What is Tenant Representation? What is Buyer Agency?
Tenant Representation and Buyer Agency are interchangeable terms. They refer to an arrangement in which a real estate agent works on behalf of the tenant or buyer to find a property to lease or buy.
Why Not Simply Renew Your Current Lease?
If your current space meets your needs and you are satisfied with your Landlord’s service, renewing your Lease is often your best option. However, representation on your behalf in a lease renewal negotiation can save your company thousands of dollars over the life of a Lease.
I have had agents show me around before. Isn’t that the same thing?
No. If a real estate agent doesn’t have a written agreement to act as your representative, then he or she is working on behalf of the landlord or owner. This means that his or her legal obligation is to get the best deal for the landlord or owner, not you, the tenant or buyer. Whenever you work with a real estate agent he or she is required to give you an Agency Disclosure Form that shows who the agent is representing.
Why do I need a written agreement?
Pennsylvania law states that without any other agreement, real estate agents work for the landlord or owner. The only way to change this relationship is by using a form called a Tenant Representation Agreement (or Buyer Agency Agreement). With this form, a tenant or buyer establishes that a real estate agent is working on his or her behalf, not for the landlord or owner.
Why would I want a tenant representative? Can't anyone show me properties?
While any real estate agent can show you properties, without a tenant representative relationship, the agent cannot offer advice, do comparative analysis, make recommendations, or negotiate on your behalf since his or her obligation is to the landlord or owner. By using a tenant representative, you are ensuring that you have someone on your side with the same type of knowledge about the real estate market, terms, and language that the landlord or owner has on his or her side.
How much does this cost?
In most circumstances there is no cost to the tenant or buyer. The fee that the landlord has already agreed to pay to his listing agent is simply split with the tenant representative. This means that the services are provided to the tenant or buyer at no additional expense. There are a couple of instances in which the landlord might not pay a fee, or the fee may be added to the rent rate or purchase price.
Why would the landlord or owner pay the fee for me to have a tenant representative?
Landlords and owners pay the fee because the tenant representative has brought them a customer, not because they are providing expertise to you. You, however, benefit from having the tenant representative’s experience and expertise on your side.
Even though the fee is figured into the price of a listed property, wouldn't it really be cheaper if the landlord or owner didn't have to pay the fee?
No. When a property is listed, the landlord or owner agrees to pay a set fee to the listing agent if it is sold or leased. The fee remains the same no matter how many agents are involved and the price of the property is not affected. If more than one real estate agent is involved (including tenant representatives), the fee is shared between the agents. Therefore using a tenant representative does not cost the landlord or the tenant any additional money.
When won't a landlord or owner pay the fee?
There are two typical situations where a landlord or owner might not pay a fee. One is when the tenant or buyer has already contacted the landlord or owner before engaging the services of a tenant representative. Because the tenant representative is not responsible for bringing the tenant or buyer to the property, the landlord or owner has no incentive or obligation to pay the fee. The other instance is when the property is not a “listed” property. This is similar to a for-sale-by-owner (FSBO) house. With this type of property, there is no commission for the real estate agents calculated in the selling price. Therefore, to cover the tenant representative’s fee, the landlord or owner might add it to the selling price or might not be willing to pay it at all.
Can I still use a Tenant Representative if the landlord or owner doesn't pay the fee?
Yes. If the landlord or owner won’t pay the fee, you can still use a tenant representative. You can pay the fee yourself or in some situations there may be other alternatives. A good tenant representative is well worth the cost in both time and money savings.
When should I talk to a tenant representative?
You should contact a tenant representative as soon as you begin to consider the idea of moving to new space. There are several reasons to get a tenant representative involved early. Foremost, it is important for a tenant representative to introduce you to potential properties so that the relationship is established with the landlord and he or she will be willing to pay the tenant representative’s fee. Additionally, the tenant representative can provide other beneficial services, including assisting with determining your space needs, preparing a lease vs. buy analysis, identifying properties, doing comparative property analysis, and much more. Many qualified tenant representatives will provide these services as part of the fee paid by the landlord or owner.
Are there other times to consider using a tenant representative?
Yes. Many tenants continue to renew their leases without ever considering negotiating new terms or obtaining needed improvements. Even though a tenant may have an option to renew with predefined terms, the tenant is always able to renegotiate the terms at the time of lease renewal. Often the marketplace has changed and the terms of your option-to-renew that looked good five years ago are no longer such a good deal. A tenant representative can let you know where you can improve the terms of your lease, how they compare to the marketplace, and even negotiate with the landlord on your behalf.