THE BUYER’S REPRESENTATION AGREEMENT A GUIDE TO
WHAT IS A BUYER’S REPRESENTATION AGREEMENT?
A Buyer’s Representation Agreement is a contract signed between a prospective home buyer and an agent and real estate brokerage, for the right to represent them in a real estate transaction.
A Buyer’s Representation Agreement is designed to protect the Buyer through all stages of the home-buying process, ensuring that they have proper representation and can operate with the highest level of confidence and ethics.
Essential components of the Buyer’s Representation Agreement
1. Scope of Services
Defines the services a buyer’s agent will provide you, including property search, property showings, negotiation, and assistance with the purchase process, all the way through closing.
2. Property Type and Location
The agreement may include details about the type of property you are interested in (single family home, condo, commercial, etc) and the geographic area where you are looking to purchase.
3. Duration
The agreement specifies the period during which you are committed to working exclusively with me (typically six to twelve months).
4. Compensation
The agreement specifies how the agent and her/his brokerage will be compensated as it relates to your representation. Through a conversation at the start of your search with the agent to discuss payment scenarios, you will establish a compensation structure. This is particularly important in the event that the property you choose to purchase is not offering a cooperative compensation. If this is the case on a property you are interested in, the agent will do his or her best to negotiate their compensation as part of the offer/counter-offer process. The buyer having to come out of pocket for all or part of the agent’s compensation is the last resort. Commissions are, and have always been, negotiable.
A Brief History of Buyer’s Agency
For many years, real estate was practiced in such a manner that agency relationships were only extended to sellers. Any real estate agent who brought a buyer to the table was actually working as a sub-agent to the seller. This began changing in the 1980s, when buyer agency started gaining momentum in residential transactions. Today, agency laws still vary from state to state, and each brokerage has its own contract terms within these broader guidelines.
WHY SIGN A BUYER’S REP AGREEMENT?
Many buyers are reluctant to sign a contract, fearing that they will be bound to a particular brokerage or agent, or pressured into buying a home they don’t want. While it may seem intimidating, the Buyer’s Representation Agreement does not force you to buy and provides you, as the client, with a number of benefits, including:
1. You Will Become a Client Instead of a Customer (see table on next page)
• Clients and customers are separated by one main difference — a contractual relationship. When you sign a buyer’s representation agreement with your agent, you become their client and they are contractually bound to act in your best interest.
• Real estate transactions are subject to a wealth of rules, and, as much as they might want to help you, there are some things the agent you are working with is not legally allowed to tell you unless you are a client.
• Your agent will be able to provide you with additional services not legally available to customers.
• Your agent will be able to negotiate on your behalf during the purchase process.
2. All Expectations Will Be Clearly Outlined
• The home-buying experience can be overwhelming, and a Buyer’s Representation Agreement offers peace of mind by clearly outlining all expectations both you and your agent have for each other throughout the process.
• Your agent will go over the agreement with you and all of the services they will perform as your buyer’s agent. This simple step will clear up any possible misunderstandings and you will be able to proceed from the outset with confidence.
• When expectations are discussed and clearly set,the buyer can focus on finding the right house and the agent can focus on properly representing the client.
3. You Will Work With, and Get to Know, One Person
• Talking to five different agents about five different homes can be confusing, and may ultimately derail your ability to buy the home you are interested in. A Buyer’s Representation Agreement means that you have one agent, regardless of how many properties you are considering.
• The rapport you have with your real estate agent will put you at ease, and the relationship you develop will make the home-buying process that much more seamless and less stressful.
4. It Protects Your Rights As a Client
• Licensed real estate agents are bound by a Code of Ethics, holding them to the highest standard of behavior in all steps of the real estate transaction. According to Article 1, “When representing a buyer, seller, landlord, tenant, or another client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client.” (This goes back to why a Buyer’s Representation Agreement was created in the first place.) As a client, your agent’s first priority is YOU.
• If you feel you were not properly represented during the transaction, your status as a client will afford you recourse unavailable to customers. While these situations are rare, knowing that you are protected by these rules will give you peace of mind.
COMMON QUESTIONS FOR A HOME-BUYER
Do I Have to Sign a Buyer’s Representation Agreement?
It has not always been the case that buyers sign a Buyer’s Representation Agreement was required. Getting a Buyer’s Rep signed before seeing any properties may become the “law of the land” at some point in 2024.
Can I Break The Agreement, If Needed?
If you feel that your relationship with your buyer’s agent is not benefiting your ability to find a property, or if you want to put your home search on hold, you can easily terminate your Buyer’s Representation Agreement at any point for any reason. All that is required is a notice, in writing, stating you wish to terminate the agreement.
A Customer Versus a Client
If you are a CUSTOMER (no signed Buyer’s Representation Agreement), an agent will:
• Maintain loyalty to the seller’s needs
• Tell the seller what they know about you
• Keep information about the seller confidential
• Focus on the selling client’s property
• Provide just the material facts
• Only provide price information that supports the seller’s listing price
• Protect the seller
• Negotiate on behalf of the seller
• Attempt to solve problems to the seller’s advantage and satisfaction
Are There Options in Agreements?
Most commonly, the Buyer’s Representation Agreement establishes an exclusive relationship between the buyer and the agent for a set amount of time. However, there are Agreements that may only apply to a specific property, or a specific day.
Nearly all aspects of the Buyer’s Representation Agreement are negotiable and can be changed to suit your needs during a home search. If the time frame listed in the agreement doesn’t work for you, ask for a shorter or longer period. You can also ask to specify the price range, property type, or area you are searching for, any of which will further limit the contract. You can then work with a different agent on transactions outside those parameters if that is your wish.
If you are a CLIENT (signed Buyer’s Representation Agreement), your agent will:
• Pay full attention to your needs
• Tell you what they know about the seller
• Keep information about you confidential
• Focus on choices that satisfy your needs
• Provide material facts as well as professional advice
• Provide price counseling based on comparable properties and their insights
• Protect and guide you
• Negotiate on your behalf
• Attempt to solve problems to your advantage and satisfaction
BUYER’S AGENT SERVICES CHART
As Buyer’s Advisor
Explain Agency Conduct Needs Assessment
Clarify the Pre-qual Process
Explain Contracts
Discuss Closing Costs
Explain Inspector’s Role
Define Appraisal Process
As Buyer’s Negotiator
Discuss Market Protocols
Review Market Analysis
Establish Price Range
Outline Negotiation Strategies
Prepare Offer
Review Market Set Up Tours
View Properties
Refine Search Criteria
Prepare CMA
Assist in Due Diligence
Explain Negotiation Strategies
Present Offer
Outline Counter-Offer Strategies
Negotiate Contract Terms
Present Counter-Offers
As Buyer’s Facilitator
Follow-up On Due Diligence
Coordinate Home Inspection Open Escrow
Discuss Homeowner’s Insurance
Work with Appraiser on Valuation
Facilitate Conversion of Utilities
Follow-up On Contract Contingencies
Coordinate Inspection Repairs Manage Closing Details
Deliver Seller Disclosures
Negotiate Home Repairs
Attend Closing
Facilitate Final WalkThrough
STRENGTH INTEGRITY TRUST EXPERTISE
Celebrate Your New Home!
