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Who Pays The Buyers Agent
Dated: September 30 2015
There is a very, very common myth out there that I have heard for years: because the buyer's realtor is paid by the seller, buyers can't really trust their realtor because he/she really works for the seller. Am I right? You've heard that one?
Well, in the State of Minnesota, that is entirely, 100% false, and for two big reasons. The first reason is that the seller doesn't pay the buyer's realtor at all - the seller pays the listing agent's broker, and that broker pays the buyer's realtor's brokerage, and that brokerage pays the realtor. It's true that the money comes from the seller, but there is no quid pro quo or business relationship between the buyer's realtor and the seller; the buyer's agent owes no fiduciary responsibility to the seller.
The second big reason is that when a buyer signs that (scary) contract with their realtor, they are binding their realtor into a fiduciary relationship that establishes clear, legally-enforced rules on that realtor. This is not a matter of tradition amongst realtors (professional courtesy, say), it's the law. Realtors that fail to live up to their fiduciary commitments to the buyer can lose their license (revoked by the State), face huge fines, be sued by one or both parties for mega bucks, or, in very extreme cases, even go to jail.
Here's what a Realtor promises to you when you sign that contract.
Loyalty – This fundamental duty obligates a realtor to act at all times solely in the best interests of his principal to the exclusion of all other interests, including the realtor's own self-interest.
Confidentiality – An agent is obligated to safeguard his principal's confidence and secrets - including how much a buyer is willing to pay, how desperate they are to move, etc.
Disclosure – An agent is required to disclose to her principal all relevant and material information that the agent knows and that pertains to the scope of the agency. This includes things like all facts about a property, how low a seller might go, or any relationship that realtor has in the property or with the seller.
Obedience – An agent is obligated to promptly and efficiently obey all lawful instructions of his principal.
Reasonable care and diligence – Essentially, an agent is obligated to do a good job of handling her buyer's affairs by being a competent real estate professional.
Accounting – An agent is obligated to account for all money or property belonging to her principal that is entrusted to her.
That's a pretty awesome set of promises your agent is making to you! In return, you promise to let her find you a house.
So, does a buyer's agent work for the seller? NO! Bogus myth! Where are the Mythbusters when you need them!