Whenever you hire a professional for something, it is a good idea to have a contract. That’s what a buyer’s agent agreement is – it’s a buyer’s agent contract. It’s a legal document that tells you what the agent is going to do for you and what it is going to cost for this service.
NAEBA agents routinely use buyer’s agent agreements (sometimes called buyer representation agreements or buying agent agreements). These agreements are good for buyers. It is important for a buyer to know what to expect from their agent, right from the beginning.
What should be in a buyer’s agent agreement?
What services will the agent be responsible for?
The agreement should state clearly what the agent will be doing for the buyer. These are typical services you should expect from a buyer’s agent:
- Confidentiality: Keeping buyers’ motives and budgets confidential
- Fiduciary (monetary) advice.
- Providing market information: Explaining the current market and providing market information about the fair market value of the house the buyer wants to negotiate for.
- Negotiation guidance and negotiation to get the best possible price and terms for the buyer.
- Property visits to critically evaluate each property
- Provide access to other professionals that will be needed through the purchase process.
- Keeping track of the process until closing.
What are the buyer’s obligations during the contract period?
- How much compensation is due to the buyer’s agent? This needs to be a set figure or set percentage of the sale price.
- How does this contract end? Can it be cancelled and under what conditions?
How much will the agent get paid?
The buyer’s agent compensation must be stated clearly. It should state that the buyer owes a specific amount and no more. It should clearly state that any additional compensation paid by the seller will be rebated to the buyer.
Why is there a clause about agency relationships?
Some buyer’s agent agreements include a paragraph reiterating the required disclosure for consumers about agency relationships. Terms vary from state to state.
An exclusive buyer’s agent (in an exclusive buyer brokerage) is an agent who works in a company that helps buyers get their property for the lowest price and best terms. The whole office agrees to work only with buyers and no one lists properties for sale. These are called “non-designated agents” or “single agents” in some states. In other states, “single agents” commit to not working with a buyer and seller in the same transaction, but the company has agents who represent seller. If your agent uses any of these terms, ask about whether sellers are represented by anyone in the company and whether the agent you want to hire works for seller, too. NAEBA members define an exclusive buyer’s agent as an agent in a company that does not work for sellers.
Designated agents are agents from companies who help buyers get the lowest price or help sellers get the highest price. Consumers need to be told, up front, if a buyer’s agent works in a company where the seller may be represented by an agent in the same company as the buyer agent you are hiring.
Facilitators or Transaction agents are agents who do not give financial (fiduciary) advice. These agents provide accurate information, process the documents, and keep the purchase process on track. They owe fairness to all parties.
Dual agency is a situation where one individual agent has a legal loyalty to both parties in a transaction. This would be a buyer’s agent selling their own house. This would be the broker who supervises the designated agents, when the seller and the buyer both have agents from the same firm.
How are the buyer’s rights being protected during the purchase?
What is the legal agency relationship between the buyer and the buyer’s agent?
Does the agent work in a brokerage with only buyer’s agents (called Exclusive Buyer Brokerage) or are there seller’s agents in the brokerage along with this agent? Does the contract include asking the buyer to consent for the agent to represent other buyers submitting offers on the same property, dual agency, designated agency, or transaction brokerage?
Is the agent providing full fiduciary duties to the buyer?
Or is the agent acting as a transactional agent or facilitator – that’s an agent who does not give financial advice, but instead processes the paperwork of the transaction.
How would a dispute be handled?
Does the contract include mandatory or optional alternative dispute resolution, such as mediation or arbitration? Is there an agreement to waive trial by jury and class actions in the event of litigation relating to the agreement?
Every real estate agent should have a contract with a buyer looking to buy a home. NAEBA agents have always used exclusive buyer’s agent agreements. Whether you hire an exclusive buyer’s agent or any other real estate licensee, you should have a contract with real estate agent.
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