Should an Investor Sign an Exclusive Agency Agreement?

Whether you are just a beginning real estate investor or experienced, it’s almost a certainty that you have done some work with a real estate agent and in the process, have been asked to sign an “exclusive agency agreement” with them. It’s also true that most of us look at this contract as the proverbial “Double-Edged Sword.”

From the perspective of the buyer/investor, it can seemingly lock you into and limit your use of other agents in your never- ending question to acquire investment properties. On the part of your agent, it locks you into them and can limit how much one “strays” in finding the right property.

So who is right? As an investor should you sign one an exclusive agency agreement or not? The answer is not a simple “yes” or “no”, rather than, “it depends.”

I am an investor and have been for many years. I have worked with several real estate agents in my work over the year, some good and some not so good. On the other hand, my wife is a real estate agent. From her perspective, I have also seen first- hand, how people try to “cheap it” and extract everything they can out of an agent as far as information, showings, services and more; and then dance away and try to buy or sell a property themselves, thinking that they are saving big bucks in doing so.

We as investors, rely on purchasing a property for the right price and good terms to have a successful business and make a good living. On the other hand, real estate agents make a living and help support their families by providing services, such as establishing a property’s value, coordinating with title companies and lenders, negotiating price and terms and a whole lot more.

So are we so far apart? The answer again is, “it depends” and much of it relies on the experience and savvy of the investor and if the real estate agent really has their customer’s best interest in mind rather than just looking at them as another paycheck.

I have signed Exclusive Buyer Contracts with agents but only when the following items have been fulfilled:

• First, I have signed with agents that I knew from past experience and knew that they were experts in a particular farm area that I was looking in. I also knew, without a doubt, that I would get stellar customer service from them. That being said, even then I will limit it to a particular area.
• If it is an agent that is new to me, then I will do it only if they agree to limit the time on the contract to 30-60 days and within a limited area. I like to get to know them and them, me.
• There are stipulations that I can break the contract if the agent isn’t responsive with calls, emails and texts, tries to push me into properties that don’t make sense with my business model, doesn’t perform as promised, or doesn’t help with the buying process after we make an offer. They can “fire” me for similar actions.
• The contract further stipulates that I can be free to pursue other properties in areas outside our agreed upon farm area with another agent.
• The contract states that properties brought to me by other sources, such as my own marketing, not come under the umbrella of the contract.[/list]

Some agents will tell you that it is their brokerage requirement, which in many cases it is not. It’s an easy way to get you to sign on the dotted line. But you can’t blame them for protecting their interests too!

Let me end with the thought that THIS IS A TWO-WAY STREET. Here are a few final tips:

• Look at your relationship with a good real estate agent as long term.
• If an agent brings you a bona fide lead, then honor your commitment to follow it through to the end with them, assuming that they perform as required.
• Do your due diligence on a property beforehand by crunching the numbers and even driving by the property beforehand.
• Don’t waste the agent’s time by looking at dozens of properties and then side stepping them when you make an offer.
• Make sure you figure out a way that they can make money for their time and efforts.[/list]

The bottom line is if you pick the right agent for the type of property and farm area you are looking to invest in, then the Exclusive Buyer Contract is almost a non- issue. I have worked with a number of agents and the good ones can not only help you buy the right properties, but they can help you quickly sell them too, when the time is right! It can be a mutually beneficial relationship that moves both of your businesses in the right direction for the long haul.

Here’s to Your Success!