A real estate Buyer Representation Agreement is a legal document that outlines the working relationship between a home Buyer and their Real Estate Agent. The Listing Agent must verify that the Buyer’s Agent has a representation agreement in place. Buyer agents can present a simple document signed by both parties to confirm the agreement, which can also register the Buyer for a specific property. However, Buyer Agents are not required to provide the Listing Agent with a copy of the Buyer Representation Agreement to schedule a showing.
Touring Agreement: Some Real Estate Agents use a Buyer Representation Agreement as a Touring Agreement. This written contract between a potential home Buyer and an Agent outlines the terms, conditions, and fees for touring homes. Typically, it is non-exclusive and limited in duration (e.g., 7 days), it often covers just the initial tours. The agreement aims to provide transparency and set expectations for both parties without requiring a long-term commitment. While some touring agreements are free for the Buyer, others require a flat fee or hourly fee to be paid immediately when services are rendered. This allows the Buyer to get to know the Agent and understand their services before committing to a more detailed Buyer Representation Agreement.
- Buyers should be cautious of Touring Agreements that automatically convert from the initial period to a more comprehensive and detailed Buyer Representation Agreement.
Key Elements of a Buyer Representation Agreement:
- Duties: Outlines the responsibilities of both the Buyer and the Buyer’s agent.
- Scope: Defines the parameters of the work agreement including locating a property, negotiating all aspects of a purchase agreement, and following through with settlement and closing.
- Buyer Remedies: Buyers should have unrestricted access to remedies. They should also be cautious of agreements that mandate mediation or arbitration clauses.
- Compensation: The document should disclose that broker commissions are negotiable and specify the Buyer’s compensation to the agent, which can be a flat fee, hourly rate, or a percentage of the sales price. To avoid ambiguity, the compensation amount should be clearly stated, including a clause that the Buyer’s Brokerage will not receive any additional compensation for facilitating the sale. It should also detail the amount due at closing and include a statement that MLS participants cannot receive compensation beyond the agreed amount with the buyer. Additionally, the document should outline the payment due date and the applicable interest rate if not paid upfront. Finally, it should indicate whether the Buyer Brokerage will file a lien if the payment is not made at closing.
- Buyers should think about negotiating either a flat fee or an hourly rate for their agent. If the agent’s compensation is based on a percentage of the sales price, they may lack the incentive to secure a lower purchase price for the buyer.
- Buyers should discuss and ensure that any extra or hidden fees are subtracted from the agreed-upon compensation.
- Buyers should ensure that no commission is due if a purchase is not completed. If a Buyer breaches a contract, they will likely forfeit their earnest money deposit. It is unexpected that, in addition to losing the deposit, the Buyer would also owe their Brokerage a commission for a property not purchased. This provision implies that a Buyers’ Brokerage could collect two commissions from the buyer: one for the failed transaction and another for a subsequent successful transaction.
- Concessions: Any Seller concessions, including a willingness to help pay the Buyer’s Agent compensation, should be approved by and paid to Buyers not the Buyers’ Brokerage, then used by Buyers as they see fit.
- Conflict of Interest: The contract should detail how the Buyer’s Agent and real estate company manages multiple buyer clients interested in the same property.
- Dual Agency: Dual agency happens when one real estate agent represents both the Buyer and the Seller in a transaction. Buyers should avoid pre-authorizing dual agency and instead decide on a case-by-case basis. This approach helps maintain the exclusivity and leverage of their relationship with their agent.
- Exclusivity: Indicates whether the agreement is exclusive (the Buyer works only with that agent) or non-exclusive.
- Fair Housing Statement: Ensures compliance with fair housing laws.
- Termination Fee: Brokers have the right to terminate contracts at any time. The contract should clearly specify the terms in which the agreement may be terminated and the amount the Buyer must pay if they choose to terminate without just cause.
The Buyer Representation Agreement helps ensure that both parties understand their roles and responsibilities, providing a clear framework for the home-buying process.
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