what is buyer representation agreement

Home Buying Resources | ABR®

Buyer representation agreement.

If you’ve started looking for a home—and a real estate professional to assist you—your buyer’s representative may ask you to sign a Buyer Representation Agreement. What is this form? Why should you sign it?

A Buyer Representation Agreement is a legal document that formalizes your working relationship with a particular buyer’s representative, detailing what services you are entitled to and what your buyer’s rep expects from you in return. While the language used in the document is formal, homebuyers should view it as an important and helpful tool for clarifying expectations, developing mutual loyalty, and most importantly, elevating the services you will receive.

• Receive a higher level of service. If you’ve formalized an agency relationship with a buyer’s rep, you can expect to be treated like a client instead of a customer. What’s the difference? Clients are entitled to superior services, relative to customers. While the details vary from state to state, and from one buyer’s agent to another, you can generally assume that being a client means that you’ve formed a fiduciary, or agency, relationship with your buyer’s rep.
• Get more without paying more.  Oftentimes the listing broker has already agreed to pay a buyer’s broker's commission. If they haven’t, you can ask your buyer’s rep to avoid showing you any such homes. Or you can still view the home, knowing that you’ll need to factor your broker’s commission into any offer you may write. 
• Avoid misunderstandings. A Buyer’s Representation Agreement clarifies expectations, helping you understand what you should and shouldn’t expect from your buyer’s rep, and what they will expect from you, which usually centers on loyalty.
• Agency relationships are based on mutual consent. While most representation agreements specify a time period, they can be terminated early if both parties consent. Most buyer’s reps are willing to end the agreement early if the working relationship isn’t going well. Some buyer’s reps also offer representation agreements for as little as one day, for the purpose of giving both parties a brief trial period to explore working together.
• Strength as a team. When you and your buyer’s rep work together within a formalized agency relationship, you have created a team dedicated to helping you achieve the best possible home-buying experience.  

Buyer Representation Agreement

Jump to Section

A buyer representation agreement is a formal legal instrument establishing a working connection between a prospective home buyer and a real estate brokerage. It specifies the services to which the buyer is entitled and their obligations towards the brokerage. This document is an important document for laying down expectations concisely and clearly. It helps improve the quality of service the buyers wish to receive from the real estate brokerage. This blog discusses the benefits and types of the agreement mentioned above.

Benefits of a Buyer Representation Agreement

• Being a Client and Not a Customer: One key distinction between clients and customers is a contractual arrangement. One becomes the realtor's customer and is obligated by contract to behave in their best interest when they sign a buyer's representation agreement with them. Without it, the realtor's legal responsibility would be to the seller. The realtors have a greater ethical duty to promote and protect the buyers' interests. Even if the realtor agent wants to help the buyer, they are not authorized to divulge certain information to the buyer unless the buyers turn into their clients instead of just a customer. It can be attributed to the complex laws in the real estate sector. Besides, the broker will be able to better represent the buyer in rounds of negotiations during the time of purchase if they have an agreement in place. The same and other services like broker’s price opinion cannot be legally offered to a mere customer. The contrast between a client and customer is so nuanced that the impact cannot be gauged from a macroscopic perspective, but it can have a major effect on the buyer’s real estate transaction.
• Clear Outlining of Expectations: A buyer's representation agreement provides peace of mind by establishing the expectations the buyer and the realtor have for one another throughout the home-buying process. The chosen realtor will review the contract with the prospective buyer and all the duties they will carry out in that capacity. This easy step will eliminate potential misconceptions, allowing the buyer to move forward confidently. An explicit buyer's representation agreement sets out what a buyer can and cannot expect from the buyer's representative and what they anticipate from the buyer, which typically revolves around loyalty.
• Streamlining of Service: Talking to five different persons about five different properties can be complicated, and if the buyer is unfamiliar with real estate jargon, comparing homes listed by various brokerages can be challenging. With a buyer's representation agreement, the buyer has a single point of contact for all inquiries. Your real estate agent will be able to help the buyer with their years of experience, thanks to the rapport you two have built. Before signing the contract, the buyer must meet their realtor in person. Like buyers, realtors will want to ensure a good fit exists before continuing.
• Protection of Rights: The ethical standards laid down in various real estate laws hold the realtors to the highest standards of conduct through every step and process of the real estate transaction to protect the buyer's interest. While acting as the agent for the buyer, the realtor promises to prioritize and advance the buyer's interest as per the code of ethics . As the buyers are legally tied to the agents, they will have access to all the legal recourse that won’t be available to customers if they feel their rights were violated during the transaction. Even though these occurrences are uncommon, buyers will feel more secure knowing these regulations cover them.
• Payment Guarantees for Agents: Realtors are compensated by the seller when a home is sold and only take commission-based jobs. The buyer should sign a buyer's representation agreement if they are dealing with an agent and are satisfied with their hard work to guarantee payment from the selling broker. If the realtor doesn't have a signed buyer's representation agreement after all their work, the listing business could decide not to pay them. It is the sole legal document that ensures a buyer's agent will receive payment. An agent will spend hours assisting the buyer and feel much more comfortable doing so if there is a contract in place so that they can be paid for their efforts, even though it may not impact the buyer's bottom line. The listing broker has often committed to paying the buyer's broker's commission. If not, the buyer can request that the broker not show them any such properties. Alternatively, buyers can still see the house, knowing that any offer must account for their broker's commission.

Types of Buyer Representation Agreements

• Non-Exclusive Not-for-Compensation Contract: It is the least common and restrictive of all the buyer representation agreements. If the agent is a friend of the buyer or provides the service as a favor, this arrangement may be used. Both parties might still like a record of their union. The agreement states that the agent won’t be entitled to any compensation, allows the buyer to engage with another realtor while working with the first realtor, and permits both the buyer and the realtor to terminate the agreement as per their requirement.
• Non-Exclusive Right-to-Represent Contract: This contract entails the payment of the agent; it ensures that the agent receives a commission for the brokering service provided and other compensation for the representation given to the buyer during the purchase, the buyer is free to engage with another agent and specific termination clauses .
• Exclusive Right-to-Represent Contract: The most typical buyer representation contract offers the agent the most protection. Buyer's agents commit a lot of time and resources. This agreement aids in ensuring that the agent is paid for their efforts. In this kind of agreement, the buyer is prohibited from working with another agency while the agreement is in effect. Besides, it states that the agent will receive compensation despite the buyer finding a house on their own or by working with another brokerage firm, and it precludes the buyer from terminating the agent without a valid and justified reason. These agreements can be valid for a few months or a year.

Key Terms for Buyer Representation Agreements

• Realtor: One of the parties to the buyer representation agreement, which is usually a brokerage firm, a realtor acts as the agent for buyers by showing them properties for buying.
• Buyer: Another party to the buyer representation agreement is interested in buying a property or house and takes the broker's help to secure a property without being duped.
• Compensation: The amount mentioned in the contract as a payment to the realtor from the buyer.
• Exclusivity: The degree of exclusivity can be established by both parties depending on the type of contract to ensure that there is no breach of the contract if the realtor or the buyer interacts with other realtors or buyers, respectively.
• Termination: The conditions for terminating the agreement, like a breach of contract or mutual agreement, by either of the parties before the contract comes to a formal end must be entailed in the contract.

Final Thoughts on Buyer Representation Agreements

The buyer representation agreement must be approached with caution as it is drafted specifically for the security of the homebuyers. The terms and conditions of the agreement should be carefully constructed and reviewed before signing to prevent either of the parties from being bereft of their rights and obligations and eventually establish a strong connection with the agent. The essence of this document lies in the loyalty of both parties towards each other and provides an effective way for the buyer to communicate their needs to the realtor.

If you want free pricing proposals from vetted lawyers that are 60% less than typical law firms, click here to get started. By comparing multiple proposals for free, you can save the time and stress of finding a quality lawyer for your business needs.

Need help with a Buyer Representation Agreement?

Meet some of our buyer representation agreement lawyers.

www.linkedin/in/michaelbmiller I am an experienced contracts professional having practiced nearly 3 decades in the areas of corporate, mergers and acquisitions, technology, start-up, intellectual property, real estate, employment law as well as informal dispute resolution. I enjoy providing a cost effective, high quality, timely solution with patience and empathy regarding client needs. I graduated from NYU Law School and attended Rutgers College and the London School of Economics as an undergraduate. I have worked at top Wall Street firms, top regional firms and have long term experience in my own practice. I would welcome the opportunity to be of service to you as a trusted fiduciary. In 2022 I was the top ranked attorney on the Contract Counsel site based upon number of clients, quality of work and top reviews.

Experienced business and contract lawyer. Our firm specializes in commercial litigation and dispute resolution.

My career interests are to practice Transactional Corporate Law, including Business Start Up, and Mergers and Acquisitions, as well as Real Estate Law, Estate Planning Law, Tax, and Intellectual Property Law. I am currently licensed in Arizona, Pennsylvania and Utah, after having moved to Phoenix from Philadelphia in September 2019. I currently serve as General Counsel for a bioengineering company. I handle everything from their Mergers & Acquisitions, Private Placement Memorandums, and Corporate Structures to Intellectual Property Assignments, to Employment Law and Beach of Contract settlements. Responsibilities include writing and executing agreements, drafting court pleadings, court appearances, mergers and acquisitions, transactional documents, managing expert specialized legal counsel, legal research and anticipating unique legal issues that could impact the Company. Conducted an acquisition of an entire line of intellectual property from a competitor. In regards to other clients, I am primarily focused on transactional law for clients in a variety of industries including, but not limited to, real estate investment, property management, and e-commerce. Work is primarily centered around entity formation and corporate structure, corporate governance agreements, PPMs, opportunity zone tax incentives, and all kinds of business to business agreements. I have also recently gained experience with Estate Planning law, drafting numerous Estate Planning documents for people such as Wills, Powers of Attorney, Healthcare Directives, and Trusts. I was selected to the 2024 Super Lawyers Southwest Rising Stars list. Each year no more than 2.5% of the attorneys in Arizona and New Mexico are selected to the Rising Stars. I am looking to further gain legal experience in these fields of law as well as expand my legal experience assisting business start ups, mergers and acquisitions and also trademark registration and licensing.

Twenty-plus years experience in family law, employment law, public agency law, federal, state and local contracts drafting and review, appellate practice.

Highly disciplined attorney with over seven years administrative litigation experience. Capable of analyzing complex research, data, and documentation to prepare and represent individuals in sensitive cases. Recognized as a leader with the ability to perform work both autonomously and collaboratively as a member of a diverse legal team. Great problem-solving skills, strong multitasking capabilities and works well under strict deadlines. A professional with a sense of humor, strong work ethic and ability to build trust across all levels.

Bryan Kennedy C.

10-year lawyer with a B.A. in Rhetoric and Writing. I use clear, direct language instead of hollow jargon to draft effective legal documents for family law, business, and general contract situations.

Jess has been practicing law since 2018, but she's been in the business world far longer. Prior to law school, she gained valuable experiences managing in both retail and service industries. As an attorney, she combines practical real-world know-how with a deep understanding of the law. Learn more at www.voyagerlawmn.com

Find the best lawyer for your project

Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.

Real Estate lawyers by top cities

• Austin Real Estate Lawyers
• Boston Real Estate Lawyers
• Chicago Real Estate Lawyers
• Dallas Real Estate Lawyers
• Denver Real Estate Lawyers
• Houston Real Estate Lawyers
• Los Angeles Real Estate Lawyers
• New York Real Estate Lawyers
• Phoenix Real Estate Lawyers
• San Diego Real Estate Lawyers
• Tampa Real Estate Lawyers

Buyer Representation Agreement lawyers by city

• Austin Buyer Representation Agreement Lawyers
• Boston Buyer Representation Agreement Lawyers
• Chicago Buyer Representation Agreement Lawyers
• Dallas Buyer Representation Agreement Lawyers
• Denver Buyer Representation Agreement Lawyers
• Houston Buyer Representation Agreement Lawyers
• Los Angeles Buyer Representation Agreement Lawyers
• New York Buyer Representation Agreement Lawyers
• Phoenix Buyer Representation Agreement Lawyers
• San Diego Buyer Representation Agreement Lawyers
• Tampa Buyer Representation Agreement Lawyers

ContractsCounsel User

WWE FEMALE WRESTLING CONTRACT

Location: florida, turnaround: over a week, service: drafting, doc type: buying agency agreement, number of bids: 3, bid range: $300 - $1,000, home purchase agreement, location: texas, turnaround: less than a week, number of bids: 4, bid range: $450 - $550, want to speak to someone.

Get in touch below and we will schedule a time to connect!

Find lawyers and attorneys by city

• Search Search Please fill out this field.
• Mortgages & Home Loans
• Homeowner Guide

Buyer's Broker Agreements and Contracts

Non-exclusive/not-for-compensation agreement, non-exclusive/right to represent agreement, exclusive right to represent agreement, non-exclusive vs. exclusive agreements, termination of the agreement, frequently asked questions (faqs).

Homebuyers typically sign buyer broker agreements, also known as "buyer representation agreements," with their real estate brokers and/or agents before writing a purchase agreement on a property they want to buy. Buyer broker agreements spell out precisely who represents the buyer and how the broker/agent is compensated.

A variety of buyer broker agreements are used throughout the United States, but three are more common than others in California. Here's a look at them.

Key Takeaways

• A buyer broker agreement establishes the relationship between homebuyers and their real estate agent. 
• A non-exclusive agreement means that the buyer can work with other agents. 
• An exclusive agreement means the buyer will work exclusively with that real estate agent. 
• Exclusive agreements are typically in force for 30 days to one year.
• Clarify how to terminate the relationship before you sign.

This agreement outlines the broker's/agent's duties and obligations to the buyer. It defines agency relationships, the broker's scope of duty, and buyer obligations. It doesn't provide for compensation.

• The buyer can hire more than one broker/agent to locate a suitable property.
• The buyer isn't obligated to compensate the broker/agent.
• The buyer has the right to demand single agency sole representation.

"Single agency" means that the agent will represent either the buyer or the seller but not both. It's referred to as "dual agency" when the agent serves both parties.

This type of non-exclusive agreement outlines the broker's/agent's duties and obligations to the buyer. It also defines agency relationships , the broker's scope of duty, and buyer obligations, and it does provide for compensation. It also removes the buyer's responsibility to pay a commission if the broker/agent is paid by another party, such as the seller. This is a portion of the contract that often confuses buyers. They don't understand that they're not paying the fee.

• The buyer can purchase a property through another broker/agent as long as the property isn't a home introduced by the first broker/agent.
• The buyer has the right to reject dual agency and demand a single agency.

This form is similar in scope to the non-exclusive form except for one major distinction: The buyer has agreed to work exclusively with the broker/agent.

• The buyer cannot hire more than one broker/agent to represent them.
• The commission is negotiable.
• The buyer has the right to demand a single agency.
• The buyer isn't responsible for the commission if another party (such as the seller) pays it.

Non-exclusive agreement terms might run for a month or two, while exclusive agreement terms typically range anywhere from 30 days to one year.

Exclusive representation gives the broker/agent the ability to negotiate with unrepresented sellers (such as for-sale-by owners ) on the buyer's behalf.

The commission is usually paid by the seller, but it may be added to the sales price and eventually paid by the buyer. The broker/agent will have more than earned their fee if the buyer is able to purchase the property at a substantial discount through the power of the broker's/agent's negotiating ability. Exclusive representation means that the broker/agent is employed by the buyer and will work solely on their behalf.

The main benefit to a homebuyer in an exclusive-right-to-represent contract is that the buyer's agent should be focused on the buyer and working diligently on finding that buyer a home. Buyers who operate under other agreements are effectively telling their agent not to work very hard for them, because they might not use that agent to buy a home.

Ask the broker/agent whether they'll release you from the contract if you find that the relationship isn't a good fit for you. However, agents aren't required to release you from a binding contract just because you ask, so think twice before signing an exclusive agreement.

This is a two-way street. You might want to discuss with your agent how they'll let you know if they feel that you're not a good match. Parties might get along very well when they first agree to work together, but potential conflicts could appear later.

How long does a buyer broker agreement last?

The agreement will detail the length of the contract. It's up to the buyer and the broker or agent to decide what works best for them. You might expect a standard contract to last about a month at a minimum.

Why should I sign a buyer broker agreement?

Many brokers won't work with someone unless they sign a contract . If you want to use a broker, then you'll probably need to sign an agreement. Contracts also protect you. It's usually in your best interest to write out all the details of the arrangement into a legal document.

California Association of Realtors. " C.A.R. Buyer Representation Agreements ."

Oregon Realtors. " Multiple Offers and Dual Agency ."

Southland Regional Association of REALTORS. " Proper Usage of Buyer Representation Agreements ."

Connecticut State Department of Consumer Protection. " Working with a Buyer's Agent ."

National Association of Realtors. " Code Comprehension: Article 16 — Commissions Are Negotiable ."

National Association of Exclusive Buyer Agents. " What Is an Exclusive Buyer-Broker Agreement? "

Realtor.com. " The 3 Types of Buyer-Broker Agreements ."

Realtor.com. " Who Pays the Realtor Commission When You Buy or Sell a Home? "

• How to BUY a House in San Jose

Buyer Representation Agreements: What You Need to Know

When you’ve found a real estate agent to guide you through the home buying process in San Jose, they may ask you to sign a buyer representation agreement. But what is this agreement and what does it entail? Should you sign one?

A buyer representation agreement, sometimes called a buyer-broker agreement, is a legally binding agreement or contract between you and your real estate agent.This agreement legally defines what you as a buyer and they as the agent are going to do to work together to your common goal to find a property. It asks you to have an exclusive relationship with the agent.

You can think of a buyer representation agreement as a choice to be in partnership with your agent. This has benefits for both parties. It protects you as a buyer, giving you reassurance that your real estate agent is doing all of their duties and keeping your best interests in mind. The buyer representation agreement has perks for the agent as well– they’re assured that all the hard work they do for you pays off.

The most seamless real estate transactions come when the real estate agent and buyer are in a closer partnership. A buyer representation agreement confirms and solidifies the relationship.

Why sign a buyer’s representation agreement??

Although it may be tempting to shop around for real estate agents throughout the buying process, you’re much better off developing a relationship with one trusted agent who understands your home buying goals.

Signing a buyer representation agreement gives you a dedicated agent who is invested in your journey. This agent will continue to educate you and work alongside you in the process. They are much more likely to connect you with off-market listings, guide you through the offer process, and ultimately get you into a home in San Jose.

If you’re serious about buying a home, it’s best to have a committed agent on your side. From an agent’s perspective, they give much more effort if they know you’re working with them because they know they’ll get paid by the seller when you close.

What’s in the standard California buyer’s representation agreement?

The standard California buyer’s representation agreement defines what a buyer’s agent does and how they’ll represent you. Here are some of the most important sections included:

Basic information

This section shares the names of you and the buyer’s agent, the date signed, and how long the agreement is in affect. We typically set 180 days or 6 months in our buyer’s representation agreements.

Property to be acquired

This agreement is for a specific real estate goal, so we usually say it’s for “any property in Santa Clara County.” Sometimes, we define it more specifically. If you buy a home outside of Santa Clara County, the contract does not apply.

Expectations for buyer’s agent

This section defines that the buyer’s agent has a fiduciary duty of utmost care, integrity, honesty, and loyalty in dealing with the buyer. This fiduciary responsibility is called agency. It shares that they have a duty to be honest and act in fair dealing and good faith, and that they will disclose all facts known that would affect the value or desirability of a property. This means they’ll be your extra sleuth with lots of experience of where to look, to discover all they can. 

Buyer responsibilities

This section shares that the buyer will work exclusively with the agent for a specific amount of time and will act in good faith. As the buyer, your responsibility is to consider all homes presented, to act in good faith, get qualified for a loan, cooperate with a broker, and work with your agent as a team. 

Disclosure about fair housing

This disclosure shares that there is no discrimination allowed when buying or selling properties in California. This is discrimination based on race, age, sexual orientation, immigration status, disability, or a number of other factors. This includes best practices for how to make sure there is no discrimination. For example, buyers used to be able to submit a letter about their family with their offer, providing details so the seller could make sure they liked the family moving in. This is no longer allowed, as there is a risk for discriminatory decision-making.

Representation of more than one buyer or seller

Your real estate agent has relationships with more than one buyer or seller. Even so, your real estate agent will have your best interests in mind. They may represent a seller who may have a good property for you.

Wire fraud advisory

We will advise you through the process, but this section basically says to call and verify for any wiring information so that you can verify anything you’ve received in a secure email to make sure you’re sending funds to the right place.

Buyer agrees to pay the broker

This is a little daunting for some clients. In 99% of cases, someone else is paying the buyer’s broker on your behalf– usually the seller when the transaction closes. How do you know how much the buyer’s broker will be compensated? When you visit a property on our site, you can see what the buyer’s commission will be– 2.5% is standard (look under the detail section called "tax and financial info" as shown below. The broker takes their cut and then pays the real estate agent. 

Thinking about signing a buyer representation agreement? We’re ready to walk you through any questions you have. Set up a buyer consultation so we can talk through where a buyer presentation agreement fits in when buying a house in San Jose.

Post a comment, related posts.

Buy a House in San Jose Now or Wait?

Should You Buy a House in San Jose Now? A Data-Driven Guide for Tech-Savvy Buyers Forget gut feelings - let's crunch the numbers! Ever fantasized ... Read More

Best Affordable and Budget-friendly Neighborhoods in San Jose

As home prices in San Jose continue to surge without showing signs of stopping, prospective buyers often wonder where they can get the best value for ... Read More

How to Get Your Funds Ready to Buy a House in San Jose

If you’re ready to buy a house in San Jose, you’ll need to make sure your funds are available. Having funds available goes deeper than ... Read More

• San Jose Communities
• Almaden Valley
• Blossom Valley
• Central San Jose
• Santa Teresa
• Willow Glen
• West San Jose
• CA School Scores
• Advanced Search
• Search All Properties by Map
• Search Condos & Townhomes
• Open Houses
• My Property Tracker
• Featured Listings
• Best Neighborhoods in San Jose
• Setup Home Search Account
• How to Buy a House
• Home Buying Consult
• Rent Vs. Buy Financial Analysis
• What is my Home Worth?
• Insider Tips for Selling
• Free Seller Seminar
• Home Selling Consult
• Capital Gains Tax on your Home
• San Jose Real Estate Market Trends
• Almaden Valley Real Estate Trends
• Willow Glen Real Estate Market Trends
• Blossom Valley Real Estate Trends
• Cambrian Real Estate Trends
• Campbell CA Real Estate Trends
• Santa Clara County 20+ year history
• About Theresa
• YouTube Channel
• Signup For Newsletter
• Quick Links

• REALTOR® Store

• Fostering Consumer-Friendly Real Estate Marketplaces Local broker marketplaces ensure equity and transparency.  Close
• Social Media
• Sales Tips & Techniques
• MLS & Online Listings
• Starting Your Career
• Being a Broker
• Being an Agent
• Condominiums
• Smart Growth
• Vacation, Resort, & 2nd Homes
• FHA Programs
• Home Inspections
• Arbitration & Dispute Resolution
• Fair Housing

• All Membership Benefits
• NAR REALTOR Benefits® Bringing you savings and unique offers on products and services just for REALTORS®. Close
• Directories Complete listing of state and local associations, MLSs, members, and more. Close
• Dues Information & Payment
• Become a Member As a member, you are the voice for NAR – it is your association and it exists to help you succeed. Close
• Logos and Trademark Rules Only members of NAR can call themselves a REALTOR®. Learn how to properly use the logo and terms. Close
• Your Membership Account Review your membership preferences and Code of Ethics training status. Close

• Highlights & News Get the latest top line research, news, and popular reports. Close
• Housing Statistics National, regional, and metro-market level housing statistics where data is available. Close
• Research Reports Research on a wide range of topics of interest to real estate practitioners. Close
• Presentation Slides Access recent presentations from NAR economists and researchers. Close
• State & Metro Area Data Affordability, economic, and buyer & seller profile data for areas in which you live and work. Close
• Commercial Research Analysis of commercial market sectors and commercial-focused issues and trends. Close
• Statistical News Release Schedule

• Advocacy Issues & News
• Federal Advocacy From its building located steps away from the U.S. Capitol, NAR advocates for you. Close
• REALTORS® Political Action Committee (RPAC) Promoting the election of pro-REALTOR® candidates across the United States. Close
• State & Local Advocacy Resources to foster and harness the grassroots strength of the REALTOR® Party. Close
• REALTOR® Party A powerful alliance working to protect and promote homeownership and property investment. Close
• Get Involved Now more than ever, it is critical for REALTORS® across America to come together and speak with one voice. Close

• All Education & Professional Development
• All NAR & Affiliate Courses Continuing education and specialty knowledge can help boost your salary and client base. Close
• Code of Ethics Training Fulfill your COE training requirement with free courses for new and existing members. Close
• Continuing Education (CE) Meet the continuing education (CE) requirement in state(s) where you hold a license. Close
• Designations & Certifications Acknowledging experience and expertise in various real estate specialties, awarded by NAR and its affiliates. Close
• Library & Archives Offering research services and thousands of print and digital resources. Close
• Commitment to Excellence (C2EX) Empowers REALTORS® to evaluate, enhance and showcase their highest levels of professionalism. Close
• NAR Academy at Columbia College Academic opportunities for certificates, associates, bachelor’s, and master’s degrees. Close

• Latest News
• NAR Newsroom Official news releases from NAR. Close
• REALTOR® Magazine Advancing best practices, bringing insight to trends, and providing timely decision-making tools. Close
• Blogs Commentary from NAR experts on technology, staging, placemaking, and real estate trends. Close
• Newsletters Stay informed on the most important real estate business news and business specialty updates. Close
• NAR NXT, The REALTOR® Experience
• REALTORS® Legislative Meetings
• AE Institute
• Leadership Week
• Sustainability Summit

• Mission, Vision, and Diversity & Inclusion
• Code of Ethics
• Leadership & Staff National, state & local leadership, staff directories, leadership opportunities, and more. Close
• Committee & Liaisons
• History Founded as the National Association of Real Estate Exchanges in 1908. Close
• Affiliated Organizations
• Strategic Plan NAR’s operating values, long-term goals, and DEI strategic plan. Close
• Governing Documents Code of Ethics, NAR's Constitution & Bylaws, and model bylaws for state & local associations. Close
• Awards & Grants Member recognition and special funding, including the REALTORS® Relief Foundation. Close
• NAR's Consumer Outreach

• Find a Member
• Browse All Directories
• Find an Office
• Find an Association
• NAR Group and Team Directory
• Committees and Directors
• Association Executive
• State & Local Volunteer Leader
• Buyer's Rep
• Senior Market
• Short Sales & Foreclosures
• Infographics

First-Time Buyer

Window to the law.

• Next Up: Commercial

New AE Webinar & Video Series

• Drive With NAR
• Real Estate Today
• Center for REALTOR® Development
• Leading with Diversity
• Good Neighbor
• NAR HR Solutions
• Fostering Consumer-Friendly Real Estate Marketplaces Local broker marketplaces ensure equity and transparency. 
• Marketing Social Media Sales Tips & Techniques MLS & Online Listings View More
• Being a Real Estate Professional Starting Your Career Being a Broker Being an Agent View More
• Residential Real Estate Condominiums Smart Growth Vacation, Resort, & 2nd Homes FHA Programs View More Home Inspections
• Legal Arbitration & Dispute Resolution Fair Housing Copyright View More
• Commercial Real Estate
• Right Tools, Right Now
• NAR REALTOR Benefits® Bringing you savings and unique offers on products and services just for REALTORS®.
• Directories Complete listing of state and local associations, MLSs, members, and more.
• Become a Member As a member, you are the voice for NAR – it is your association and it exists to help you succeed.
• Logos and Trademark Rules Only members of NAR can call themselves a REALTOR®. Learn how to properly use the logo and terms.
• Your Membership Account Review your membership preferences and Code of Ethics training status.
• Highlights & News Get the latest top line research, news, and popular reports.
• Housing Statistics National, regional, and metro-market level housing statistics where data is available.
• Research Reports Research on a wide range of topics of interest to real estate practitioners.
• Presentation Slides Access recent presentations from NAR economists and researchers.
• State & Metro Area Data Affordability, economic, and buyer & seller profile data for areas in which you live and work.
• Commercial Research Analysis of commercial market sectors and commercial-focused issues and trends.
• Federal Advocacy From its building located steps away from the U.S. Capitol, NAR advocates for you.
• REALTORS® Political Action Committee (RPAC) Promoting the election of pro-REALTOR® candidates across the United States.
• State & Local Advocacy Resources to foster and harness the grassroots strength of the REALTOR® Party.
• REALTOR® Party A powerful alliance working to protect and promote homeownership and property investment.
• Get Involved Now more than ever, it is critical for REALTORS® across America to come together and speak with one voice.
• All NAR & Affiliate Courses Continuing education and specialty knowledge can help boost your salary and client base.
• Code of Ethics Training Fulfill your COE training requirement with free courses for new and existing members.
• Continuing Education (CE) Meet the continuing education (CE) requirement in state(s) where you hold a license.
• Designations & Certifications Acknowledging experience and expertise in various real estate specialties, awarded by NAR and its affiliates.
• Library & Archives Offering research services and thousands of print and digital resources.
• Commitment to Excellence (C2EX) Empowers REALTORS® to evaluate, enhance and showcase their highest levels of professionalism.
• NAR Academy at Columbia College Academic opportunities for certificates, associates, bachelor’s, and master’s degrees.
• NAR Newsroom Official news releases from NAR.
• REALTOR® Magazine Advancing best practices, bringing insight to trends, and providing timely decision-making tools.
• Blogs Commentary from NAR experts on technology, staging, placemaking, and real estate trends.
• Newsletters Stay informed on the most important real estate business news and business specialty updates.
• Leadership & Staff National, state & local leadership, staff directories, leadership opportunities, and more.
• History Founded as the National Association of Real Estate Exchanges in 1908.
• Strategic Plan NAR’s operating values, long-term goals, and DEI strategic plan.
• Governing Documents Code of Ethics, NAR's Constitution & Bylaws, and model bylaws for state & local associations.
• Awards & Grants Member recognition and special funding, including the REALTORS® Relief Foundation.
• Top Directories Find a Member Browse All Directories Find an Office Find an Association NAR Group and Team Directory Committees and Directors
• By Role Broker Association Executive New Member Student Appraiser State & Local Volunteer Leader
• By Specialty Commercial Global Buyer's Rep Senior Market Short Sales & Foreclosures Land Green
• Multimedia Infographics Videos Quizzes
• Video Series First-Time Buyer Level Up Window to the Law Next Up: Commercial New AE Webinar & Video Series
• Podcasts Drive With NAR Real Estate Today Center for REALTOR® Development
• Programs Fair Housing Safety Leading with Diversity Good Neighbor NAR HR Solutions

Window to the Law: The Benefits of Using a Buyer Representation Agreement

Learn how real estate professionals can use buyer representation agreements to ensure consumer protection and build strong relationships with buyers, as well as how to articulate the many benefits of these agreements when meeting with buyers.

Window to the Law: The Benefits of Using a Buyer Representation Agreement — Transcript

Buyer representation agreements are a win-win proposition for both real estate professionals and consumers. They assist in building trust and a mutually beneficial relationship by promoting transparency through up-front conversations, and provide clarity regarding services consumers can expect to receive, as well as how their real estate professional will be compensated. This transparent practice is crucial for consumer education during one of the biggest and most complex transactions many make in their lifetime.

In this video we’ll explain how real estate professionals can use buyer representation agreements to ensure consumer protection and build strong relationships with buyers, as well as the many benefits of incorporating buyer representation agreements as a regular business practice.

A buyer representation agreement is a legally binding agreement that details many crucial elements of the relationship, such as services, agency relationship and compensation. And, signing one at the outset of the relationship protects both the broker and the buyer by avoiding misunderstandings. While jurisdictions vary in what is required in terms of written agreements when it comes to compensation, most states require that any exclusive brokerage or agency relationship be in writing, and about half of states require written disclosure of an agency relationship in order for the real estate professional to be paid for their services. Make sure to know where you fall in terms of requirements, and check with your state REALTOR® association for a buyer representation agreement form. Be sure to explain all provisions of the agreement to a buyer client before they sign.

For brokers, a buyer representation agreement protects their exclusive client relationships, which is reinforced by Article 16 of the REALTOR® Code of Ethics. And, a signed agreement may be helpful in the event of a procuring cause dispute, or in rare instances, a legal dispute with a buyer. For example, in a recent Montana case, the court relied on the buyer representation agreement in holding that the broker had no obligation to disclose available zoning information.

When meeting with a buyer who may be unfamiliar with buyer representation agreements, be prepared to articulate the many benefits of these agreements, such as how they:

• Ensure the client has a loyal advocate representing them in the transaction;
• Provide clarity on the services a consumer should expect from their agent, and how the consumer can partner with the agent to conclude a successful transaction;
• Understand the agent’s representation and duties owed to the consumer, including whether the agent may be serving as a dual agent; and
• Allow consumers an opportunity to ask questions about how their real estate professional is being compensated, including who is responsible for the payment for their services.

For resources to help facilitate these important conversations during a buyer representation meeting, including articulating your value and explaining how compensation works, check out competition.realtor for infographics, informative articles and more.

Additional Resources

Competition in real estate, the abr® designation, highlights: profile of home buyers and sellers report november 13, 2023, disclosure suit against brokers rejected by court march 16, 2023, working with buyers.

Avoiding the Unauthorized Practice of Law

Updated Guidance for TCPA Compliance

Using Floorplans to Market Listings

Independent Contractor Best Practices

Rules for Using Endorsements and Testimonials

Know Your Fiduciary Duties

Avoiding Vacant Land Scams

Working with Non-English Speaking Clients

Cryptocurrency Best Practices

Legal Tips to Use AI in Your Business

Latest videos from nar.

Raise Funds for RRF During June Homeownership Month

Shaping NAR’s 2024 Policy Priorities

Advancing DEI in an Anti-DEI Climate

2024 REALTOR® Broker Summit Recap

Kevin Sears: Update From The Road at Broker Summit

PropTech with NAR: Generative AI's Claude by...

Kevin Sears: Update From The Road in Wyoming

Eve B. Lee - 2024 Fair Housing Champion

Paul Yorkis - 2024 Fair Housing Champion

Next up: commercial series.

After the Eviction Moratorium

Next Up: Commercial Market Insights Overview

The Next 6 Months in DC

Optimizing Commercial Listings & Syndication

Commercial Financing During Covid

Next Up: Preserving the 1031 Like-Kind Exchanges

Next Up: Eviction Moratorium & Rental Assistance

Next Up: PropTech - The Future is Now

Next Up: What's the Data Say?

1031 Like-Kind Exchanges, Insights & Updates

Finding Your Association’s Roots and More!

REALTOR® L.E.A.D. and NAR Leadership Academy

The MLS Hour: New AE Edition

NAR's Institutes, Societies, and Councils

RPR® Tools for Advocacy & Member Engagement

Core Standards for New AEs

Level up: the real story from realtors®.

Level Up: Economic Forecast

Level Up: Financial Wellness

Level Up: The REALTOR® Difference

Level Up: Safety

Level Up: Innovation

Level Up: Diversity, Equity, and Inclusion

Level Up: Advancing Homeownership

Level Up: Sustainability

Level Up: Advocacy

Level Up: Fair Housing Part 2

Building the Dream Home in OKC

Persistence Pays in A Tight Market

Condo Conundrum

Working Remote? Relocating to North Tulsa!

That Old House in Tulsa, OK

As Is in Chicago

Tulsa Time Crunch

A Doctor in the House

A New Start in Missouri City, TX

Sarasota Hot Market Moves

NAR Videos on YouTube

NAR offers additional topics online covering legislation, events, industry news and guides for both NAR members and the public. Visit NAR on YouTube

National Association of REALTORS®

25.6K subscribers

Open YouTube

REALTOR® Party

1.82K subscribers

REALTOR® Magazine

3.96K subscribers

NAR Meetings

1.85K subscribers

Realtors Property Resource® (RPR)

13.4K subscribers

1.46K subscribers

3.7K subscribers

That’s Who We R (playlist)

• Digital Resume
• Freelancers 
• Buyer Presentation
• Listing Presentation
• Pre-Listing Presentation
• Digital Flyers

Find and copy inspiring presentations #builtwithhighnote

Coming Soon..

• Real Estate
• All Industries

What Is a Buyer Representation Agreement?

A buyer representation agreement is a legally binding contract between a real estate buyer and a real estate agent or broker. It outlines the terms and conditions of the relationship between the buyer and the agent during the home-buying process.

An exclusive buyer representation agreement typically includes the following key elements:

1. Duration

The agreement specifies the duration of the agent’s representation, outlining the start and end dates of the agreement. This ensures that both parties have a clear understanding of the timeframe.

The agreement defines the geographic area or specific neighborhoods in which the agent will assist the buyer in searching for properties. It may also specify the type of properties the buyer is interested in, such as single-family homes, condos, and other residential properties.

The agreement outlines the responsibilities of the agent, including assisting with property searches, scheduling and attending property viewings, providing market analysis and property information, negotiating offers, and facilitating the closing process.

4. Compensation

The agreement details the agent’s compensation for their services. It typically specifies the commission structure and how the agent will be paid upon the successful purchase of a property. The commission is often paid by the seller of the property and shared between the listing agent and the buyer’s agent.

5. Exclusivity

The buyer and agent may agree to an exclusive representation, meaning that the buyer will work exclusively with that agent and not seek services from other agents during the term of the agreement. This exclusivity protects the agent’s interest in investing time and effort into finding a suitable property for the buyer.

6. Fair Housing Statement

A fair housing statement is a declaration or policy that emphasizes a commitment to adhere to fair housing laws and principles. The statement communicates a commitment to providing equal housing opportunities to all individuals, regardless of race, color, religion, sex, national origin, familial status, disability, or any other protected characteristic under fair housing laws.

Advantages and Disadvantages of a Buyer Representation Agreement

As an agent, making buyers sign an exclusive buyer representation agreement can offer several benefits, but it also has its downsides. While it may offer you financial security, it can also put some buyers off. Let’s analyze the pros and cons to help you make an informed decision!

Disadvantages of Exclusive Buyer Representation Agreement

When forcing buyers to sign an agreement, it’s important to be mindful of potential drawbacks. Here are the most common disadvantages:

• Buyer representation agreement can put some buyers off, and they may decide they don’t want to work with you. It’s better to demonstrate your capabilities, expertise, and fiduciary as a great buyer agent than to force them to sign an exclusive buyer representation agreement. That’s how we trained our agents and how we carried out our business, be the “best buyer agent” in the market. Why force them to sign something? If you are truly the best buyer agent and you sincerely care about their interests at heart, we rarely find we need to require our buyer clients to sign anything – they would naturally want to work with us!
• You may miss out on other potential clients and opportunities.
• If the relationship with the buyer becomes strained or circumstances change, terminating the agreement might present some challenges.
• In a competitive real estate market, multiple agents may approach buyers. By requiring exclusivity, you run the risk of losing potential clients to competitors who offer non-exclusive agreements.
• If you fail to meet the buyer’s expectations or there is a breakdown in the working relationship, the buyer may become dissatisfied. However, due to the exclusive nature of the BRA, terminating the agreement can be challenging and may lead to negative reviews or damage your reputation.

Advantages of Exclusive Buyer Representation Agreement

Buyer representation agreement also offers some advantages for real estate agents. Let’s see them:

• Based on the competitive landscape in your real estate market, a buyer representation agreement can be the industry standard.
• When a buyer shows signs they may work with other real estate agents, a buyer representation agreement can make sure they choose to work only with you.
• By signing an exclusive BRA, buyers are demonstrating their commitment to working exclusively with you as their agent. This commitment fosters a sense of loyalty, giving you the assurance that the buyer will rely on your expertise and services throughout their home-buying journey.
• With an exclusive BRA, you can dedicate your time, resources, and expertise to a specific client. This focused approach allows you to gain a deeper understanding of the buyer’s needs, preferences, and budget, enabling you to provide tailored and efficient assistance in finding their ideal property.
• By being their dedicated agent, you can provide personalized attention, demonstrate your market knowledge, and become their go-to resource for all their real estate needs.

Check out Highnote

How to explain buyer representation agreement.

When explaining a Buyer Representation Agreement (BRA) to buyers, you may come across some problems and misunderstandings. You can avoid that by breaking it down into simple terms. Here’s a step-by-step guide on how to explain a buyer representation agreement:

1. Start with the purpose.

Begin by explaining that a Buyer Representation Agreement is a contract between a real estate buyer and a real estate agent. Its purpose is to establish a formal relationship where the agent (you) represents and assists the buyer in their home-buying process.

2. Explain your role

Describe your role in the agreement and that your primary responsibility is to help the buyer find a suitable property, provide guidance throughout the transaction, and negotiate on their behalf.

3. Exclusivity

Clarify that by signing the agreement, the buyer agrees to work exclusively with you. This means that the buyer will rely on your expertise and assistance and will not engage other agents during the agreed-upon timeframe.

4. Services provided

Outline the services you will provide under the agreement. This can include property searches, arranging viewings, providing market analysis and information, assisting with negotiations, and guiding the buyer through the closing process.

5. Mutual expectations

Emphasize that the Buyer Representation Agreement establishes clear expectations and responsibilities for both the buyer and the agent. This ensures a smoother and more efficient home-buying experience.

6. Review and understanding

Encourage the buyer to carefully review the agreement, ask any questions they may have, and seek legal advice if needed. It’s crucial that they fully understand the terms and conditions before signing.

Remember to use plain language, avoid jargon, and address any concerns or misconceptions the buyer may have. Providing real-life examples or anecdotes can also help illustrate the benefits and importance of a buyer representation agreement.

Final Thoughts on the Buyer Representation Agreement

My final thoughts on buyer representation agreements are always to demonstrate your competency and give your best to make buyer agreements an unnecessary formality. Put your expertise, market knowledge, previous results, and confidence to build trust with buyers and show them why you’re a great choice to find them a property.

If you always stream to be a great agent, buyers won’t feel like they need to sign a buyer representation agreement. Instead, they won’t even consider hiring another agent, which should be your primary goal. How you handle yourself with buyers, your reputation and your added value to the conversation should always take precedence over buyer agreement.

However, remember that every market is different, and make sure to explain the buyer representation agreement if you want your clients to sign it. If other agents do it and the market dictates it, it also makes sense for you to do it.

When you’re a great buyer agent with an awesome buyer presentation and your buyers know it, they will want to work exclusively with you without unnecessary formalities. But once again, you need to evaluate competitors and the market where you provide services to make an informed decision.

Questions to Ask Sellers at the Listing Appointment

Wondering how to prove your worth? We’ve prepared questions to ask sellers at listing appointment to increase your chances of winning a listing!

What is a Solar Proposal Software?

This comprehensive guide will introduce you to solar proposal software, highlighting its significance, features, and how it’s transforming the solar business.

Step-by-step Guide to Creating Buyer Presentation

Check out now the step-by-step guide to creating buyer presentations. Try Highnote and sign up for a free trial to elevate your buyer presentations.

Elevate Your Presentations and Impress

Upload, send, and win. 

Used by thousand of sales, marketing, consulting professionals in all industries to deliver, impress, and win.

• Blog & News
• Become an Affiliate
• 548 Market Street #46205 San Francisco, CA 94104-5401
• [email protected]
• Privacy Policy
• Terms of Use

Guide to Signing a Buyer’s Representation Agreement (BRA)

Before you put an offer on a property you want to purchase, your real estate agent will ask you to sign a Buyer’s Representation Agreement.

In this article:

What is a Buyer’s Representation Agreement?

Covid-19 clauses in your buyer’s representation agreement, top 5 questions to ask yourself before signing a buyer’s representation agreement.

This agreement can be exclusive (you owe a commission to the agent on any home within the agreed time frame) OR non-exclusive (you pay the agent only for homes shown by them). 

You can find a copy of a typical Buyer’s Representation Agreement here.

• Everything in the agreement is negotiable—you can outline your wants and needs for a property
• The real estate agent must act in accordance with the preferences of YOU, including disclosure of all material factors (seller’s financial condition, property’s true worth, commission split, strengths/weaknesses of property, existence of other offers)
• The real estate agent acts as your advocate
• The document clarifies expectations
• Buyer’s don’t pay commissions, with ONE exception: If the property is for sale by owner, the commission you would pay is laid out in the agreement—it is a percentage of the for sale price
• Limits you from signing your own purchasing contract
• Limits you to one broker
• Limits your options for that time period, i.e., prevents you from a private sale or going through a new home/condominium development
• Locked into an agreement regardless of personalities
• Indemnification clause: the Agent is not liable for any physical condition of the property not disclosed or verified

Get listing alerts straight to your inbox

In the wake of the pandemic, the Ontario Real Estate Association has put forward a “Schedule B” to include clauses to protect buyers from penalties if there are delays to the closing date because of COVID-19.  These clauses include:

• Paperless Closing: for all closing documents to be signed electronically including lawyers.
• Delay of Closing if Third Parties are Unable to Close: if the buyer’s bank or mortgage lender, Land Registry Office, property insurers or other entities temporarily stop operating due to COVID-19, then the closing date is automatically delayed for 10 business days.  However, if the delays exceed 60 days, then either the buyer or the seller can choose to terminate the purchase and sale agreement.
• Delay of Closing and Title Insurance: this protects any delays by the Provincial Government to the Land Titles system in the event that there are more closures from the pandemic.
• Automatic Delay of Close if Either Party is Quarantined and Cannot Sign: this protects the buyer and seller if they need to be quarantined resulting in their inability to complete the transaction. If this happens, the closing date will be automatically extended for 30 calendar days. 

Read about other clauses and agreements that are important to sellers when they sign a Listing Agreement .

1. Is the information on the agreement correct?

• Property Type (Commercial/Residential)
• Location (Geographic Region)
• Names of brokerage and buyer(s)

2. Am I happy with the length of the agreement?

• A BRA will typically last 90 days, and rarely exceeds 6 months.  You will need to initial the agreement if it does exceed 6 months.

Get a top-rated REALTOR®

3. Do I understand how my agent’s commission will be paid?

• Commission is typically 2.5% for the buyer’s broker
• The seller pays the commission, unless it is a “for sale by owner” property, in which case it would come out of the sold price
• If, during the house hunt, the listing states a lesser commission than your agreement, you are responsible for paying the difference

4. Do I understand the terms of the holdover period?

• This details the period after the agreement expires that you would still need to pay commission to the agent if you go to the seller directly
• This typically lasts 30-90 days after the agreement’s expiration

5. Is my agent only representing me?

• Multiple representation occurs when the agent OR broker represents both the buyer and the seller in a transaction.  With multiple representation, no information will be confidential.
• In Ontario, a multiple representation agent or broker is required to disclose information to both the buyer and seller, and receive written consent from all parties (a standard OREA Confirmation of Co-Operation and Representation form)
• In British Columbia, multiple representation is prohibited , effective March 15 th , 2019

Mortgage Interest Calculator

What is a mortgage.

When you purchase a house, you are making monthly payments to pay it off. You borrow money from a bank in order to pay for the mortgage and are paying the bank back. Learn more about mortgage

Down Payment

The down payment is the amount you will pay upfront to obtain a mortgage. Learn more about down payment

Interest Rate

An interest rate is charged with your mortgage since you are borrowing money from them. The smaller the amount you borrow, the lower your interest charge will be.

Mortgage Term or Amortization Period

The amortization period is the total length of time over which you plan to pay off your mortgage.

Share "Guide to Signing a Buyer’s Representation Agreement (BRA)"

Recent articles

January 2024

Greater Toronto Area Housing Market Facts - December 2023

December 2023

Greater Toronto Area Housing Market Facts - November 2023

November 2023

Greater Toronto Area Housing Market Facts - October 2023

August 2022

Toronto Real Estate Market Facts 2022

Kitchener Real Estate Market – Prices and Stats 2022

All About Kitec Plumbing

News by city

Meet our top agents

Fivewalls is a 100% free service to match sellers and buyers with full-time real estate agents.

Get a Buying Agent

Real estate news

How to buy a home?

How to sell a house?

Testimonials

Terms of service

Privacy policy

Selection Process

Code of Conduct

Join as an agent

FAQ for agents

Mississauga

More Locations...

Get expert advice delivered straight to your inbox.

What Is a Buyer’s Agent Agreement?

8 Min Read | Oct 24, 2023

Browsing home listings, dreaming about life’s next chapter, finally reaching your homeownership goals—these are all the exciting things you look forward to when deciding to buy a house. And while all of that is definitely part of the fun and games, coming face to face with a real-life real estate agent and their buyer’s agent agreement might snap you out of home-buying dreamland for a second.

But don’t worry. When an agent you’re considering working with presents you with a buyer’s agent agreement, it’s not a sign that you’re in over your head. If you understand what’s in the contract, ask the right questions, and work with your agent to negotiate an agreement that works for you both, then you can have confidence you’re on the road to finding your new home.

Buyer’s Agent Agreement Defined

A buyer’s agent agreement is a contract between a home buyer and a real estate agent that defines how the two agree to work together. And that’s it! While an agent typically is the one who requests a buyer’s agent agreement, it’s meant to set expectations and protect both agent and buyer in case one party doesn’t hold up their end of the deal.

Think about it this way: If you were shopping at a store and a sales associate really took the time to help you find exactly what you were looking for, then they earned the commission for your sale. Well, let’s say after all the sales associate’s hard work, a different one swoops in right at the close, rings you up, and takes the first associate’s commission. Not okay, right? That’s the kind of funny business a buyer’s agent agreement protects a real estate agent from.

Likewise, if the sales associate you’re working with ends up doing an awful job, you’ll want to be able to find a better associate, maybe even a better store. Well, if the right conditions are outlined in a buyer’s agent agreement, that’s exactly what it empowers home buyers to do.

But before you sign anything, you need to make sure the right conditions are outlined—that’s the only way the buyer’s agent agreement will work for you. So how do you know good conditions versus bad ones? Check out our breakdown of what to look for and what it means for you.

With the right agent, taking on the housing market can be easy.

Buy or sell your home with an agent the Ramsey team trusts.

What’s Included in a Buyer’s Agent Agreement?

Across the industry, different agents and brokerages have their own versions of buyer’s agent agreements—heck, they might even call them different things. But whether your agent presents you with a buyer’s agent agreement, buyer representation agreement or a buyer broker agreement, there’s really no difference between them. So, whichever version you come across, you just want to make sure to look out for these key details:  

Term Length : The term length is the time period that your contract is active. A lot of contracts last around 90 days, but as long as you and your agent agree, they can be as long or as short as you want. Term length language may also include instructions for what happens when the contract ends in the event you haven’t found your new digs yet—whether to renew the agreement, renegotiate terms, part ways, etc. Keep in mind that waiting out the term length is the easiest way to get out of a contract you don’t want to be in, so think carefully about signing anything that’d commit you to a timeline you’re uncomfortable with. Contract terms typically last 3–12 months.  

Termination Rights: No, we’re not talking about the rights of cyborg assassins from the future (that’d be terminator rights)—but this section is pretty crucial, so listen up. If either the agent or home buyer needs to end the working relationship, the termination rights basically spell out how you should break up. Expect to find language on things like: grounds for termination, how termination should occur, how much compensation (if any) the agent receives, or how much notice should be given beforehand. Termination tends to get sticky (one of the reasons you may want to think twice before hiring a friend or family member ). In addition to knowing exactly what this section commits you to, make sure you know how to choose the right real estate agent to avoid this mess in the first place.

Buyer Exclusivity and Representation: Consider this the “not seeing other people” section. This commits you to only work with the agent or the brokerage you’re signing with—at least until the term length is up. If this triggers commitment issues and you feel a cold sweat coming on, take a deep breath. You’re not locked in if things go south with your agent. Just talk to the agency’s broker about your situation. They’ll likely be able to find another agent at their brokerage that’s a better fit.

Compensation: You’ve probably heard that the home seller normally pays both the sellers and buyers agents’ commissions (yay!). But that doesn’t mean you can just skim over the compensation section when you go to sign your buyer’s agent agreement. It’s very important to understand exactly what you’ll be on the hook for in the event a seller refuses to pay or you breach the terms in the buyer’s agent agreement.

Property Description: Often times, the agent will outline the specs of the home you’re on the hunt for—things like price, neighborhood, type of property or size. Now, remember, this isn’t where you mention that you really want an at-home gym with east-facing windows for sunrise yoga. This is simply meant to set expectations and give you something to point back to if your agent misses the mark in a big way when they show you homes.

Agent Duties: There will probably be a description of your agent’s duties somewhere in your buyer’s agent agreement. Expect to find responsibilities like: finding and showing you potential homes, writing and negotiating offers and addendums, or making sure everything happens within your contract’s terms. When reviewing this section with your agent, this is a good time to get on the same page about expectations—like scheduling preferences or communication style—for your home-buying experience.

Real Estate Advice Directly to Your Inbox

Enter your email to get monthly content that’ll help you navigate the market with confidence.

Are Buyer’s Agent Agreements Normal?

Signing a buyer’s agent agreement is a totally routine part of agreeing to work with a real estate agent when buying a home. It’s just like signing a listing agreement with a listing agent when selling. While you do need to be careful and understand everything in your agreement before signing, it can be a good sign when an agent requests one. Because agents work on 100% commission, having your John Hancock on a buyer’s agent agreement lets them know you’re serious about buying a home—which in turn makes them serious about finding you one.

Find expert agents to help you buy your home.

If you’re still not comfortable signing, ask yourself:

• Do you trust your real estate agent? Interviewing your real estate agent before you hire them is one of the best ways to gauge whether they’re there to serve you or there to collect a commission check.  Use these questions  during your agent interviews to weed out the agents who won’t have your back.
• Do you understand everything in your agreement? If it’s your first time buying a home , don’t let the paperwork and fancy lingo intimidate you. Get crystal clear on the agent’s compensation and your termination rights—and don’t be shy about negotiating if something doesn’t add up.
• If things went sour, how would you come out? If you’d be in serious trouble in the event you had to terminate—say, out a termination fee you can’t afford—you might want to hold off moving forward until things are more stable for you. Even though that type of situation is rare, you’ll want to be financially secure before you commit so that you’re not screwed if something goes haywire.

Have More Home-Buying Questions?

Let’s face it, buying a home is a complicated process and there’s probably a lot more on your mind than just the buyer’s agent agreement. The good news is, we can connect you with some of the best real estate experts in your area who will help you work through all your home-buying questions.

Our RamseyTrusted   real estate agents are top-performing agents in your area with years of success under their belts. We endorse them because they believe in doing money and business the Ramsey way and have a heart to serve you. With a RamseyTrusted agent, you can be confident you're working with a real estate expert who's got your back.

Find a real estate pro today!

• Find trustworthy agents near where you’re buying or selling.
• Interview them and choose which one’s right for you based on their experience and expertise.
• Read your buyer’s agent agreement, sign if you agree to the terms, and get to house hunting.

Did you find this article helpful? Share it!

About the author

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

15 Questions to Ask When Buying a House

Buying a home and wondering what to look for? Wonder no more! Here’s a list of 15 questions you should ask before buying a house to make sure you wind up with a good deal.

Should I Use My Friend or Relative as My Real Estate Agent?

Considering using a friend or relative as your real estate agent? Here are four reasons to choose a true real estate expert instead!

Buyer Representation Agreement

What you should know.

• A Buyer Representation Agreement (BRA) turns a customer into a client of a real estate agent .
• You don’t have to sign a BRA, but it will affect your agent’s or brokerage’s obligations to you.
• Agents have a fiduciary duty to act in a client's best interests, but there is no such duty to work in a customer’s best interests.
• In some provinces, an exclusive BRA means that the agent that you are signing with will be your only agent. You cannot work with another agent unless the home search criteria is different.
• BRAs usually last 90 days, but can be up to 6 months or longer
• The BRA will also include services that you want to be included, such as real estate advertising or open houses, along with defining who will pay for these services.
• Buyer representation agreements can be cancelled if there is mutual consent with your agent and your BRA contains a clause that allows you to do so.
• BRAs only define your relationship with the agent or brokerage. You are not forced to purchase a home with them or during the length of the contract.

A Buyer Representation Agreement (BRA) is a written contract between you and your real estate agent that confirms your business relationship. It is an important document that outlines the services your real estate agent provides and what your real estate agent expects from you. This includes:

• The agent’s duties and obligations to the buyer
• Agency relationships
• The scope of the agent’s duties
• Buyer obligations

Your real estate agent will ask you to sign a BRA before making a purchase offer on a house. You are required by law to sign a BRA when working with a real estate agent. When shopping for homes, you should also make sure to get the best home insurance policies .

Standard Buyer Representation Agreement Forms

The forms listed below are posted by provincial real estate associations and serve as standard BRA contracts.

Should I sign a buyer representation agreement?

A Buyer Representation Agreement (BRA) is a legal requirement if you want to work with a agent. You should never sign a contract that you do not fully understand, so make sure that you ask questions and accept every point in the BRA. Only sign a BRA if you agree with all the terms and you want the real estate agent to represent you.

By signing a BRA, you give up certain privileges and you gain some benefits:

• Representation: A BRA ensures that your real estate agent will work in your best interests and abide by the services listed in your contract. They can handle much of the homebuying process including negotiating, inspecting, and paperwork.
• Clarification: By formalizing your professional relationship, a BRA clearly lays out exactly what your real estate agent expects from you and what you can expect from them.
• Negotiable: Most of the terms in a BRA can be negotiated with your real estate agent. If you are unhappy with the contract, do not sign it.

Disadvantages

• Locked Term: By designating the real estate agent as your representative, if you purchase property during the contract term, your real estate agent will receive a commission no matter what.
• Exclusivity: With an exclusive BRA, you will not be able to use other real estate agents. If you later realize that you’re unhappy with your agent, you cannot go elsewhere during the contract term.

How long does a buyer representation agreement last?

The contract length is one of the first things included in a BRA. During the contract duration, your real estate agent is entitled to a commission on home purchases and must work in accordance with the terms set by the contract. A BRA should have a clause that addresses exactly when the agreement begins and when it expires. You are not required to buy a home or place a purchase offer during the contract duration.

For example, this is the duration clause in the Ontario Real Estate Association’s (OREA) Buyer Representation Agreement :

The expiration can be set at any date, but if the contract length exceeds six months, the buyer must initial the document. This rarely happens, so these initials are usually omitted.

Holdover Clause

The holdover clause designates a period of time as the “Holdover Period”. During this period, which typically lasts between 30 and 90 days, the agent is entitled to a commission on a home purchase or lease introduced to the buyer during the original BRA contract length. This means that your real estate agent may still receive a commission even after the contract’s expiration. You should ask if a BRA includes a holdover clause.

Non-Exclusive Buyer Representation Agreements

Non-exclusive BRAs provide the same details as a regular BRA and they have a clause for commissions. However, the buyer may use any real estate agent to find a property and only the agent that found the property is compensated. The commission is often included in the purchase price and will always be paid for by the seller. This means that home buyers do not have to provide compensation to the real estate agent.

Cancellation of Buyer Representation Agreement

Buyer representation agreements are legally binding contracts so they are often difficult to cancel, but there are still many things you can do.

• BRAs often have a clause allowing you and your agent to terminate the contract by mutual consent. If your agent gives you the option of terminating your contract, this is the easiest way to do it.
• If your real estate agent refuses to cancel your contract, you can ask the brokerage for a cancellation. Real estate agents are required to work for a brokerage. Technically, you are the brokerage firm’s client and they have the power to cancel your BRA.
• If both your agent and your brokerage refuse to cancel the contract, you can go to your state’s real estate council to file a complaining, ask for an investigation, or request a mediator. If your agent is not performing the services outlined in the BRA, you have solid ground to forcefully cancel the contract.
• As a last resort, you can hire a lawyer or go to court. However, this is costly and may not work out in your favor. If you have a good case, you can probably resolve the issue through your state’s real estate council. At this stage, it’s easier to wait until the contract expires.

What’s a Buyer Broker Agreement, And What Should You Know Before Signing One?

• Making the Offer
• Published on April 19th, 2022
• 13 min read

Amber was one of HomeLight’s Buyer Center editors and has been a real estate content expert since 2014. The former editor-in-chief at Inman, she was named a “Trendsetter” in the 2017 Swanepoel Power 200 list, which acknowledges “innovators, dealmakers, and movers-and-shakers who made a noteworthy impact over the last year” in real estate, and her assessment of revenue and expenses at the National Association of Realtors won a NAREE Gold Award for “Best Economic Analysis” in 2017.

• Share on LinkedIn
• Share on Twitter
• Share on Facebook
• Share by Email
• Save to Pinterest

At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict  editorial integrity in each of our posts.

Gone are the days where a simple handshake could solidify a working agreement between a buyer and their real estate agent. Instead of a handshake, buyer’s agents are presenting homebuyers with a document called a “buyer broker agreement” — and you might not know what that is!

If this is your first time buying a house, the buyer-broker agreement is just another document in a long list of others that require your John Hancock. However, if you’ve purchased a home before the 1990s, you might be wondering why this document is necessary.

Before we go into detail about the buyer-broker agreement, let’s first clarify what a buyer’s agent does.

Find a top real estate agent near you

We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs. It takes just two minutes to match you with the best real estate agents, who will contact you and guide you through the process.

What does a buyer’s agent do?

A buyer’s agent is a real estate professional who’s going to be your new best friend during this exciting and sometimes stressful endeavor. We spoke to Josh McKnight , a top-selling real estate agent in Pennsylvania , and he describes the role of the buyer’s agent:

“A buyer’s agent has a fiduciary responsibility to their client, the buyer, to make sure that they understand the language in the contract and make sure they’re buying a home that fits their needs. They make sure the buyer is choosing all the correct contingencies and that they’re not being taken advantage of. They also have a responsibility to make sure that the home is worth what the sellers are asking for, and will work with the buyers to make an offer.”

In short, working with a pro who legally represents you and looks out for your best interests — throughout the entire home purchase process — is a very good thing. It’s certainly possible to buy a home without the representation of a buyer’s agent, but in a competitive market where things change rapidly, you’ll be glad to have a knowledgeable professional on your side.

Buyer-broker agreements, explained

The buyer-broker agreement is an important — and legally binding — document that’s designed to protect both the buyer and the buyer’s agent. This agreement clearly outlines what the agent will do for you, the terms of the agreement, and how the agent will be compensated, which depends on what kind of buyer’s broker agreement you have.

Exclusive right-to-represent contracts are the most common buyer-broker agreement. The document will outline what the agent will do for you — the buyer — and will further describe your obligations.

For example, you may be on the hook to pay your agent’s commission, as is detailed in the agreement, but if the seller agrees to pay the commission (which is, fortunately for buyers, the norm !), you won’t have to worry about that.

The defining factor of this agreement is that, once signed, you cannot work with another agent during the specified time period. You can view a sample of an exclusive right-to-represent agreement here .

Nonexclusive not-for-compensation contracts can be broken at any time by either the buyer or the agent. This type of contract will allow you to work with any other agent if you’d like, and there is no compensation paid to the broker from your end. This type of buyer-broker agreement affords you the fiduciary privileges of agent representation when viewing houses with that particular agent, but you’re not beholden to them exclusively, and you won’t have to make up for any compensation that isn’t paid out by the seller in the event of a purchase.

Nonexclusive right-to-represent contracts state that the buyer will compensate the broker — if commissions are not fully covered by the seller — if the buyer purchases a house their agent presents to them. Under this contract, though, the buyer can purchase a home with another broker as long as their original agent didn’t propose that particular property.

What is a buyer-broker agreement?

As you’ve probably discerned by now, a buyer-broker agreement is a document that establishes a business agreement between the buyer (you) and your real estate agent’s supervisor (also known as the broker).

A buyer-broker agreement is used to protect the buyer as well as the real estate agent representing them. It outlines the scope of work the real estate agent will do for the buyer, while giving the buyer reassurance that the real estate agent has their best interest at heart, McKnight explains.

If something goes wrong and you aren’t happy with the real estate agent you initially started working with, you can also ask the broker to assign a new agent to work with you.

The components of a buyer-broker agreement

A buyer-broker agreement consists of several important parts.

This section of the agreement outlines the responsibilities of your real estate agent . Some of the tasks your agent will do for you include the following.

Show you properties that meet your needs

A buyer’s agent is going to sit down with you to help you figure out how much house you can afford and what requirements the house should meet. They will sift through property listings in your desired area and schedule appointments to show you homes that best fit your criteria . They’ll give you a general rundown of the neighborhoods where you’re shopping for homes and will answer any questions you may have along the way.

Explain documents, procedures, and disclosures

A buyer’s agent will gather appropriate documents and review them with you. They’ll recommend the proper inspections for your house, and they’ll even arrange to have those inspections done.

Help you write and submit your offer

Once you find the house that you’d like to make an offer on, the buyer’s agent will offer you advice about what they think is a reasonable offer for the home. Then they’ll write it up and present it to the listing agent to give to the seller. If the seller rejects the offer, the buyer’s agent will consult you and negotiate on your behalf.

Monitor contingency time limits

There are a lot of steps in buying a house, and each of those steps will take a certain number of days to complete. The buyer’s agent will help make sure things like the home appraisal , the home inspection , and mortgage approval are completed on time.

Be your support on closing day

A buyer’s agent is going to work hard to make sure that you get the house you’re interested in buying. When closing day finally comes , they’ll offer support and guide you through all of the paperwork (there’s going to be a lot!) and ensure that the transaction goes off without a hitch.

Term length

The length of your buyer-broker agreement is one of the first things laid out in the contract. During this time, you are contractually obligated to honor the agreement for that time frame.

Typically, the agreement will last for six months . However, some agents will request a full one-year agreement, while others will agree on a 30-day agreement. This is generally a negotiable term, so just talk it over with your agent if you have concerns about the proposed length of your buyer-broker agreement.

Termination

It is usually possible to terminate the buyer-broker agreement if either the buyer or the agent feels that the arrangement isn’t working out. This section of the contract will outline how someone can terminate the agreement, how much prior notice needs to be given and a dollar amount the buyer will have to pay if the advance notice is not given.

Buyers should beware, however, that because buyer-broker agreements are actually between you and the brokerage — not just one specific agent — your request to terminate may be countered with an offer to simply assign you to a different agent within the same brokerage.

That said, brokers usually understand that when one party wants out, pressuring the other side to continue probably isn’t going to do anyone any favors.

“I don’t like to hold anybody to contracts,” says Adam Slivka , an Irwin, Pennsylvania -based agent with 10 years of experience. “If someone wants out, I probably don’t want to work with them, either — you know what I mean?”

As long as you’re not trying to weasel out of your agreement as soon as your purchase offer has been accepted, there’s likely room to talk things through and part ways amicably.

“It just depends on the circumstance and the broker,” says Slivka.

Compensation

Two types of compensation could be listed in this section of the agreement: Retainer fee and payment.

Retainer fees are placed in the agreement to compensate agents for their time and any expenses that may have been incurred while looking for a buyer’s dream home. Frequently, agents will use retainer fees as a way to differentiate the serious buyers from the ones that aren’t committed.

Payment is outlined in this section as well, and a lot of buyers have questions. In 2020, the average commission rate for a home sale (including both buyer and listing agents) was 5.656% , but — and remember that there will always be exceptions — it can range as low as 3% and as high as 7%.

But you, the buyer, will rarely be responsible for your real estate agent’s commission . Once the transaction has finalized, the seller will pay their agent (the listing agency) all commission costs. Then the listing agency will pay the buyer agency what they are owed.

If, however, you happen to fall in love with a house that is for sale by owner , you will be responsible for compensating your agent — unless you’re able to negotiate with the seller and get them to agree to cover a suitable fee (usually 3% of the sales price).

“When you’re dealing with a for sale by owner house, that seller isn’t tied into any kind of relationship with the multiple listing system ,” explains Dan Robins , a 20-year agent in West Chester, Pennsylvania .

“You need to clarify that up-front with your agent to make sure you’re on the same page — if it’s a $500,000 house, your closing costs might increase by $15,000 if there’s a 3% commission built into that buyer-broker contract.

“Buyers need to be aware of that before they sign.”

Representation

This section of the agreement outlines what kind of representation you have.

If you agree to designated representation , this means that your agent will show you homes listed by other agents from their real estate agency. If you agree to dual representation , your buyer’s agent is now a dual agent . With a dual agent, you agree to see properties that your agent has listed with the sellers, and your agent will represent both you and the seller. Dual agency is not legal in some states due to the potential for conflict of interest.

Exclusivity

This section details exclusivity rights that the buyer agrees to.

If you’re in an exclusive agreement with an agent, this means you will work with them and only them. You can negotiate the commission rate, but if the seller agrees to pay additional commission and it is disclosed, the buyer’s agent may receive more. However, that doesn’t mean your agent is going to slack on their duties — they still have your best interest at heart.

If you’re in a nonexclusive agreement , then you, the buyer, may work with other agents to purchase a property.

Property description

This paragraph clearly states what kind of property you are looking for and the price range. Because this paragraph specifies what type of property you want to buy, it may grant you the ability to use another agency to look for something else.

For example, if you are working with an agent to find a new summer home, and the property description states you want a single-family home in the $100,000 to $150,000 price range, then you can probably work with another agent to find an investment property — like a 10-unit complex in the $800,000 to $900,000 price range — but clarify this with your initial agent first.

Confidentiality is one reason to sign a contract; the other reason might be that the agent then knows you’re a little more serious. Hopefully they’ll put a little extra effort in to make things happen or to find a property for you as a client. Adam Slivka Real Estate Agent Close Adam Slivka Real Estate Agent at C21 Fairways Years of Experience 18 Transactions 435 Average Price Point $221k Single Family Homes 428

Frequently asked questions, answered

Should you sign a buyer-broker agreement.

If you’re serious about buying a home, it’s in your best interest to sign a buyer-broker agreement and reap the benefits of proper representation.

“Until you sign that agreement, an agent has no fiduciary relationship with you,” cautions Slivka. “So, if you go through a house with an agent and you say, ‘Wow, I would pay $X for this house!’ and you’re not being represented by them, they have no real obligation not to tell the seller’s agent, ‘Hey, do you think we can put this together for $X? Because this is what I know the guy will pay.’”

Slivka acknowledges that agents should still deal honestly and in good faith whether a buyer-broker agreement is in place or not — but, technically, what you tell them prior to signing is not confidential because you’re not yet a client.

“Confidentiality is one reason to sign a contract; the other reason might be that the agent then knows you’re a little more serious,” says Slivka. “Hopefully they’ll put a little extra effort in to make things happen or to find a property for you as a client.”

How long is the contract valid?

As we touched on earlier, the length of a buyer-broker contract can vary, but it’s safe to assume that six months is a standard place to start. Talk to the agent if you think you’ll want more or less time — or perhaps if you prefer to limit your contractual agreement to a particular home.

“Sometimes buyer-broker agreements are tied to a specific property,” says Robins. “That’s usually a more commercial-oriented use; I work with a lot of investors, and investors often have more than one broker they deal with. When I do buyer contracts for my investors, I’ll put the address of the property in the contract so it’s only valid for that property.”

Is this an enforceable contract?

Well, it wouldn’t be a contract if it weren’t enforceable! Yes, your buyer-broker agreement is enforceable from both sides — if either you or the undersigned brokerage fails to hold up your end of the deal, the other party can take action. This is why it’s so important to thoroughly read through the agreement prior to signing and address any questions or concerns from the outset.

What happens if you want to get out of the contract?

Again, as we noted above, it’s essential to talk to your agent as soon as you start feeling that twinge of “I want out.”

Whether it’s a personality clash (can the issue be solved by switching to a different agent from the same brokerage?), a breach of trust, or a lifestyle shift (maybe you’ve decided not to purchase a home right now after all), the best hope for an amicable parting of ways is to have an honest conversation.

What happens if you buy a house with a different agent?

Unless the buyer-broker agreement you’ve signed allows for this, you’ve breached the contract.

“Technically speaking, the [original] broker would be due a commission,” says Robins. “These things usually get negotiated out somehow, but they’re under contract — so there’s a commission due.”

Your best bet is to avoid this scenario and only work with the agent with whom you’ve signed a buyer-broker agreement. Should something come up that makes this impractical — perhaps you’ve found a home in a different state, or you’ve switched gears to a totally different type of property — talk to your agent and find a solution together.

What's your home worth today?

Tell us a little bit about your property and get a preliminary estimate of value in as little as two minutes.

Which agreement is best for you?

The buyer-broker agreement that works best for your scenario will vary depending on where you live and which agent you’d like to help with your home search. Whichever type of agreement you go with, buyers are advised to pay close attention to the compensation and termination sections of the contract before signing on the dotted line.

And talk to your agent if you have any questions; remember, the buyer-broker agreement exists to protect you both.

Header Image Source: (Medienstürmer / Unsplash)

Amber Taufen

Former Managing Editor, Buyer Resource Center

Why hire a buyer’s agent

How to pick a buyer’s agent

Find a top agent

How much is my home worth?

Home affordability calculator

Down payment calculator

Shop for homes

Watch these Dates for Key Market Research Reports

Make Your Voice Count in the Capital

• News & Media
• Florida Realtors News

Is It Time to Introduce Buyer Representation Agreements?

If you’re a buyer’s agent, are you using buyer representation agreements? Here’s why you might want to consider it.

Signing a contract when representing sellers and listing a property is second nature to all real estate professionals. An agent would never list a property without a contract, right? So, why do so few agents require a buyer representation agreement? It’s not standard practice because it can be a difficult conversation to have with buyers.

In a 2022 November session at the National Association of Realtors® NXT Conference in Orlando, Adorna Carroll, president of Dynamic Directions, Inc., offered training to real estate agents on buyer/seller representation.

For buyer’s agents, getting a signed buyer agreement requires a careful conversation about the amount of time you will be spending with your buyers to find them their dream home. Yet rather than propose a signed buyer agreement, agents often do this work without a signed agreement, keeping their fingers crossed that the buyers won’t act without them or with a different agent.

The next time a homebuyer approaches you for assistance in finding their dream home, have them sign on the dotted line. “I recommend you tell them, ‘There are certain things that I need to cover here so we can mitigate your risk and we can manage mine,’” she said.

Putting together a process for buyer representation

There are several classes that you can take to guide you in how to approach buyers when requesting they sign an exclusive buyer agreement. Some that Carroll recommends are: Accredited Buyer’s Representative course (ABR®), the Seller Representative Specialist course (SRS) and the Real Estate Negotiation Expert certification course (RENE). Enrolling in these courses and earning these certifications will elevate your skill set and reassure buyers that they are working with a seasoned professional.

But once you’ve acquired the skill set to attract buyers, what do you include in a buyer’s contract? How do you write one? And most importantly, how do you get buyers to sign?

According to Carroll, there are a few key points that every buyer’s contract should cover:

• What the agent can do by law.
• What the agent can’t do by law.
• The agent’s business routine.
• A start and end date.
• Payment guidelines.

Some buyer’s contracts include termination fees, but not all do. Whether or not you decide to include a termination fee will be largely based on personal experience. Some agents require termination fees for any expenses they forwarded on behalf of the buyer in the search process.

No exceptions

Using a buyer representation agreement is important whether you are working with buyers you know, like family, friends or colleagues, or complete strangers.

It may be easier to get known clients to sign on the dotted line, but for some reason, agents are least likely to ask them to do so. In reality, these known clients probably make up a large percentage of an agent’s client base.

Asking unknown or new clients to sign a buyer’s contract has challenges as well. Clients may not yet feel comfortable signing with an agent they’re unfamiliar with, and that is OK. You don’t want the business of a buyer who will be difficult to work with. However, if an unknown client does sign, then you have a set of parameters on which you can build a relationship with them. Allow them to ask questions about the process and spend time with you in your office so they feel assured in their decision to sign with you.

Your time is valuable, and a signed buyer representation agreement ensures that your value is recognized. #

Florida Realtors® buyer agreements

Florida Realtors® has several contracts designed for working with buyers in different relationships. Here’s a list of some of the ones that are available.

• Exclusive Buyer Brokerage Agreement–single agency (EBBA-6sa):  This form may be used when a broker wishes to act as a buyer’s agent and be paid commission by the buyer. It establishes an exclusive, single agency representation with a buyer and provides for a retainer fee.
• Exclusive Buyer Brokerage Agreement–transaction agency (EBBA-6tb) : This form may be used when a broker wishes to act as a buyer’s agent and be paid commission by the buyer. It establishes an exclusive, transaction agency representation with a buyer and provides for a retainer fee.
• Exclusive Buyer Brokerage Agreement–no brokerage relationship (EBBA-6nr) : This form may be used when a broker wishes to act as a buyer’s agent and be paid commission by the buyer. It establishes an exclusive, no brokerage agency representation with a buyer and provides for a retainer fee.
• Exclusive Buyer Brokerage Agreement–transition from single agency to transaction agency (EBBA-6tn) : This form may be used when a broker wishes to act as a buyer’s agent and be paid commission by the buyer. It establishes an exclusive, single agency representation with a buyer and provides for a retainer fee, with a right to transition into transaction agency.
• Showing Agreement (SA-3x) : This form may be used to create a buyer’s commission agreement based on a one-time showing of property.

Click here to find a list of all the contracts Florida Realtors provides members.

The benefits of using a buyer representation agreement

The National Association of Realtors® put together a video discussing the benefits of using a buyer representation agreement . Here are some takeaways:

Buyer representation agreements are a win-win proposition for both real estate professionals and consumers. They assist in building trust and a mutually beneficial relationship by promoting transparency through up-front conversations, and provide clarity regarding services consumers can expect to receive, as well as how their real estate professional will be compensated. This transparent practice is crucial for consumer education during one of the biggest and most complex transactions many make in their lifetime.

When meeting with a buyer who may be unfamiliar with buyer representation agreements, be prepared to articulate the many benefits of these agreements, such as how they:

• • Ensure the client has a loyal advocate representing them in the transaction.
• • Provide clarity on the services a consumer should expect from their agent, and how the consumer can partner with the agent to conclude a successful transaction.
• • Understand the agent’s representation and duties owed to the consumer, including whether the agent may be serving as a dual agent.
• • Allow consumers an opportunity to ask questions about how their real estate professional is being compensated, including who is responsible for the payment for their services.

For resources to help facilitate these important conversations during a buyer representation meeting, including articulating your value and explaining how compensation works, check out competition.realtor for infographics, informative articles and more.

Audrey Lee is a content writer for HW Media.

This information is meant as a guideline and not legal advice. Always enlist the help of an attorney when crafting and executing contracts. This article originally appeared on RealTrends.com

You May Also Like

• FTC Issues Final Rule Banning Non-Competes
• Does Reverse Mortgage Have a Non-Recourse Clause?
• Buyer’s Offer Was Unexpectedly Rejected

What is the Buyer Representation Agreement (BRA)?

• February 5, 2021

The search for your dream home is an exciting, albeit frenzied, endeavour. It is filled with endless possibilities; do you want to live in the city or suburbs? Will you live in a condominium, townhouse or a detached home? This is essentially the fun part of home buying before you become unnerved by formal Realtor language and daunting paperwork.

After making the initial decision to buy a property, the next step would be to seek out a Realtor. Almost every prospective buyer looking to enter the real estate market will require the assistance of real estate professionals. They are the experts in the industry, and without them, home buying and selling would be a far more complex process. When you secure a real estate agent and begin to search for homes, the agents will eventually ask you to sign a Buyer Representation Agreement (BRA) prior to putting an offer down on a property. Although it sounds intimidating, the contract is ultimately in the best interests of both the buyer and the real estate agent. Having said that, it is important for you to understand the terms and clauses of the agreements before you sign one.

As a buyer , you need to stay informed and educated throughout the entire home buying process. After all, this will be is your home so you will want to be knowledgeable and informed on the entire process. Even it can be challenging to put your furniture shopping on the back burner when a Realtor is asking for a signed buyer representation agreement , it is crucial to do your research before both parties consent to this contract. Ask questions. Seek clarity. Negotiate if you read something you do not agree with.

We have compiled some key information on everything you need to know about a Buyer Representation Agreement. Give it a read, make a decision on whether you want to sign and then get back on track to securing your dream home! 

What is a Buyer’s Representation Agreement?

A Buyer Representation Agreement is a law-binding document that establishes a formal working relationship between a home buyer and the buyer’s representative. The contract comprehensively details in writing the services provided by the Realtor, as well as any expectations the agent may have of the buyer in return.

The language used in the document is formal in nature and homebuyers should ensure they comprehend the terms of the agreement. This is a great opportunity to clarify expectations, develop a relationship with your agent and most importantly, elevate the services you will receive.

A buyer representation agreement (BRA) is always signed prior to putting in an offer on a home.

Five questions to ask yourself before signing a Buyer’s Representation Agreement  

Question 1: is the information on the buyer representation agreement correct and accurate.

The agreement should be sure to include the following sections:

• Property Type (Commercial/Residential)
• Location of the Home (City, Province, Country)
• Names of Brokerage and Home Buyers
• Closing Date

Question 2: Am I happy with the length stated in the agreement?

The representation agreements should clearly outline the time period for which it is valid:

• A buyer representative agreement (BRA) is typically valid for a time period of 90 days and rarely exceeds six months.
• If the period of time exceeds six months, you will also need to initial the agreement document.

Question 3: Do I understand how my real estate agent’s commission will be paid?

Before signing the agreement, the client should know what the monetary expectations are between the buyers and the agent

• The commission number is typically 2.5% for the buyer’s salesperson.
• Usually, the seller pays the commission, unless the property is being sold by the owner, in which case the commission would be taken out of the sold price.
• During the search for homes, if the listing states a lesser commission than your agreement, you are responsible for paying the difference.

Question 4: Do I understand the terms of the holdover clause in the BRA?

There should be one clear section in the Buyer Representation Agreement (BRA) regarding the holdover clause:

• Holdover clause is the period after the buyer representation agreement expires that commission will still need to be paid to the broker if the sale of the property is done directly through the seller.
• The order typically lasts 30 to 90 days after the buyer’s representation agreement’s expiration.

Question 5: Is my agent only representing me?

There should be transparency and agreement between the client and salesperson in regards to who the broker is representing in this deal:

• Multiple representations happen when the real estate agent represents both the buyer and the home seller in a transaction.
• In this case, no information will remain confidential between the two parties in the real estate transaction.
• In Ontario, a multiple representation agent or broker is required to disclose information to both the buyer and seller, and receive written consent from all parties.

The pros and cons of signing Buyer Representation Agreements (BRA)

The pros of signing a bra.

• The Buyer Representation Agreement (BRA) is a negotiable form. It gives you the opportunity to outline your wants and needs for a property. If there are reasons why you, the client, are not comfortable with the details and services outlined in the buyer representation agreement, it can be addressed with the agents directly.
• The real estate agent and brokerage must act with you. By signing the Buyer Representation Agreement (BRA) form, you become clients rather than customers. This means the real estate agents exclusively represent you (unless you agree otherwise) and ensures your information is kept private from the seller. In turn, your brokerage must also share with you details of the seller’s financial position, the home’s true value and details regarding the commission split. This is enforced by The Real Estate Council of Ontario (RECO).
• The real estate agent acts as your advocate. Home buying can be a stressful endeavour, which is why it is important to solidify your relationship with a brokerage and real estate. If you run into a problem, agents will provide you with the right advice and service to ensure you’re making the best decision.
• The document provides clarity on expectations. When dealing with a real estate salesperson in the purchase of a home, it is helpful to have a legal contract. If there are any reasons for concern or disagreement down the line, it helps provide clarity and order about what was expected from both parties.
• The document lays out commissions. All information regarding commissions and fees will be made aware to the clients in the BRA. The Real Estate Council of Ontario (RECO) enforces a Code of Ethics that prevents a representative from providing false information. The commission fees stated are standard and in accordance with the RECO.

The cons of signing a BRA

• It limits you from signing the purchasing contract of your home. The only negative of this step is just one of personal satisfaction. Your brokerage will provide their service to ensure your offer and the remaining
• It limits you to one agent and brokerage. There have been instances where a broker has gone MIA in the midst of the customer searching for their dream home. It’s always best to do your research on a real estate agent so you can make sure you will receive the services you deserve.
• It limits your options for that time period and prevents you from a private sale or deciding to go through a new home or condominium development. It happens – once in a while, it’s just more beneficial for you, the client, to purchase a home through a private sale because you know the sellers directly. Just understand that once a BRA is signed, your relationship with the real estate agent and brokerage supersedes the one with the seller.
• You could be locked into an agreement regardless of your conflicting personalities. Sometimes the relationship between the real estate agent and the customer/client is less than ideal. In the search for a home, there could be a number of reasons for a clash of personalities. Be sure to choose agents who respect you as a client and are willing to put their customers ahead of their ego.
• The Indemnification Clause means the agent is not liable for any physical condition of the property not disclosed or verified. As a customer making a very large purchase, it’s disheartening to know there may be obstacles in your endeavour to obtaining the perfect home.  

COVID-19 clauses in your Buyer’s Representation Agreement (BRA)

Because of the ongoing COVID-19 pandemic, a “Schedule B” has been put forth by RECO. This protects the interest of buyers in the event that there are penalties resulting from delays to the closing date due to COVID-19. The clauses are listed below:

Paperless Closing

All documents and agreements, including lawyers, are to be signed electronically

Delay of closing and title insurance

In the event of closures due to the pandemic, this protects against any delays by the Provincial Government to the Land Titles system

Delay of closing if third parties are unable to close

The closing date is automatically delayed up to 10 business days if the buyer’s bank, mortgage lender, property insurance, or Land Registry office is forced to stop operating due to COVID-19. If the delay exceeds 60 days, however, then either the buyer or seller can choose to terminate the home purchase and sale agreement.

Automatic delay of closing if either party is quarantined and cannot sign

If either the buyers or sellers are quarantined as a result of COVID-19, the closing date will automatically be extended for 30 calendar days. This protects both the sellers and the home-buying clients.

Frequently Asked Questions  

1. how is a buyer representation agreement presented.

To protect everyone involved, the is required in writing with a signature in order to protect everyone involved.

2. When is the best time to sign a Buyer Representation Agreement?

Typically, a BRA is signed prior to working with the real estate agent.

3. What happens if I don’t want to sign?

While you are able to choose to be customers rather than an agent’s clients, there are stark differences in regards to your representation. The BRA is created to protect and promote the client’s best interests.

4. What is a holdover clause?

This clause means that even if your BRA expires, and you purchase your home within 90 days of the expiration, you must still go through the original agent in the purchase of your home.

So, should you sign The Buyer Representation Agreement?

Now that you understand what a Buyer Representation Agreement is, you have to make the crucial decision on whether to sign. It is important to remember these documents are put in place to protect both the client and the brokerage during the process of buying a home.

Ultimately, the BRA is standard practice within the RECO. Before offering their full services and prior to you putting in an offer on the home of your dreams, a brokerage and Realtor will always require you to sign and initial one.

In order to make sure you’re receiving the services you were verbally promised, it is also in your best benefit to understand and address the terms of your buyer representation agreement. As long as the author of the document (the brokerage) and the signer (the client) agree, you’re more than likely on the right track.

Congratulations! You’re one signature away from obtaining your new home.

Related Posts:

About the Author

Post a comment, related articles, latest housing accelerator fund recipients: grand bay-westfield, harvey rural community, and the town of sussex.

• Real Estate News Canada

February 2024 Canada-Wide Construction Update Released

Most trending news, mortgage lender trends, stay connected, subscribe to our newsletter.

Join our community of 29,000 investors and stay ahead with the latest news, updates, and exclusive offers delivered straight to your inbox. Sign up for our weekly newsletter today!

Designed to offer readers accurate, cutting-edge information to guide their investment decisions, each issue of Canadian Real Estate is filled with informative articles on a broad range of topics.

Useful Links

• Expert Advice

© 2024 Canadian Real Estate Wealth . All Right Reserved

• HousingWire
• Altos Research
• Reverse Mortgage Daily
• Newsletters
• HousingWire Annual
• Gathering of Eagles
• Virtual Events

Popular Links

• Mortgage Rates Center
• Whitepapers
• Marketing Solutions
• We’re Hiring

NAR clarifies details on buyer broker agreements

According to the trade group, agents need to have an agreement signed before taking a client on a home tour, unless state laws require agreements at an earlier stage

• Click to share on Twitter (Opens in new window)
• Click to share on Facebook (Opens in new window)
• Click to share on LinkedIn (Opens in new window)
• Click to email a link to a friend (Opens in new window)
• Click to share on SMS (Opens in new window)
• Click to copy link (Opens in new window)

As the July deadline for the implementation of the business practice changes outlined in the National Association of Realtors’ (NAR) commission lawsuit settlement agreement approaches, the trade organization is looking to iron out some details about buyer broker agreements.

Under the terms of the settlement agreement , agents will have to have a written agreement with a client in order to work with them as a buyer’s agent.

NAR recently published an FAQ page related to the settlement agreement where it clarifies that the phrase “working with” is meant to “distinguish MLS participants who provide brokerage services to a buyer from MLS participants who simply market their services or just talk to a buyer.”

Examples of broker-provided services include identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of the buyer, or presenting offers by the buyer. Conversely, a broker who is ”providing an unrepresented buyer access to a house they have listed” is an example of someone who is not ”working with” a buyer.

Additionally, the FAQ states that an agent is not working with a buyer if they are working only as an agent or subagent of the seller, or if the MLS participant is only performing ministerial acts without the expectation of being paid for these acts.

Under these circumstances, the agent or MLS participant would not need a written agreement with the buyer. But if the agent is representing both the buyer and the seller in the transaction — also known as dual agency — a written buyer broker agreement is needed.

NAR also noted in the FAQ that a written agreement between an agent and a buyer would be necessary prior to that agent taking the buyer on any home tours, unless state law requires that the agreement be signed earlier in the process.

The FAQs noted, however, that if an MLS participant hosts an open house on behalf of their seller and an unrepresented buyer comes to look at the house, the listing agent hosting the open house would not need to have a written agreement with that buyer since the agent is not working with them.

In addition to clarifications on when a buyer representation agreement is necessary, the FAQ also addressed how agreements may define an agent’s agreed-upon compensation. It notes that the compensation must be “objectively ascertainable and not open-ended.”

“For example, the range cannot be ‘buyer broker compensation shall be whatever amount the seller is offering to the buyer,’” the FAQ page states.

NAR also addressed how agents should deal with listings and transactions that may occur right before or after the policy changes are implemented.

According to the FAQ page, buyer agreements entered into before the MLS policy changes are implemented should be amended to remove any provisions that authorizes the buyer broker to keep any offers of compensation exceeding the amount of compensation agreed upon with the buyer.

Additionally, NAR noted that if the sales contract is signed after MLS policies are changed, even if the listing originally offered compensation, the offer will not be valid. In these cases, the parties will have to include the offer of compensation in the sales contract, if the seller is still open to covering the buyer agent’s fees.

• Commission Lawsuit
• National Association of Realtors

It looks like the circle is complete and REALTORS® will go back to sub-agency with a contingency that the the “unrepresented” buyer will have x number of days to get lawyer review. Back to the future!

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Most Popular Articles

Latest articles.

After a long-held face-to-face restriction, reverse mortgage counseling can now be conducted remotely in Massachusetts

NAR settlement terms slated to go into effect in mid-August 

Exp acquires 500-agent independent brokerage in florida , fha extends foreclosure moratorium on hawaiian island of maui , realreports partners with new england-based mls , what lies ahead for short-term rentals .

Remember me

Don't have an account? Please Sign Up

Connect with an agent

A realtor.com coordinator will connect you with a local agent in minutes.

A local real estate agent can answer questions, give guidance, and schedule home tours.

By proceeding, you consent to receive calls and texts at the number you provided, including marketing by autodialer and prerecorded and artificial voice, and email, from Realtor.com and others Persons who may contact you include real estate professionals such as agents and brokers, mortgage professionals such as lenders and mortgage brokers, realtor.com and its affiliates, insurers or their agents, and those who may be assisting any of the foregoing. about your inquiry and other home-related matters, but not as a condition of any purchase. More You also agree to our Terms of Use, and to our Privacy Policy regarding the information relating to you. Msg/data rates may apply. This consent applies even if you are on a corporate, state or national Do Not Call list.

A Realtor.com coordinator will call you shortly

What’s next.

• A coordinator will ask a few questions about your home buying or selling needs.
• You’ll be introduced to an agent from our real estate professional network.

To connect right away, call (855) 650-5492

( Getty Images )

What Is a Buyer’s Agent? A Trusted Guide Who’ll Help You Find a Home

Ready to house hunt? It’s a jungle out there: Prepare for a flurry of paperwork, stampedes of buyers competing for the same digs, and other challenges, before you get your hands on those house keys.

We won’t lie: The process can be complex and stressful—especially if you are a first-time buyer. Having a real estate pro by your side can make all the difference.

You might have heard of buyer’s agents, selling agents, listing agents, and so on. You’re a buyer, so what is a buyer’s agent?

True to their name, buyer’s agents help real estate buyers navigate the real estate market; they can also save you tons of time and money on the road to your new home.

Read on to learn how a real estate buyer’s agent can help, and how to find the right one for you.

Buyer’s agent vs. Realtor: Benefits of using a buyer’s agent when buying real estate

“A buyer’s agent will guide you through the home-buying transaction and be at your disposal for any questions or concerns,” says  Shane Wilcox , a Realtor® with Partners Trust. Here are some of the things a buyer’s agent can do:

• Find the right property. After determining what the clients are looking for and what they can afford, the agent will schedule appointments to tour homes that fit the bill. The agent can also explain the ins and outs of various properties and neighborhoods, to help buyers decide which home is right for them, by explaining the pros and cons of various options.
• Negotiate the offer. The buyer’s agent will advise clients on an appropriate price to offer and present it to the seller’s agent. “Then they will negotiate on your behalf and write up the contracts for you,” says  Matt Laricy , a Realtor with Americorp Real Estate in Chicago. This is where the agent’s experience in negotiating deals can save you money and help you avoid pitfalls like a fixer-upper that’s more trouble than it’s worth.
• Recommend other professionals. A buyer’s agent should also be able to refer you to reliable mortgage brokers, real estate attorneys, home inspectors, movers, and other real estate professionals. This can also help expedite each step of the process and move you to a successful real estate sale all the faster.
• Help overcome setbacks.  If the home inspector’s report or appraisal brings new issues to light, a buyer’s agent can advise you on how to proceed with the transaction, and then act as a buffer between you and the sellers or their broker. If negotiations become heated or hostile, it’s extremely helpful to have an experienced professional keeping calm and offering productive solutions.

Buyer’s agent vs. listing agent: What’s the difference?

Buyer’s agents are legally bound to help buyers, whereas listing agents—the real estate agent representing the home listing—have a fiduciary duty to the home seller.

“That’s why it’s in your best interest as a buyer to get an agent who is there to represent you,” explains Alex Cortez , a Realtor with Wailea Village Properties in Kihei, HI.

“Think about it this way: If you were getting sued, would you hire the same attorney as the person suing you? Of course not. You need someone who will diligently fight for your interests and rights.”

Let’s say, for instance, you walked up to the listing agent at an open house. You might gush about how you love the home and want to buy it, but add that you will need to move soon—because you’re expecting your second child and need to decorate the nursery, pronto, or because the lease on your rental is up in a couple of months.

A seller’s agent could then use this information against you by informing the sellers that your clock is ticking, so they shouldn’t budge too much on their asking price—if at all.

Yet make this same confession to the buyer’s agent you’re working with, and it’s all fine—this professional would know to keep this info private from sellers (and their agents), so it can’t be used against you.

Some states, recognizing this problem, required a disclosure of dual agency when a broker represents both sides of a real estate transaction.

However, you may still not be comfortable after signing an agreement saying you know someone is a double agent. You might want to hire an agent who is not representing the owner, and who is looking out for your best interests.

How to find a buyer’s agent

A good buyer’s agent can ease your way to homeownership—and a bad one can result in a bumpy ride.

You should not just take the first buyer’s agent you meet (as two-thirds of home buyers do), or blindly accept the recommendation of a friend (more than half do this). Instead, it’s best to interview at least three agents and ask them a few questions, including the following:

• What neighborhoods do you specialize in? Real estate requires local expertise, so you should find an agent who’s extremely familiar with the areas you’re interested in.
• What’s your schedule and availability? Part-time real estate agents who are committed can do a fine job, but if the house of your dreams pops up or you encounter last-minute closing snafus, you want an agent who will be readily reachable.
• How long have you been a real estate agent? You ideally want someone with a couple of years of experience, and a proven track record of selling homes.

To find real estate agents in your area, head to realtor.com/realestateagents , where you can also read online reviews provided by past clients and learn more.

The agent/buyer contract

Once you agree to work with someone, you will have to sign a contract called an “exclusive buyer agency agreement,” outlining the agent’s services and compensation (more on that next).

This contract also means that this person will be your sole representative and that you won’t work with other buyer’s agents.

Who covers the buyer’s agent commission

Home buyers don’t need to worry about the expense of hiring a buyer’s agent. Why? Because the seller pays the commission for both the seller’s and buyer’s agents.

Liz Alterman is a writer who's covered a variety of subjects, ranging from personal finance issues for CNBC.com to career advice for The Muse. She is also the author of a young adult thriller, "He'll Be Waiting." Follow her on Twitter @LizAlterman.

Twitter Follow @LizAlterman

• Related Articles

Share this Article

StarTribune

Here's what july's commission changes mean for minnesota homebuyers, sellers and agents.

On Friday, Edina-based HomeServices of America agreed to a $250 million antitrust settlement with homeowners who filed a lawsuit that essentially says they were forced to pay inflated commissions. That settlement follows a similar $418 million agreement in March with the National Association of Realtors, which on Tuesday received preliminary approval by a judge.

The issue has been top of mind in the midst of one of the busiest spring markets in years . Many full-service agents in Minnesota charge sellers a 5% to 6% commission paid to the listing broker who splits it among the various agents and brokerages involved in the deal. The March settlement — which aims to quash (but not admit to) longstanding concerns about whether the current commission structure is akin to price fixing but doesn't specifically challenge the percentages charged — requires agents to have a written representation agreement that specifies compensation before they can show buyers a home. It bans real estate agents from advertising the compensation

Those changes won't go into effect until July, but here is the latest on what the ruling means for those diving into Minnesota's real estate market this spring and summer:

Clarification needed

A recent poll of thousands of homebuyers by Redfin, an online discount brokerage, asked consumers what they know about agents' payment. Here's what they said:

• Nearly 30% had no idea how much their agent earned.
• Nearly 20% had no idea who determined the payment amount or how.
• Nearly 40% of all homeowners who planned to sell their house in the next year thought a 3% commission for a seller's agent seems "a little" or "very" high. Almost exactly the same share (40%) said it seemed "just about right," and 21% said it seemed "a little" or "very" low.

"Many Americans make the biggest purchase of their life without knowing precisely how the professional they hired to guide them through the transaction is getting paid," said Redfin chief economist Daryl Fairweather, in a statement.

The responses were similar in a recent Lending Tree poll focused on how often buyers/sellers and agents negotiate commissions:

• 31% of buyers or sellers tried to negotiate real estate agent commission fees, and of those, 64% managed to achieve a reduction.
• 36% said they didn't know negotiating was an option but would have tried if they knew they could. Overall, 84% believed agents should be flexible with their commission.
• Nearly half of all buyers and sellers didn't know what percent commission their agents received in their latest transaction.

Impact unknown

Though some changes are abundantly clear, how the settlement will impact everything from home prices to agent income remains unknown. Both Carrie Chang, CEO of the Minneapolis Area Realtors (MAR), and Jamar Hardy, MAR president and a longtime Twin Cities sales agent, stressed that the compliance process is complicated and uncertain.

"There's not a lot of there there yet," Chang said. "But there is a lot happening."

While the national organizations sort through the settlement, Chang said staff at both Northstar MLS — which manages all the home listings — and the Minnesota Association of Realtors are still working to understand how the national ruling will affect state rules.

In some cases, Minnesota law already addresses some of the new rules. For example, the settlement requires all contracts to contain a statement that commission rates are negotiable: Minnesota law already requires such a statement, Chang said. And the settlement requires listing brokers disclose any compensation shared with or offered to a buyer's broker: Minnesota forms already include that requirement.

'We're not fighting this'

Chang reiterated the settlement does not dictate agent commissions, which a buyer/seller technically pays to a broker who then takes a share before splitting the rest among the listing agent and the buyer's agent.

"The settlement does not say anything about changing commissions or compensation," she said.

She, Hardy and others said agent commissions have always been transparent and negotiable, but the settlement is raising new questions about whether buyers and sellers should negotiate their agents' compensation.

"I do think more agents are preparing themselves for those conversations," Hardy said.

Chang said those discussions are productive.

"I want people to know that the agents who are operating professionally out there, we're not fighting this," she said. "We're confident that this will improve us and support people better."

Sellers' stability

NAR agreed to create a rule that prohibits listing agents from including the buyer's agent compensation on the Multiple Listing Service (MLS) raising concerns that buyers will have to find a way to pay the agent hired to represent their interests.

On that front, there's good news for buyers: Last week, Fannie Mae and Freddie Mac offered clarification about whether sellers can compensate a buyer's agent without running afoul of a longstanding policy that limits how much a seller can contribute toward a buyer's financing costs. The clarification means seller-paid buyer's agent commissions/fees won't count toward the established cap on seller concessions.

"Buyer agent fees have historically been paid by the property seller or property seller's real estate agent, and, as such, they are currently excluded from these financing concession limits," according to Freddie Mac .

Currently, the policy allows sellers to contribute 2% to 9% of the property value in borrower's financing costs.

Buyers' agreements

Justin Fox, broker/owner of RE/MAX Professionals in Cottage Grove, said a new rule that requires MLS participants working with buyers to enter into a written agreement with their buyers even before touring a home means instead of "interviewing" their agent on the job, buyers will have to meet their agent to discuss the process before they've had even an initial showing.

"They'll have to explain the process and what is expected of both parties and have them sign an agreement, much like listing a house for sale," he said. "I think many buyers don't understand what their agent does because they don't always sit down to talk about it. So this is a good thing!"

The buyer's agent will have to call the listing agent before every showing and ask if there's an offer of compensation and how much.

"Even before this settlement, the offered compensation may not have been sufficient to pay the buyer's broker," Fox said. "In those cases, it would have to be negotiated as part of the offer. Now it will just take more time to determine."

Jim Buchta has covered real estate for the Star Tribune for several years. He also has covered energy, small business, consumer affairs and travel. 

• Minneapolis residential property taxes could rise steeply in 2025
• South Dakota Gov. Noem erroneously describes meeting with North Korea's Kim Jong Un in new book
• The 5 best things our food writers ate in the Twin Cities area this week
• Why did the Minneapolis Lakers basketball team move to Los Angeles?
• Thousands believe COVID vaccines harmed them. Is anyone listening?
• Old new burger alert: Edina's Convention Grill is back

Democratic officials criticize Meta ad policy, saying it amplifies lies about 2020 election

Closing prices for crude oil, gold and other commodities, three groups are suing new jersey to block an offshore wind farm, french cyberwarriors ready to test their defense against hackers and malware during the olympics, u.s. bancorp names gunjan kedia new president.

• Twin Cities sees surprise influx of home listings as agent commission uncertainty looms Mar. 18
• Friends split a mortgage, share a home to beat high housing costs Apr. 27
• Midwest Mountaineering alum opens outdoor store to fill void • Business
• U.S. Bancorp names Gunjan Kedia new president • Business
• After failed mediation, Timberwolves, Lynx ownership dispute heads to arbitration • Business
• Minnesota Power agrees to smaller bill increase for customers in settlement • Business
• What a Trump immigration crackdown would mean for Minnesota's economy • Business

© 2024 StarTribune. All rights reserved.