Beginning August 17, 2024, many agents will be required to enter into a written agreement with a buyer before touring a home either in-person or through a live virtual tour and buyers should be familiar with what it entails.
There have been buyer agreements for decades in the real estate industry and it was always suggested that the agent have a buyer acknowledge it in their first substantive meeting. The practice of when it was signed was not scrutinized which is why some buyers may not be familiar with the practice.
The agreements benefit both parties specifying obligations and duties. The advantages for the buyer include:
- Dedicated Representation: A buyer's agreement ensures that the agent is committed to representing the buyer's best interests throughout the entire home buying process.
- Clear Expectations: The agreement outlines the scope of services provided by the agent, including their duties and responsibilities, helping to establish clear expectations between both parties.
- Priority Access: By signing a buyer's agreement, the buyer gains priority access to the agent's time, resources, and expertise, ensuring they receive personalized attention and support.
- Exclusive Representation: The agreement typically stipulates that the buyer will work exclusively with the agent, preventing conflicts of interest and ensuring undivided loyalty from the agent.
- Streamlined Communication: With a buyer's agreement in place, communication between the buyer and agent is streamlined, making it easier to stay informed and make informed decisions throughout the home buying process.
- Negotiation Strength: Having a committed agent by their side gives homebuyers greater negotiating power, as the agent can leverage their expertise to secure the best possible terms and price for the buyer.
- Peace of Mind: Knowing that they have a dedicated and experienced professional advocating for their interests gives homebuyers peace of mind, reducing stress and uncertainty during the home buying journey.
Since the agreements may not be standardized, this article will familiarize you with the components of a typical agreement.
The agreement should specify and conspicuously disclose the amount or rate of any compensation the agent/broker will receive from any source. The amount must be objectively ascertainable and not ambiguous like "whatever amount the seller is offering to the buyer."
It should be stated that the agent/broker may not receive compensation from any source that exceeds the amount or rate agreed to with the buyer. Additionally, the agreement should note that broker commissions are not set by law and are fully negotiable and any other provisions required by state law.
If mandatory agreements have not been promulgated by state licensing authorities, the broker or agent can develop their own. However, there are some elements that should be included:
- Agreements should be written in understandable terms for all parties in readable font size.
- Types of representation can include those provided by state law.
- Agreements should clearly enumerate the services provided to the buyer.
- Agents and buyers can negotiate and agree to the term of the agreement, and automatic extensions until closing the sale following completing a contract of sale. Other provisions may include termination for cause and without cause by both the buyer and the agent, and whether compensation is owed if the buyer terminates the written agreement.
- Contracts should transparently outline the buyer's obligations, confidentiality duties, and the Equal Housing Opportunity statement, along with warnings about wire fraud and seller video/audio recording during home tours. MLS Participants may also inform consumers that they're offering real estate brokerage services and recommend seeking assistance from inspectors, lenders, attorneys, tax advisors, and title agents.
- Agents and buyers may agree to a retainer fee and if that fee is included in the total compensation, credited against other compensation, and whether it is refundable under specific conditions.
- The agreement may address how conflict of interest will be resolved during the term of the agreement including disclosure and consent for representing other buyers submitting offers on the same property, dual agency, designated agency, or transaction brokerage.
- A provision can be included on how to handle disputes such as mediation or arbitration.
Buyer representation offers numerous advantages when purchasing a home. With a dedicated agent, buyers gain access to expert guidance and advocacy throughout the entire process, ensuring their best interests are prioritized.
From navigating the complexities of the market to negotiating the best terms and price, a buyer's agent provides invaluable support and peace of mind. Additionally, buyer representation streamlines communication, provides access to exclusive listings, and enhances negotiating power, ultimately leading to a smoother and more successful home buying experience.
Buying a home is a sizable investment relative to each buyer. Even if a person has purchased a home in the past, it benefits the buyer tremendously to work with a professional to advise them through the process and the buyer's agreement spells out the specifics.
Download our Buyers Agent Guide and schedule an appointment to get answers for your questions.