My advice to any prospective property buyer would be to get your own real estate agent. In South Africa, real estate agents usually represent the seller in a real estate transaction. Buyers have traditionally had to fend for themselves, or appoint an attorney to represent their best interests. But once again, the custom in South Africa is for the seller to appoint the transferring attorney who will handle the transfer of ownership, even though the buyer will be paying the attorney's fee. So buyers would have to pay extra to get their own legal representation.

Mmm. That doesn't seem quite fair, does it? The poor buyer goes into the transaction unarmed and totally outnumbered. So what is a buyer to do?!

Start your own gang, that's what! And the first member to recruit is your own real estate agent.

Some people (even real estate agents) will say that it is impossible for a buyer to appoint a real estate agent to act on his/her behalf. But it is possible and it has been done many times before. All the buyer has to do is have an agreement with the agent who will be representing him/her.

Buyers don't have to sign a mandate document in order to have an agent-client relationship with a real estate agent. But the buyer and the agent must clearly understand that the buyer appoints the agent as his/her real estate agent. And a written document is always better than an oral agreement - especially when things go wrong.

Your agreement with your buyer agent doesn't have to be an exclusive agency. It could be an agreement similar to the open mandate agreements agents often have with property sellers. An open mandate with the buyer agent would allow the buyer to make use of the services of other agents as well.

But there are definite advantages (for both parties) to having a well worded sole agency agreement with your buyers agent. The agent would be more certain that the effort he/she puts into finding the ideal property for you would pay dividends, while you would have the right to fire your agent if he/she does not perform to your satisfaction. Remember, no money is due to the agent until the transaction is complete. Your agent, will be paid a commission out of the proceeds of the sale, just as the seller's agent gets paid his/her commission from the purchase price.

Beware of signing a buyers agency agreement with wording that makes it an exclusive buyers mandate, because you could end up paying a commission even if you find a house on your own, or buy from a private seller. Be sure to understand what the terms of the exclusive mandate are, and negotiate about changes to the agreement before you sign.

Terms of the Buyer's Agency Mandate

Your mandate with your buyer agent will contain a number of terms, of which the agent's commission, the mandate period and the scope of the mandate are only a few obvious ones. These terms will be implied, even if your agency agreement has not been reduced to writing, but other important terms, such as the agent's responsibilities, your responsibilities and the provisions for cancellation of the agreement would be much clearer to all the parties involved if they were reduced to writing.

Don't be afraid to negotiate the mandate terms you require. There are a number of factors that can be included in a buyer's agency mandate that wouldn't ordinarily be included in a seller's mandate.

You should keep in mind that you are appointing the real estate agent to find you a suitable property in a specific geographic area. You should firstly make sure that your chosen agent is experienced and active in the area where you want to buy. And secondly, you might want to limit the agency agreement to that specific area. This would void the buyer's agency mandate if you have to venture outside your chosen area to buy your new property. Alternatively, your buyer's mandate could make provision for the agent to refer you to another agent who would be experienced in that area. The agent would then be able to collect a referral fee from your new agent, if the new agent introduces you to your new property.

Decide on a reasonable time period for working with the agent. A buyer's mandate with a relatively short term could work in your favour by getting the agent to realise that you are serious about buying and require him/her to perform as soon as possible. You can always extend the term of the agreement later, if you are satisfied that the agent has tried his/her best. This will allow you to switch agents quickly, should your current real estate agent fail to perform.

Please take note: If the agent introduces you to a property, he/she might still be entitled to the agent's commission, even if you end up buying from a private seller or through another agent.

The agent's commission could be a flat fee or a percentage of the purchase price. You will have to negotiate this with the agent. I feel that a flat fee commission works better for a buyer agency. If the commission was a percentage of the purchase price, the agent would earn more money if you paid more for a property. This is not in your best interest. You want the agent to represent your best interests without being tempted into looking after his/her interests at your expense.

The buyer's agent mandate should clearly state that the buyer agent's commission will be paid from the purchase price of the property, by the seller to the buyer's agent. This is to ensure that you will not be caught in a situation where your real estate agent's commission gets added on top of the purchase price you offer to pay for the property. The seller and his agent will have to decide if the buyer's agent will be paid from the agent's commission they negotiated, or if the seller will pay the additional fee.

The buyer's agent mandate should also mention what is to happen to any additional commission or bonuses a seller might pay at transfer of ownership or thereafter. You don't want the seller's side to effectively "bribe" your agent not to protect your best interests, after all.

Make sure that you understand and agree with the provisions for cancellation of the buyer's agency agreement. You might never use it, but you need to be able to escape from the buyer's mandate, should you be unhappy with the agent’s performance. Always plan your escape from a bad contract before you enter into one. You don't have to run straight out the back door, but if you suddenly find yourself in the middle of a disaster, you will regret it if the back door is locked - or worse still - don't exist at all!

You have to decide if you still want buyer representation if you buy from a private seller. I'd suggest that you still need real estate agency representation, but if you feel differently and want to be able to buy privately without having to pay a commission, you better include that as a term of the buyer's agent mandate right at the start.

The buyers mandate should clearly define the rights and obligations of both the buyer and the real estate agent. These terms may vary, depending on your needs and the needs of the your real estate agent, so they need to be negotiated.

The buyer's agency mandate might include terms that describe the agent's duties as follows:

• The buyer's agent shall afford the buyer his/her best efforts in performing the buyer's mandate.
• The buyer's agent shall represent and protect the buyer's best interests in so far as it relates to the process of finding and purchasing a suitable property.
• The buyer's agent shall immediately inform the buyer of any conflicting mandate granted to the agent that might affect the agent's duty and/or ability to represent the buyer's best interests.
• The buyer's agent shall negotiate any and all contracts to include the best possible terms for the buyer.
• The buyer's agent shall keep personal and proprietary information provided by the buyer secret and confidential.
• The buyer's agent shall assist the buyer in obtaining mortgage financing or other loans to allow the buyer to purchase the property of his/her choice.
• The buyer's agent shall disclose any information at the agent's disposal that might affect the buyer’s decision to purchase.
• The buyer's agent shall not be abligated to introduce any property to the buyer where the seller refuses to pay the buyer agent's commission from the proceeds of the sale of the property, unless the buyer requests it in writing.

The buyer's agency mandate might also include terms that describe the buyer's obligations as follows:

• The buyer shall provide his/her agent with adequate personal and financial information to perform to this mandate.
• The buyer shall cooperate fully with the buyer's agent to fulfill the terms of this agreement.
• The buyer shall work exclusively with the buyer's agent to find a suitable property while this agreement is valid.
• The buyer shall be available to view available properties and honour viewing appointments.
• The buyer shall pay the agent's commission if the seller of the property refuses to pay the buyer agent's commission from the proceeds of the sale of the property.

Now that you know haw many aspects of the buyer-agent relationship can be negotiated, I sincerely hope that you will reduce your buyer's agent mandate to writing. It is the smart thing to do. The written buyer's agent mandate will help to clear up any misunderstandings between yourself and your real estate agent.

Original article posted at http://www.realfact.net/Real-Estate-Agent-Mandates-for-Buyers.article00000398.html

Should you, as a buyer, be interested to be represented please contact Gideon on 082 471 6337 or gideon@protego.co.za

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