The homebuying process involves many stages and many important documents to review. Among those documents is an item called an exclusive buyer’s agency contract or buyer’s agent contract. It may seem daunting to sign this document, but it helps guide a conversation between you and your exclusive buyer’s agent (EBA) so that both of you feel ready to work together in purchasing your home.
Your EBA and the brokerage they work for will be the people you depend on to make sense of the paperwork, facilitate conversations with various real estate professionals, and assist with other due diligence. Ask questions, read through the fine print, and negotiate with your brokerage or EBA before signing anything.
What Is an Exclusive Buyer’s Agency Contract?
An exclusive buyer’s agency contract is an understanding between you (the buyer), your agent, and the brokerage within which they operate. It outlines your agent’s role, the contract’s length, compensation expectations, and other terms. More broadly, it defines the responsibilities of all parties – the buyer, the EBA, and the brokerage.
While it is a measure of precaution, it helps both EBAs and homebuyers feel confident about working together as a team by defining the relationship. Every contract looks different, and it’s a requirement in some states. It’s also sometimes called a buyer’s representation contract or buyer-broker contract.
What Are Various Exclusive Buyer’s Agency Contract Terms?
Outlining the terms of how services will be provided for both parties involved is a helpful practice in any business transaction. Real estate transactions involve large amounts of money and commissions, so this understanding helps ensure the agents are compensated and the buyer feels that the EBA is providing their services to the fullest.
Exclusive buyer’s agency contracts will typically include a few of the following specifics to negate conflict, but every contract looks different.
Exclusive or Non-Exclusive Representation
When a brokerage begins working with a buyer and dedicating time to their homebuying process, they want to make that time is not wasted. An exclusive buyer’s agency contract will usually include a clause about the buyer only working with a single brokerage for the course of the transaction. Sometimes the buyer has the right to switch to a different agent after a specified period of time.
In other cases, the buyer may be permitted to switch brokerages entirely if they are unsatisfied with their current one. This non-exclusivity allows the buyer to work with multiple brokerages without the obligation to compensate them for their efforts.
Contract Term Length
One of the most obvious details to include in any arrangement is how long the contract is valid. This could be as short as a few weeks to as long as more than a year – it’s entirely negotiable.
Similar to the exclusivity or non-exclusivity portion of the contract, a brokerage and agent will want to ensure they’re paid for their efforts. This commission rate varies but usually falls in the range of five-to-six percent of the home’s selling price. In most contracts, that money should only be paid if the home sells, not from the buyer’s pocket.
Last but not least, a standard exclusive buyer’s agency contract will include details about the type of home that the buyer wants along with their budget.
This section allows the buyer to be protected if they buy a different kind of property with another brokerage, such as a condo, commercial building, etc. It’s a rare case, but sometimes a buyer will want to work with various brokerages when purchasing more than one type of property.
These details go beyond just the property type and price range, though – it should include the location of where the desired home would be in case the buyer pursues a new site altogether.
Sign When You’re Ready
The terms of an exclusive buyer’s agency contract are entirely negotiable. Think about your expectations before you sit down to discuss the contract. You’re entitled to ask for a trial period, a shorter contract length, or anything else before you sign on the dotted line.
Once you’ve had a good conversation with both the brokerage and your EBA, you’ll feel ready to sign this contract and begin the homebuying process.