First-Time Home Buyer Guide to Buyer's Agents and Buying a Home
Review the roles of buyer's agents, agency relationships and buyer's agent compensation in real estate transactions.
For many first-time home buyers, understanding the role of buyer’s agents and who represents who during the home buying process can be quite confusing. What types of working relationships do real estate brokers and agents have with clients and customers in real estate transactions? Are you, as a first-time home buyer, a client or a customer of the buyer agent? Does the buyer or seller pay the buyer’s agent during the real estate transaction?
These are a few of the questions a first-time home buyer buying a home in North Carolina and other states may have. These unanswered first-time home buyer questions add to an already-complex real estate transaction. To help clarify some of this confusion and answer the above questions, here is a first-time home buyer guide to buyer’s agents and buying a home.
Agency Relationships in Real Estate
What are the agency relationships for buyers and sellers involved in the buying and selling of real estate? As relayed in the Working with Real Estate Agents brochure shared on the North Carolina Real Estate Commission website, “In some real estate transactions, the agents work for the seller. In others, the seller and buyer may each have agents. And sometimes the same agents work for both the buyer and the seller.”
Here is a basic explanation of agency relationships.
- Listing Agent: This agent represents the seller and holds fiduciary responsibility to the seller.
- Buyer’s Agent: This agent represents the seller and holds fiduciary responsibility to the buyer
- Dual Agency: Means that a real estate brokerage represents both buyer and seller, this means that the listing agent and the buyer’s agent work for the same brokerage firm
- Dual Agent: (outlawed in most states) is one person represents both buyer and seller.
When you are interviewing real estate agents in North Carolina, the law requires those agents to provide you with a copy of the Working with Real Estate Agents at “first substantial contact.” After receiving the brochure, take the time to ask any questions you may have about agency relationships.
Are You a Customer or Client in the Real Estate Transaction?
When a buyer is involved in a real estate transaction, you’re either a client or a customer. If you have never bought a home or sold a home, you may wonder if there is a difference between the two. There is a difference, and it is an important difference buyers need to understand.
Buyers who have not signed a contract with an agent are considered customers when they are taking part in a real estate transaction. While real estate customers are to be treated with fairness, honesty, and integrity, and provided with reliable and competent service; they do not have representation with a legal obligation to protect their best interests during the real estate transaction.
Real estate clients, on the other hand, have signed a contract and are legally represented by agent/broker and the real estate brokerage. Moreover, a client’s agent has a primary fiduciary responsibility to the client. This fiduciary duty to promote and protect your best interests in the real estate transaction is the difference between customer and client which is necessary to understand.
Buyer Agent Compensation for Real Estate Transactions
One first-time home buyer question which comes up quite often has to do with paying the buyer’s agent. More specifically, when buying a home in North Carolina, buyers want to know, “Who pays my buyer’s agent?” There is more than one answer to that question.
How your buyer agent is compensated depends on the compensation arrangement you agree to and put in writing in the buyer agency agreement. The buyer can pay their agent an agreed to amount out of pocket. A more likely scenario, however, is that the buyer’s agent will be compensated by a sales commission from the seller and that commission will be split between the seller’s agent and buyer’s agent.
We hope you found this first-time home buyer guide to buyer’s agents and buying a North Carolina home helpful. If you have any further questions about agency relationships or the real estate transaction, please do not hesitate to contact us at Red Door Company.