Below we will discuss everything you need to know about a buyer broker agreement before signing one with a buyer’s agent. But before we dive into the details, let’s first clarify that a buyer agency agreement or buyer broker agreement is essentially the same thing. Whether you’re working with a real estate agent or an associate broker, the agreement you will sign will likely be called a buyer broker agreement. This agreement will create an agency relationship between you and your buying agent as well as their brokerage (the buyer agency).
Table of Contents
Buyer Broker Agreements Defined
Is Signing a Buyer Agency Agreement Required?
Can You Terminate a Buyers Broker Agreement?
Can You Terminate a Home Purchase Agreement?
Should I Hire A Buyer’s Agent?
Hiring A Buyer’s Agent Benefits
Buyer Agency Agreements Bottom Line
Buyer Broker Agreements Defined
A buyer broker agreement is a formal contract between you and the real estate agency that outlines the commitment that you have to one another. Overall, an agent will want you to sign this agreement to prevent them from wasting their time on a buyer who is not committed to them or the process, which can be lengthy depending on the market and the buyer’s requirements. Keep in mind that the terms of a buyer agency agreement are always negotiable. You can create as many boundaries as necessary to ensure that you and your agent can work with each other efficiently.
Contrary to popular belief, it’s actually a good sign if a real estate agent asks you to sign a buyer broker agreement. This means that they want to work hard for you, but they also want some commitment on your part. Sometimes larger brokerages will ask you to sign an agency agreement immediately when you enter their office. And after you sign, they will assign you an agent to help you.
Buyer agency agreements are, for the most part, enforceable contracts. If this makes you uneasy, you always have the option of consulting with the attorney in your area to discuss the implications of signing a buyer broker agreement.
Is Signing a Buyer Agency Agreement Required?
Generally speaking, you are not required to sign a buyer agency agreement. As such, if your buyer’s agent wants you to sign an exclusive agreement with them, you can explain that you do not want to enter into one. However, be prepared for the agent to stop working with you, as they may view you as a waste of time. Don’t be offended, as they are only doing this for their protection. Specifically, the buyer agency agreement ensures that your agent gets paid if they procure you a property.
As a buyer, you benefit from a buyer agency agreement also. Specifically, it ensures that you are a top priority to your agent. Think of it this way, a buyer agency agreement is a motivation for your agent to find your property so that they can receive their commission. Another reason that a buyer agency agreement is important is that it ensures that your agent is not representing the seller in the transaction. Therefore, you do not have to worry about any conflicts of interest.
Can You Terminate a Buyers Broker Agreement?
Since a buyer broker agreement is a contract, there are typically termination clauses that allow for you to break the contract if needed. Additionally, most agents will agree to mutually cancel the contract if they realize that they are not a good fit.
If you find that you want to cancel your buyer agency agreement, you should first talk to the agent about it. If you guys cannot come to an arrangement or an understanding, you can move forward with canceling the contract.
If for some reason, your agent will not agree to let you out of the contract, you can then look deeper into the terms of the contract to see if any loopholes allow you to cancel it without penalty. For example, if the broker fails to perform his or her duties, you may be entitled to cancel the contract unilaterally.
If all else fails, you can try to work out the agreement with the brokerage, managing broker, or supervising broker. Keep in mind that most agents will let you cancel the contract as they don’t want to get bad reviews.
However, remember you won’t be able to cancel the contract after the agent has found you a place. As technically, they have already earned their commission.
Can You Terminate a Home Purchase Agreement?
When you enter into a home purchase agreement, also referred to as a contract for sale, you are typically required to make an earnest money deposit. This deposit is a good faith deposit and shows the seller that you are serious about purchasing the home. If you cancel a home purchase agreement without a legal reason outlined in the agreement, you run the risk of losing your earnest money deposit.
For the most part, your buyer’s agent will ensure that your contract of sale includes the proper contingency agreement to protect you should you need to back out of the deal. For example, the contract usually includes a home inspection contingency. This allows the buyer to walk away from the deal if the home inspection comes back unsatisfactory.
Should I Hire A Buyer’s Agent?
There is absolutely no reason why buyers shouldn’t hire a buyer’s agent to help them with a home purchase. In most standard residential sales transactions, the seller is responsible for paying both their listing agent and your buyer’s agent commission fees. This fee arrangement is typically outlined in the listing agreement. As such, a buyer can hire an agent to work on their behalf with no fees. If you do not find a suitable property with your agent, you will not be responsible for paying them anything, and the seller will not have to pay them a fee either.
Hiring A Buyer’s Agent Benefits
There are several reasons why you should hire a buyer’s agent and why they are beneficial to buyers. This is especially true if you are a first-time homebuyer and have no clue about the homebuying process.
1. They Educate You and Answer Questions
Buyer’s agents are there to educate you. Specifically, they know the right questions to ask before entering into a sales contract. Likewise, they can answer all your questions about the transaction.
2. They are Constantly Working For You
Buyer’s agents are constantly looking for listings on your behalf. Notably, buyer’s agents have access to more listings and showing appointments than you would have by simply just searching online without an agent. Additionally, buyer’s agents have their own real estate network and access to the multiple listing service (MLS).
3. They are Expert Negotiators
Buyer's agents are there to negotiate on your behalf. Buyer’s agents are professional negotiators because this is what they do for a living. As such, if the seller presents you with an offer that is unfair or there are other issues with the transaction, your agent can help you work through those issues. Throughout the entire process, the buyer’s agent will ensure that all the terms and the sales contract are drafted in your best interest.
4. They Offer Support and Get You To The Closing Table
Last but not least, your buyer’s agent will offer you support throughout the entire transaction and get you to the closing table as quickly as possible. If there are little things to be completed before you can close, your buyer’s agent will ensure that they get done. Remember, your buyer’s agent doesn’t get paid until you close. As such, it is within their full interest to ensure that they get you to the closing table.
Buyer Agency Agreements Bottom Line
Overall, buyers should not be intimidated about signing a buyer broker agreement as these legally enforceable contracts are there to protect both the buyer and the real estate agent. It ensures that you have someone working extremely hard on your behalf to find you a home for the buyer. The real estate agent ensures that they get paid and compensated for all their hard work. Since a buyer agent is free for the buyer, there is simply no reason not to hire one. Keep in mind as a contract, there is typically a termination clause, so you do not have to feel stuck once you sign a buyer agency agreement. If for any reason you are uncomfortable with a buyer agency agreement when presented with one, keep in mind that you may hire the assistance of an attorney before you commit to one. Nevertheless, if you want to ensure that you have an agent working on your behalf at all times, you should hire a buyer’s agent immediately.