Real Estate Agent Contracts for Buyers

You don't have to sign on a dotted line to work with a buyer's agent, but most agents will want some sort of agreement between you before they put in any time. Remember, no money is due to the agent until the deal closes. The agent is paid a commission out of the proceeds of the sale.

If you have no contract, you are free to change agents at any time or even work with multiple agents. But agents aren't so crazy about having you work with several of them at the same time. Many buyer's agents won’t ask you to sign an exclusive contract; if they do, you could end up paying a commission, unless you condition any offers you place on a home on the seller's agreement to  pay the buyer agent's commission. This is especially true if the home is FSBO.

If you are faced with an exclusive buyer-broker agreement, you will need to negotiate up front. Be sure you understand what a buyer’s broker is all about and what the exclusive buyer-broker agreement means to you. If  the agent says they are an Exclusive Buyer Agent ask if their office takes listings.  If the answer is yes- they are not an exclusive buyer's agent or do not know what the term means. For more information about exclusive buyer's agents you can go to the website of the National Association of Exclusive Buyer Agents at  naeba.org.

Terms of the Exclusive Agreement

Don’t be afraid to negotiate on issues like commissions, retainer fees, and length of contract. Each state multiple listing service has their own buyer-broker agreement, but here’s a list of issues you should look at carefully.

• Geographic area.  Make sure the agent is experienced in the area where you want to live. If you venture outside the comfort zone, make a provision that the agent can refer you to another broker and collect a referral fee. Or that the contract is void in that case.

• Term.  Set a reasonable time period for working with the agent. You can always renew later. That way if they haven't shown you houses of interest quickly, you can switch agents. And note: If the agent shows you a property, he or she is still entitled to a commission for a number of months after the contract expires, should you decide to purchase. Check either the buyer's agent contract or listing contract for a time limit

• Compensation.  This can be a flat fee or a percentage of the sale price.  Total compensation should be covered in the agreement to include compesation paid by the seller to the buyers agent.  Any commission paid by the seller to the buyers agent shall reduce any commission owed by the buyer. Agree who shall be entitled to any bonuses paid by the seller at or after settlement. Avoid paying a retainer fee.  Also check for provisions on how to cancel the contract should you be unhappy with the agent’s performance.

• FSBOs.  Decide if you want to leave out For Sale By Owner properties. If you don’t want to pay a commission on FSBOs, put that in the contract. (On the other hand, the agent may be able to save you a lot of money by determining a fair purchase price and negotiating the deal.)

Buyer and Agent Duties

The contract needs to clearly define the duties of the buyer and the agent. While these responsibilities may vary by state, the duties will probably include:

Agent Duties

• Agent’s best effort to identify properties that meet the buyer’s needs
• Arranges for inspections of properties
• Negotiates contracts
• Keeps confidential any proprietary information disclosed by the buyer
• Assists with obtaining financing
• Discloses to the buyer any information that would affect the buyer’s decision to purchase
• The agent is not obligated to show properties not available in the Multiple Listing Service unless requested to do so by the buyer in writing

Buyer's Duties

• Provides the agent with adequate financial information to research appropriate properties
• Works exclusively with the agent to find property while the agreement is valid
• Is available to view potential properties
• Cooperates with the agent to fulfill terms of the agreement
• Pays compensation (However, you can and should, as part of any offer to purchase, ask that the seller pay the fee due the buyer's agent to the buyer's agent at closing)

Next article: Working With Your Buyer's Agent

Previous article: How Buyer's Agents are Paid

Related Links

• Use an Agent or Go It Alone?
• What a Buyer's Real Estate Agent Does
• How Buyer's Agents are Paid