What is a Buyer's Broker Agreement and Do Buyers Need One?

When buying a home, your first step should be finding your perfect local top agent.

Once you’ve gotten connected with an agent that you’re comfortable working with, you’ll kick off the process by building a custom purchasing strategy, shopping for potential homes, and preparing strong competitive offers — but, at what stage of the process do you need to enter into a formal buyer’s broker agreement?

A buyer’s broker agreement is sometimes called a buyer’s agreement or a buyer representation agreement. Here’s an overview of what this is, whether or not you need one, and when to get one if you opt for it.

What is a Buyer’s Broker Agreement?

A buyer’s broker agreement is a formal agreement between a buyer and a buyer’s agent, setting the terms and conditions of their business relationship. The buyer’s broker agreement specifies which agent is representing the client and how much that agent will be compensated upon the deal’s closing.

This agreement clarifies any questions that may arise concerning the buyer’s representation by a real estate agent. Similar to a temporary hiring contract for a freelance job, like the one you would sign when hiring a general contractor, the buyer’s broker agreement states the work that will be performed, by who, and the associated fee.

Three Types of Buyer’s Broker Agreements to Know

There is not just one type of buyer’s broker agreement, there are actually three. Here is an overview of each of them.

Exclusive Right to Represent Buyer’s Broker Agreement

This is the only form of a buyer’s broker agreement where the buyer agrees to exclusively work with the agent or broker they are signing with.

This document would outline the terms of:

• The broker’s duties related to the transaction
• Buyer’s responsibilities
• Compensation conditions
  

With an exclusive right to represent buyer’s broker agreement, it’s a norm for the payment responsibility of the agent or broker commissions to be passed off to the seller.

In this case, the buyer is not responsible for paying the service fees for their agent or broker — and it will instead come out of the seller’s profits at closing, bundled into their closing costs.

Non-Exclusive Not For Compensation Buyer’s Broker Agreement

With a non-exclusive not for compensation buyer’s broker agreement, the documents outline the same terms — the broker’s transaction duties and buyer responsibilities. However, this contract does not outline compensation.

Since this agreement is non-exclusive, the buyer has the right to hire more than one agent or broker to help them find the right home.

However, the buyer is technically able to require the real estate professional’s single agency — where the agent cannot represent both the buyer and seller — as a contingency clause of the agreement.

Non-Exclusive Right to Represent Buyer’s Broker Agreement

A non-exclusive right to represent buyer’s broker agreement outlines the same terms as the other types of buyer’s broker agreements — mainly, the responsibilities of the buyers and brokers.

Since this agreement is non-exclusive, the buyer is legally able to hire more than one real estate professional to help with the purchase.

When using this contract, the buyer is not required to pay the agent or broker, and the buyer can set single agency as a term of the agreement.

Do You Need a Buyer’s Broker Agreement?

Not all real estate agents require a formal contract to begin working together, but the majority of brokers do. If you’re working with a broker, it’s likely that this agreement will be one of the first steps of their workflow process.

A buyer’s broker agreement is always a good idea because it safeguards your best interests. When working with anyone, it’s a best practice to have the terms of the relationship outlined in plain writing — which prevents misunderstandings and bad business practices in the future.

If you don’t sign any sort of agreement on paper, you could be subject to false claims or miscommunications.

When Should You Sign a Buyer’s Broker Agreement?

To protect your position when buying a home, we recommend a buyer’s broker agreement at the onset of the business relationship. Once you’ve decided which real estate professional you’d like to work with and are ready to begin the process, it’s the right time to outline business terms on paper to keep on the record.

As mentioned before, buyers working with a broker will probably have this proposed to them. If your real estate agent does not suggest or require this type of formal agreement themselves, don’t hesitate to bring it up yourself.

If you’re ready to get in touch with the best real estate agents in your market with the highest performance rates, get matched with your perfect real estate professional with RealEstateAgents.com.