Buyer Representation and Broker Compensation Agreement

WHY AM I BEING ASKED TO SIGN A WRITTEN BUYER AGREEMENT?

If you’re a homebuyer working with an agent who is a REALTOR®, it means you are working with a professional ethically obligated to work in your best interest. As of August 17, 2024, you will be asked to sign a written buyer agreement after you’ve chosen the professional you want to work with. Here’s what you should know about these agreements:

What is a “written buyer agreement?” What does it do?
A written buyer agreement is an agreement between you and your real estate professional outlining the services your real estate professional will provide you, and what they will be paid for those services.

 

Why am I being asked to sign an agreement?
Written buyer agreements became a nationwide requirement for many real estate professionals as a part of the National Association of REALTORS®’ proposed settlement of litigation related to broker commissions. The requirement went into effect on August 17, 2024.

 

Are these agreements new?
In some places, yes. Many states have required them for years, while some have not. As a result, it is entirely possible you or others you know have not used them in the recent past. Regardless, they are now a nationwide requirement for many real estate professionals.

 

Are these agreements negotiable?
Yes! You should feel empowered to negotiate any aspect of the agreement with your real estate professional, such as the services you want to receive, the length of the agreement, and the compensation, if any. Compensation between you and your real estate professional is negotiable and not set by law. In the written agreement, the compensation must be clearly defined (e.g., $0, X flat fee, X percent, X hourly rate) – and not open-ended or a range. Only sign an agreement that reflects what you have agreed to with your real estate professional.

 

How do I benefit from these agreements?
These agreements clearly lay out what services you (as a homebuyer) expect your real estate professional to provide, and what your real estate professional will be paid. These agreements make things clear and reduce any potential confusion at the outset of your relationship with your real estate professional.

 

When do I need to sign an agreement?
You will be asked to enter into a written buyer agreement with your real estate professional before “touring” a home with them, either in-person or virtually. If you are simply visiting an open house on your own or asking a real estate professional about their services, you do not need to sign a written buyer agreement.

 

Does this mean I have to pay my real estate professional out of pocket?
Not necessarily. While you are responsible for paying your real estate professional as outlined by your agreement, you can still request, negotiate for, and receive compensation for your real estate professional from the seller or their agent.

 

Do agreements dictate a specific type of relationship I need to have with my real estate professional?
No—you are allowed to enter into any type of business relationship with your real estate professional allowed by state law where you live. 

 

Can I change or exit an agreement?
Yes. You and your real estate professional can mutually agree to change your agreement. Agreements may have specific conditions under which they can be exited, so read the text of the agreement and speak with your real estate professional if you would like to change or exit your agreement.

Practices may vary based on state and local law. Consult your real estate professional and/or consult an attorney for details about state law where you are purchasing a home.

For more information and resources, please visit:
https://www.nar.realtor/the-facts

REALTORS® are members of the National Association of REALTORS®

Read the entire agreement: As with any written agreement, just skimming through it can be risky. It is advisable to fully read and understand the entire agreement – and address any questions or concerns prior to signing.
Are all buyer-broker agreements the same?

No – These agreements can vary between Realtor's and brokerage offices. Each agreement can vary in terms and conditions including unique terms based on your particular situation.

  • Standard Agreement Terms and Conditions

    Representation:

    • Representation period
    • Type of representation

    Property to be acquired:

    • Property type
    • Location
    • Additional description
    • Additional buyer preferences and priorities
    • Properties excluded from representation

    Broker Compensation:

    • Amount of compensation
    • Payments received by Broker from seller or others
    • Continued right to payment for Broker involved properties
    • Cancellation rights and notice

    Buyer Financial/Personal Information:

    • Time to deliver buyer personal/financial information
    • Other terms
Red Flags in buyer-broker agreement
  • Extended Term Limits
  • High or Non-Negotiable commission fees
  • Vague Cancellation Terms
  • Unreasonable Penalties for Termination
  • Inconsistent information across documents
  • Missing Signatures
  • Altered Dates
  • Unclear Financing Details
  • Faulty Disclosures
  • Unclear Seller Authority
  • Referral Kickbacks
Key benefits of a buyer-broker agreement: While these agreements may seem like an extra step and additional paperwork for the home buying process, they do offer several advantages: 

Here's a more detailed look at the key benefits:

  • Clarity and Transparency

    Defined Expectations:

    The agreement clearly spells out the services the agent will provide and how they will be compensated, eliminating ambiguity. 


    Reduced Confusion:

    This clarity helps prevent misunderstandings and potential disputes about the scope of work or payment arrangements. 


    Transparency:

    The agreement ensures transparency between you and your real estate agent in the financial aspects of the transaction, including potential commission structures and who is responsible for paying them, and what each of your respective responsibilities are.

  • Dedicated Representation

    Fiduciary Duty:

    The agent is legally bound to act in the buyer's best interests, providing advice, negotiating on their behalf, and disclosing all relevant information about the property.


    Prioritized Attention:

    By formalizing the relationship, the buyer gains a dedicated advocate who is committed to finding them the right property and guiding them through the process. 


    Accountability:

    The agreement holds the agent accountable for their actions and ensures they are working towards the buyer's goals. 

  • Streamlined and Efficient Process

    Focus on Buyer's Needs:

    With a clear understanding of the buyer's requirements, the agent can focus their efforts on finding suitable properties.


    Reduced Risk:

    The agreement helps minimize the risk of disputes and potential legal issues by outlining expectations and responsibilities. 


    Informed Decision-Making:

    The agent is obligated to disclose all relevant information about the property, therefore empowering the buyer to make informed decisions. 

  • Potential Cost Savings

    Negotiation Power:

    A buyer-broker agreement can give buyers more leverage to negotiate the purchase price and other terms of the transaction.


    Commission Clarity:

    The agreement clarifies how the agent's commission is structured and who is responsible for paying it, potentially leading to more favorable terms. 

In essence, a buyer-broker agreement provides a structured and transparent framework for the buyer-agent relationship, ultimately leading to a more informed, efficient, and potentially more cost-effective home-buying experience.