Buyer-Broker Agreements & Contracts

Buyer-Broker Agreements& Contracts

Buyinga home comes with a lot of responsibilities. You need to findthe right home for you and your family, and figure out yourideal purchase price. To cut down on thetime it takes to do this, you might want to hire a real estate broker,otherwise known as a buyer’s broker, to represent you. Home buyers typically sign buyer agreements with their realestate brokers before placing an offer on a home. The buyer-broker agreementsspell out precisely who represents the buyer and how. It's also known as buyerrepresentation.

There are three commonly used types of buyer-broker agreementsin California, with most weight given to Exclusive Right to Represent becauseit's the preferred form. Here is what you need to know about each:

Non-Exclusive / Notfor Compensation

Thistype of buyer-broker agreement describes the broker's duties and obligationsto the home buyer, generally to be performed by the broker's agent. It alsooutlines the relationship between the agent and the broker and the buyer'sresponsibilities. This contractspecifies that the:

• Buyer may hire more than onebroker/agent to locate property
• Buyer is not obligated tocompensate the broker/agent
• Buyer has the right todemand single agency, where the agent cannot represent the seller as well
• Buyer or broker can revoke thiscontract at any time

Non-Exclusive, Rightto Represent

Thisbuyer agreement defines the broker's responsibilities to the buyer, therelationship between the broker and the agent, and the buyer's obligations. Itprovides for compensation to be paid to the broker if the broker presentsthe house the buyer decides to buy or otherwise represents the buyer. However,it does remove the buyer'sresponsibility to pay a commission if the broker/agent is paid by another partysuch as the seller. Here:

• The buyer may purchase aproperty through another broker/agent, if the property is not a homeintroduced by the first broker
• The buyer has the right todemand a singleagency
• The broker/agent can receive a higher commission than the negotiable fee stated in the agreement if theseller elects to pay more and it is disclosed

Exclusive Right toRepresent

Thisis the most common buyer-broker agreement between home buyers and brokers. Thisagreement outlines the obligations of the broker, the broker-agentrelationship, and the responsibilities of the buyer. It sets forth thecommission amount to be paid to the broker, which is owed even if the buyerfinds the house on their own or another broker does so. However:

• The buyer cannot hire more thanone broker/agent to represent him or her
• The commission is negotiable
• The buyer has theright to demand a single agency
• The buyer is not responsiblefor the commission if another party (such as the seller) pays it
• The broker/agent can receive ahigher commission than the negotiable fee stated in the agreement if theseller 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 30 days to one year.If the buyer elects to subsequently purchase any property introduced to her bythe agent, he or she will owe the agency a commission.

Unlike the other contracts, the main benefit to a home buyer touse an exclusive right to represent is the fact that the buyer's agent knowsyou are working solely with them. They are not competing with anyone for commissionand should thus be more focused and motivated on finding you a home.

Termination

Before signing, ask the broker/agent if they will release youfrom the contract if you find that the relationship is not a good fit for youor vice versa. While agents are not required to release you, if they won'tagree to this upfront, don't sign the agreement with them. Professionals oftenguarantee that the customer will be satisfied. If an agent can't give youthat assurance, the agent does not deserve your business.