whether that's the case. The corollary is:

- Agent signs a buyer-agency agreement
- Buyer turns into a dud and doesn't want to buy or pay market value
- Agent has no compensation from contracting with a dud buyer.

Real estate brokerage is a business. It's a service business, but it's a business.There is no question that brokers have a right to contract with sellers to provide exclusive brokerage services for compensation; how is this different than contracting with buyers for the same?
  • July 07 2012
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Profile picture for the_country_hick
Mack, "how is this different than contracting with buyers for the same?"

Simple, the realtor has a clause saying they get to end the business relationship at any time. The buyer (or seller) does not have the same option available to end the business relationship at any time in the standard contracts.
  • July 07 2012
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Profile picture for SoCal Engr

@ Mack...

I have no issues with businesses making rules for how they do business. That's their business, so to speak.

My point is more that consumers should realize that they are also part of the business transaction, and they should be willing/able to decide how they want to conduct business - not just have it dictated to them.

Some business transactions are so common that there's little/no reason to get into the specifics. But, there are those transactions where the consumer should educate themselves and take control/responsibility for their side. This is one of those times, and this is simply an option that I have never seen consumers talk about before.

  • July 07 2012
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Wow.  Our profession really has a bad reputation!  I am an exclusive buyer's agent because I know it really does make a difference if you buy a house using your own (not the seller's) agent.  And I really care about my clients. I am giving up all listing commission because I feel so strongly that the buyers get the shaft in these deals.  And it does not cost the buyer anything extra.  If they don't have their own agent, the listing agent takes the entire commission.  'Built in' to the transacitons already via the listing agreement they signed early on with the seller. 
 If you are good at this, you do not cherry-pick or fail to negotiate agressively because it is a referral business and a happy client is the best marketing. Plus some of us just want to do a good job.  Maybe you feel that way in in your profession?
 Using an agent who represents only you but under an agreement that allows you to terminate at any time is the best combination.  That is what I I offer. In Pennsylvania, it is a requirement that we have some form of agreement. If you want to use a different agent for every transaction, that is your business but I guarantee you won't get as good a result as if you deveolp a relationship and trust with one good agent.
  • July 09 2012
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Actually, Dan, that's incorrect. If the listing broker engages a buyer, that broker can't just up and go away.

-  My point is more that consumers should realize that they are also part of the business transaction, and they should be willing/able to decide how they want to conduct business - not just have it dictated to them. 

If the argument is that a buyer should be able to contract with a broker for the purpose of viewing homes and then cancel that contract and engage another to negotiate the sale, then the real answer is to have two separate contracts, isn't it? Not to have one pretend to be the other, right?
  • July 09 2012
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