What is an exclusive buyer agency agreement? This homebuyer was asked to sign an agency agreement and wants to know the pros and cons of agency exclusivity.
Q: We are looking for homes to buy and one of the real estate agents we interviewed wants us to sign an agency agreement form that will commit us to him. What are your thoughts on this type of document?
A: Well, we’re generally not in favor of these documents, but understand why some real estate agents want their buyers to sign them. These documents frequently will say that the buyer agrees to work with one particular real estate agent for a certain period of time. If the buyer buys something without the help of the agent during that time, these agreements often state that the buyer’s agent is due a fee on that purchase.
The Problem with Buyer Agency Agreements
Our problem is that while buyers and agents may get along in the beginning of their working relationship, the relationship can quickly turn sour for any number of reasons. We feel that buyers should have the option to find a different agent to work with on the purchase of a home. Some buyer agreements state that upon the termination of the arrangement, the buyer won’t owe a fee to the agent if the buyer uses the services of another agent.
Having said that, real estate agents don’t appreciate buyers who use their time, effort and services to look at properties and then buy one of those properties behind the back of the agent. Many agents that work with buyers never have their buyers sign anything. Those agents either have a high comfort level that the customers they are working with will continue to work with them during the home buying process or are fine when buyers move on to other agents as they may be relieved to no longer have to work with a particular buyer. (This happens more often than you think.)
Now, some agents insist on having some sort of a written agreement with a buyer. As a buyer, you have to evaluate the agent that wants you to sign this document and determine if the agent is right for you, how long are you bound by the terms of the agreement to work with the agent and on what terms can you break the arrangement.
When You Should Sign a Buyer Agency Agreement
There are some buyer agency agreements we think you should sign. These agreements might include more palatable terms, such as a cash rebate at the closing or a reduced commission. In these instances, if you’re working with a buyer’s broker and are expecting some sort of financial benefit on the purchase of a home, make sure the arrangement is in writing to avoid any confusion or misunderstanding.
Before You Sign an Agency Agreement
Of course, before you sign any legal document, please make sure you read the agreement and understand the terms. You want to make sure you are working with the right person for the right home. And, you need to understand what the terms of the arrangement are between you and the broker you are working with.
Here’s our hot list: Watch out for the length of the term of the agreement, whether you can work with other real estate agents at the same time, if it’s an exclusive arrangement, whether you will owe a commission to the agent if the deal falls through or you cancel the agreement, what fees you might have to pay, and whether the agent can act as a dual agent or not.
Your real estate attorney can provide more insight or at the very least, be sure to spend some time reading information on these types of documents.