Homebuyers typically sign buyer broker agreements, also known as "buyer representation agreements," with their real estate brokers and/or agents before writing a purchase agreement on a property they want to buy. Buyer broker agreements spell out precisely who represents the buyer and how the broker/agent is compensated.
A variety of buyer broker agreements are used throughout the United States, but three are more common than others in California. Here's a look at them.
- A buyer broker agreement establishes the relationship between homebuyers and their real estate agent.
- A non-exclusive agreement means that the buyer can work with other agents.
- An exclusive agreement means the buyer will work exclusively with that real estate agent.
- Exclusive agreements are typically in force for 30 days to one year.
- Clarify how to terminate the relationship before you sign.
This agreement outlines the broker's/agent's duties and obligations to the buyer. It defines agency relationships, the broker's scope of duty, and buyer obligations. It doesn't provide for compensation.
- The buyer can hire more than one broker/agent to locate a suitable property.
- The buyer isn't obligated to compensate the broker/agent.
- The buyer has the right to demand single agency sole representation.
"Single agency" means that the agent will represent either the buyer or the seller but not both. It's referred to as "dual agency" when the agent serves both parties.
Non-Exclusive/Right to Represent Agreement
This type of non-exclusive agreement outlines the broker's/agent's duties and obligations to the buyer. It also defines agency relationships, the broker's scope of duty, and buyer obligations, and it does provide for compensation. It also removes the buyer's responsibility to pay a commission if the broker/agent is paid by another party, such as the seller. This is a portion of the contract that often confuses buyers. They don't understand that they're not paying the fee.
- The buyer can purchase a property through another broker/agent as long as the property isn't a home introduced by the first broker/agent.
- The buyer has the right to reject dual agency and demand a single agency.
Exclusive Right to Represent Agreement
This form is similar in scope to the non-exclusive form except for one major distinction: The buyer has agreed to work exclusively with the broker/agent.
- The buyer cannot hire more than one broker/agent to represent them.
- The commission is negotiable.
- The buyer has the right to demand a single agency.
- The buyer isn't responsible for the commission if another party (such as the seller) pays it.
Non-Exclusive vs. Exclusive Agreements
Non-exclusive agreement terms might run for a month or two, while exclusive agreement terms typically range anywhere from 30 days to one year.
Exclusive representation gives the broker/agent the ability to negotiate with unrepresented sellers (such as for-sale-by owners) on the buyer's behalf.
The commission is usually paid by the seller, but it may be added to the sales price and eventually paid by the buyer. The broker/agent will have more than earned their fee if the buyer is able to purchase the property at a substantial discount through the power of the broker's/agent's negotiating ability. Exclusive representation means that the broker/agent is employed by the buyer and will work solely on their behalf.
The main benefit to a homebuyer in an exclusive-right-to-represent contract is that the buyer's agent should be focused on the buyer and working diligently on finding that buyer a home. Buyers who operate under other agreements are effectively telling their agent not to work very hard for them, because they might not use that agent to buy a home.
Termination of the Agreement
Ask the broker/agent whether they'll release you from the contract if you find that the relationship isn't a good fit for you. However, agents aren't required to release you from a binding contract just because you ask, so think twice before signing an exclusive agreement.
This is a two-way street. You might want to discuss with your agent how they'll let you know if they feel that you're not a good match. Parties might get along very well when they first agree to work together, but potential conflicts could appear later.
Frequently Asked Questions (FAQs)
How long does a buyer broker agreement last?
The agreement will detail the length of the contract. It's up to the buyer and the broker or agent to decide what works best for them. You might expect a standard contract to last about a month at a minimum.
Why should I sign a buyer broker agreement?
Many brokers won't work with someone unless they sign a contract. If you want to use a broker, then you'll probably need to sign an agreement. Contracts also protect you. It's usually in your best interest to write out all the details of the arrangement into a legal document.