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Buyer's Broker Agreements and Contracts

Buyer Representation Contracts Contain Terms and a Duration

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Home buyers typically sign buyer broker agreements with their real estate brokers / agents before writing a purchase agreement. The buyer broker agreements spell out precisely who represents the buyer. It's also known as buyer representation. There are a huge variety of buyer broker agreements used throughout the United States. For simplicity, I will review the three most common types of agreements used in California, with most weight given to Exclusive Right to Represent because it's the preferred form.

The following information is a general overview. It is not a legal interpretation of Buyer Broker Agreements. I cannot give legal advice. If you desire legal advice, please consult a real estate lawyer.

Buyer Broker Agreement (Non-Exclusive / Not for Compensation)

This agreement outlines the broker's / agent's duties and obligations to the buyer, agency relationships, broker scope of duty and buyer obligations; it does not provide for compensation.

  • Buyer may hire more than one broker / agent to locate property
  • Buyer is not obligated to compensate the broker / agent
  • Buyer has the right to demand single agency

Buyer Broker Agreement - Non-Exclusive, Right to Represent

The non-exclusive agreement outlines the broker's / agent's duties and obligations to the buyer, agency relationships, broker scope of duty and buyer obligations; however, 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.

  • Buyer may purchase a property through another broker / agent, as long as the property is not a home introduced by the first broker
  • Buyer has the right to demand single agency
  • The broker / agent can receive a higher commission than the negotiable fee stated in the agreement if the seller elects to pay more and it is disclosed

Buyer Broker Agreement - Exclusive Right to Represent

This is the form that I use with my buyers. It 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 her
  • The commission is negotiable
  • Buyer has the right to demand single agency
  • The buyer is not responsible for the commission if another party (such as the seller) pays it
  • The broker / agent can receive a higher commission than the negotiable fee stated in the agreement if the seller elects to pay more and it is disclosed

While non-exclusive agreement terms may run for a month or two, exclusive agreement terms are typically anywhere from three months to one year. If the buyer elects to subsequently purchase any property introduced to her by the agent, she will owe the agency a commission. Exclusive representation gives the broker / agent the ability to negotiate with unrepresented sellers (such as for sale by owners) on the buyer's behalf. In these instances, the commission is often added to the sale price and then paid by the buyer to the broker as part of the financing. If the buyer is able to purchase the property at a substantial discount through the power of the broker's / agent's negotiating ability, the broker / agent will have more than earned her fee. Exclusive representation means the broker / agent is employed by the buyer and will work diligently on the buyer's behalf.

Termination

Ask the broker / agent if she will release you from the contract if you find that the relationship is not a good fit for you or vice versa. While agents are not required to release you, if they won't agree to this upfront, don't sign the agreement with them. Professionals give personal guarantees that the customer will be satisfied. If an agent can't give you that guarantee, the agent does not deserve your business.

This is also a two-way street. If the agent feels that the client is not a good match, you might want to discuss with your agent how the agent will let you know and whether you will comfortable if your agent says goodbye. When parties first agree to work together, they might get along very well because everybody seems mostly sane and normal upon first introduction. Moreover, there can be assumptions formed by either party that do not live up to expectations.

At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

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