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Buyer-Broker Representation Agreement — How Exclusive Representation Protects Buyers

You've finally decided to take the leap and buy a home! And, after careful research and consideration have decided on the Real Estate Agent that you believe will be the best fit to help find your dream home. Excitedly, you let the Agent know your decision. They're thrilled and suggest they swing by with coffee and the Buyer-Broker Agreement for you to sign. You agree to meet but silently wonder what exactly it is that you'll be signing.

If this is your first time buying a home or if you bought a home before 2012, the Buyer-Broker Representation Agreement can be a gray area. Many years ago, a verbal agreement or "handshake" was the only thing necessary to hire a Real Estate Agent. Nowadays, however, a written agreement has been put into place.

Buyer Broker Agreement

The purpose of this written agreement is to protect both you as the buyer and the Real Estate Agent. Each state has its own rules for when you should engage with an Agent and even has different names for this agreement, so it pays to ask the right questions up front.

The "Why"

Many question why it's necessary to enter into a contractual agreement with a Real Estate Agent. The answer is two-fold and benefits both you and your selected Agent.

When you sign a Buyer's Agreement, you, as a buyer, are upgraded from a casual customer to being one of the Agent's exclusive clients. By creating a formal relationship, the Agent is agreeing to represent you at an elevated level of service ensuring that you will find the home that is the best fit for you, under the best possible terms.

In return, you are assuring that the Agent will be compensated for their time and expenses while giving you their highest level of care. Your exclusive Buyer's Agent will be the one that gets to know you and your specific needs, spend time with your family, help you figure out your priorities (fenced yard for your dogs, a certain school district, proximity to work), ensure you are one of the first to see new listings, connect you with the best experts such as lenders and inspectors and of course, get you the best deal.

The Agreement

Officially named the "Exclusive Right to Represent Buyer Agreement," the Buyer-Broker Agreement is essentially a contract that you enter with the Real Estate Agent of your choosing that outlines what services you will receive and what your Agent will expect in return.

Considering this document is a formal contract, you can expect that the language will follow suit in a very formal manner. However, your Real Estate Agent should be more than happy to help break down exactly what the agreement outlines. And while it can feel a bit unusual to enter into a contract with your Real Estate Agent before you even begin to look at homes, it is best to clarify expectations up front. Going into such a large financial and emotional investment, don't you want to feel as confident as possible that your Agent is working solely in your best interest?

Many Agents are now governed by regulations that don't allow them to perform any substantive tasks for a potential client without having a signed agreement in place. This means that even showing one home to you is a substantive task so they are complying with the rules and regulations of their industry when they ask you to sign an agreement. Moreover, it should be viewed as a helpful way to set expectations and ultimately bring you a much higher level of service.

It's also a good idea to discuss with your Agent what happens in the event you are not satisfied with the level of service they are providing. Some Agents already have a process in place for these unusual situations. Having this conversation up front will make sure that you both are on the same page.

So before you consider questioning the Agent on why a Buyer-Broker Agreement is necessary, it's good to remember that they are doing their job and following the rules. And it should be incredibly important to you that the Real Estate Agent that you are choosing to represent you in one of the largest financial purchases you will ever make — be very diligent about following all contractual obligations and regulations to the letter!

Buyer Broker Agreement

Terms Outlined in the Contract

  • As the buyer, you will not work with any other Real Estate Agents — AKA you won't ask another Agent (not even Uncle Joey) to do any substantive tasks like show you a home or write a contract, etc. Furthermore, if you visit an open house without your Real Estate Agent, it's always good to be transparent with the hosting Agent to disclose that you are already represented by another Real Estate Agent. Agents should not try to "poach" other Agent's clients if they are already represented.
  • Length of Agreement — The amount of time the contract is in place can differ by Real Estate Agent but may be anywhere from days to a year (or more). Your Agent should be willing to negotiate the time period if necessary. There will also be information about how an early termination is handled.
  • Compensation paid to the Real Estate Agent — It's common to pay 3% of the purchase price as part of the closing, however, commission is up for negotiation depending on your local market conditions. Each region has its own local nuances, so ask your Agent to explain how the compensation works in your area.
  • Duties, expectations and commitments of the Real Estate Agent — These details protect you as the client and help ensure you receive a high level of service.
  • Home Criteria and desired price range — Lastly there will be a description of the type of property that you as the buyer are interested in along with your desired price range.

Buyer Broker Agreement

Now the fun can begin!

Hooray! Once you've agreed to all the terms and signed the Buyer-Broker Agreement, you can now begin the house hunt. Since all of the paperwork is behind you (until you find a home), you can now enjoy the fun part of looking at potential new homes!

It's normal to feel a twinge of uncertainty when it comes to signing a contract you aren't familiar with, and rightly so! And until you fully understand a Buyer-Broker Agreement it can feel like you might be signing away some rights as a buyer. In fact, it's just the opposite. You're protecting yourself and setting the tone for your client/Agent relationship.

Now that you fully understand the purpose of the contract and why it only helps you to form an exclusive and dedicated relationship with your chosen Real Estate Agent, you can sign the dotted line with confidence knowing that you've made a great decision. Happy house hunting!

Want more advice about all things home — including homebuying or selling advice? Nestiny is a great place for homebuyer education and to help you gauge how ready you are to buy a home. Journey Homeward allows you to enter all your wants and needs while the True Affordability Tool will break down your budget, showing what you can comfortably afford. You will also receive a Ready Report that will give you a vital head start in the home buying journey, saving you valuable time and money.

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Ready To Become A Smarter Homebuyer?

By signing up, you agree to Nestiny terms of use .
Whether you need a step-by-step guide, video resource or one of our many helpful tools, Nestiny has your back 24/7 for all things home buying and selling. You choose the pace, material, and when and where to learn. Unlock your free access to Nestiny today!
Are you a real estate professional? Go here .
By clicking this button, you'll enjoy free unlimited access to Nestiny and agree to our terms of use . And don't worry! Nestiny will not share your information with any parties without your consent.