The Buyer-Broker Agreement
A few buyers have asked me why certain real estate brokers will not show them property or even put them in their car without first signing a buyer - broker agreement with them. In fact, when I was working at one of the bigger brokerages, I was expressly warned that unless I got a client to sign one of these very serious contracts, I was not to take them inside a home listed for sale at all. “At the very least,” one manager said at a sales meeting, “Get the Agency signed.”
It was easy for us green agents at the time to lap all this up as bringing us one step closer to being great real estate salespeople - soon on our way to making our first $100,000 in commissions (ha!) but now I believe the manager may have had other motives besides giving us confidence in real estate sales. Today, let’s look at what this contract is.
The Buyer Broker Agreement
Actually, the title should probably say the buyer broker agreements. There are three: the exclusive buyer representation agreement, the non-exclusive representation and one that calls itself simply the buyer representation agreement. They all say The essential difference between the three is simply the amount of commitment expected by the broker on the buyer’s part. They vary from the buyer hiring one broker exclusively (named, uncreatively enough, the buyer representation agreement - exclusive) to the broker agreeing to be simply one of the agents the client can hire (the buyer representation agreement - nonexclusive). The third leaves all the above negotiable.
How the Buyer Agreement Benefits You
I know most clients are afraid when it comes to signing anything before the offer is written or they have found the house they want. They fear that they will be tied to one broker or have to pay the Realtor® even if they don’t find their dream home. While this is a legitimate concern and will be discussed in a minute, buyers should remember that most real estate contracts are written to protect the buyer in many cases. The verbiage of the buyer representation agreement binds the broker to look for a house for the client as much as it binds the client to the broker. In other words, the commitment works both ways. If the broker isn’t doing his job, the buyer should be able to fire him.
What you Should Look For if you Sign These
So along those lines, here are a few things you should consider before you sign one of these agreements. (By the way, you should know that I actually had to go looking for these in my forms because I haven’t used one for years, but some real estate agents swear by them and so do some home buyers, so I feel the need to tell you about them.)
1. Is this exclusive? First off, if you trust your Realtor® and believe her to be the only one you will look for homes with, you should get an exclusive agreement. If not, sign a non exclusive contract.
2. The timeline: Check how long the Realtor® is committed to showing you homes and if that matches your timeline for finding a house.
3. Compensation: If you wish to pay your broker out of pocket (may happen if the price of the property is extremely low, as in the case of some mobile homes) the amount will need to be agreed upon and included. If not, most brokers get paid by sharing the commission with the seller’s agent and this line should say “as noted in MLS.” It is important that this line not put a percentage like “3% of sales price” because if the seller has only agreed to 2.5% of the sales price, you as the buyer will be responsible for the difference.
A Powerful Tool
One of the best things about the buyer representation contract is that it gives us as Realtors® permission to go prospecting for the right home for our homebuyers. If you don’t find the home you want, we can then legally advertise the fact that we have a home buyer who wants a certain home. It gives us permission to knock on someone’s door and broadcast a definite need. To me, that is the best use of this agreement and can be a powerful tool for any home buyer. So don’t immediately get on the defensive when a Realtor® offers you this 4 page contract. Read it over and see if you can negotiate it to help & protect your needs as much as you think it protects those of the broker.
