What You Need to Know Before You Sign a Buyer-Broker Agreement

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You'll be asked to sign a lot of documents before buying a home. Some signatures will be more important than others.

Real estate agents will ask you to sign a number of disclosures, advisories, and contracts during the process. When you sign a disclosure, you're simply agreeing that you've received a copy. Contracts, on the other hand, are legally binding agreements.

A buyer-broker agreement is a contract. It sets up the relationship between the buyer and the broker. If you're buying a home, should you sign one? Here are the key parts of this type of contract. Keep these in mind before moving forward.

What Is a Buyer-Broker Agreement?

A buyer-broker agreement is used when you contract with a broker for help in buying a home. Signing one means that you can't use a broker to find a home, then work around them or sign with another broker.

These agreements differ from state to state. The California Association of Realtors form offers an example of common language. In this contract, the buyer-broker relationship is defined by these duties:

  • Broker's duties: The broker will (among other things) find properties for the buyer to consider, disclose material facts, review paperwork, prepare purchase offers, and conduct a visual inspection.
  • Buyer's duties: The buyer will (among other things) consider the homes presented, act in good faith, qualify to purchase the property, read documents (especially the buyer inspection advisory), and cooperate with the broker.

Essential Elements of Buyer-Broker Agreements

If you can't agree to these terms, then you might not be ready to sign a buyer-broker agreement.

Buyer-Broker Exclusivity

Brokers either own brokerages and employ agents or work independently. By signing, you agree that you will work solely with the broker and the agent you have chosen.

You shouldn't ask a different broker or agent to show you a home or write a purchase offer for you, because your broker is the "procuring cause." This term refers to which broker is directly responsible for the sale of the home.

If you clash with your agent, you have the right to ask the broker to assign a new agent to you. Your contract is with the broker, not the agent.

Realtors are real estate professionals, including agents and brokers, who are members of the National Association of Realtors. Realtors must abide by NAR's code of ethics.

How Long Does a Buyer-Broker Agreement Last?

The term refers to how long the contract will last. It's often spelled out in the first part of the contract. You are bound to the terms of the buyer-broker agreement for that length of time. Depending on your needs, you may want a term as long as 360 days, but most agents will agree to 30 days.

Buyer-Broker Compensation

The buyer-broker agreement states the amount of compensation that the broker and agent will earn from you. All real estate commissions are negotiable.

The agreement clarifies that you are not obligated to pay if another party, such as the seller, pays it instead. Most listings also state that the seller will pay the buyer's broker. It's unusual for a buyer to pay an agent directly, but if your agent performs and you try to break the agreement, you may directly owe the compensation, because you can't cancel the contract by yourself.

The Property Description in the Buyer-Broker Agreement

The agreement should describe the type of property to be acquired and its price range. For instance, if the contract states that you are looking for a single-family home, you're free to pursue a 20-unit apartment building through another broker. If the fine print limits the contract to homes in a certain county, and you decide to buy in an adjacent county, you are not bound to the terms of your agreement.

Breaking the Buyer-Broker Agreement

The buyer-broker agreement is binding for both parties. Getting out of it might be tricky. You can ask to be released by the broker if you're not happy. If the broker doesn't agree, the next steps depend on your contract's terms.

Many buyer-broker agreements will say that buyers and brokers must start with mediation if there's a problem with commissions. Any other issues can be settled by going to court. The buyer and broker can also agree to resolve any other disputes through arbitration rather than in court.

Frequently Asked Questions (FAQs)

Are buyer-broker agreements enforceable?

The agreement is a legal contract. If either party fails to abide by the terms, the other party has the right to seek legal enforcement of the contract.

What can you do while under an exclusive contract with a real estate agent?

What's allowed under a buyer-broker agreement will depend on the type of contract you have with your broker and agent. If you have an exclusive agency listing, you're still free to market the property on your own and even sell it on your own. However, you can only use the agreed-upon broker if you engage the services of an agent. An exclusive right-to-sell agreement is more restrictive. Under such an agreement, your broker and agent will earn a commission on the sale regardless of whether you sell through them or on your own, and you may not work with other brokerages.

Can you have more than one real estate agent when buying a house?

There are no laws specifying that you can't work with multiple agents. However, agents work by a code of ethics and are not permitted to interfere with other agents' clients, so they will not want to work with someone who is already represented. If you sign an exclusive agreement, you are then legally bound not to work with another agent. In general, it's unethical to work with more than one agent on a real estate transaction.


Article Sources

  1. California Association of Realtors. "Buyer Representation Agreement," Pages 2-3.

  2. Texas Realtors. "Procuring Cause."

  3. National Association of Realtors. "When Is a Real Estate Agent a Realtor?"

  4. California Association of Realtors. "Buyer Representation Agreement," Page 1.

  5. Texas Real Estate Commission. "I Signed a Buyer Representation Agreement, but I Want to Work With a Different Broker. Can I Cancel the Agreement?"

  6. California Association of Realtors. "Buyer Representation Agreement," Page 4.

  7. National Association of Realtors. "Section 3: Definitions of Various Types of Listing Agreements."

  8. Cape Cod & Islands Association of Realtors. "Legal Hotline: When is It Permissible to Contact Another Agent's Client?"

  9. Realtor.com. "Can You Work With Multiple Realtors? Sometimes More Is Less."