Buyer representation agreements: how do they work? This reader points out that some states have real estate laws that regulate buyer agency agreements.

Q: I saw your recent article on exclusive buyer agents and buyer agency agreements that discussed an agent that required the homebuyer to sign an agreement for the showing. I feel your article misleads buyers in the state of Connecticut. 

Connecticut has a law that requires buyer sign an agreement with that person in order to show a home that is not listed by the agent’s brokerage. Agents who do not have buyers sign a representation agreement are breaking the law! 

Buyer Representation Agreements in Connecticut

In Connecticut, realtors can show our broker’s listings without the consumer signing a Buyer Representation Agreement; however, we need to provide the consumer with an Unrepresented Persons Disclosure which the consumer is asked to sign. An Unrepresented Persons Disclosure does not bind the buyer to the agent; it advises the consumer whose best interest the agent represents. 

Nowhere is your article did you advise the consumer to check with their state’s real estate laws. Your article is written from the perspective that buyer representation laws are the same throughout the country. 

A Buyer Representation Agreement is flexible. It can be for a specific property, properties in a specific town or county, and/or for a specific period of time, as mutually agreed upon by the agent and the buyer.

Since people believe what they read, I encourage you to write a follow up article advising consumers to check their state real estate laws regarding buyer representation agreements and when they are or are not required. 

A: Thank you for your comment to our recent article. The article was about a home buyer interviewing agents to represent them in the purchase of a home. Your point is well taken and we’ll clarify the other side of the question that we did not address in our answer. 

Our answer only addressed the question of the terms that may be listed in some buyer agency agreements but we’ll try to address some of the other issues involved in hiring a real estate agent in a purchase and sale of a home. (We don’t have sufficient space to go through all of the intricacies and can only give a broad overview.)

A Brief History of Buyer Agency Agreements

Many years ago, real estate agents got paid a commission by the seller at closing and because the seller paid the commission, the real estate agent was seen as representing the seller. This included the real estate agent that brought the buyer to the table. Over time, the law has progressed to a point where you could have a real estate agent represent only the seller, only the buyer or, in some situations, both the buyer and seller.

Where the real estate agent represented the seller, the agent was more like a traditional agent from years ago that owed a duty of loyalty to the seller. The agent that represented the buyer would be a buyer’s agent and owe a duty of loyalty to the buyer. In either case, the buyer and the buyer’s agent would need to sign some form of documentation to formalize their arrangement. The seller always had to sign a listing agreement with the listing agent. 

With the advent of discount listing brokers, iBuyers, and other online providers that can list a home for a seller, the real estate agency game has changed. Sometimes it’s hard to know who represents you in the purchase of a home – who is your true buyer’s agent.

Dual agency is another wrinkle. It describes a situation where the same agent represents the buyer and seller in the same transaction. The dual agent might also be known as a facilitator or nonagent, since they don’t represent anyone’s best interests and have no fiduciary duty. 

There are further distinctions within each of these categories. For example, exclusive buyer agents only represent buyers and never sellers. Exclusive buyer agents do this to avoid any potential conflict of interest in their representations. 

Buyer Representation Agreement Functions and Legality

Having said all this, all brokers will request some form of documentation to work with a buyer or a seller, even discount brokers and brokers that provide other services and benefits to buyers. The questions you should ask: What does the documentation say? How does it affect the buyer or seller? What are the terms of the representation?

Many states have their own version of the documents that brokers can use with their buyers and sellers. Some of the real estate brokerage houses have their own customized forms that may add terms to the requirements under the applicable state laws. In other words, a buyer’s agency form from the State of Illinois wouldn’t be valid in any other state.

You can ask the agents you interview to provide you with a buyer’s agency agreement to review. You can also go online to your state’s department or agency that regulates real estate agents and brokers and review the forms online. Finally, you can always consult with an attorney to go over any of the legalities that may be included in those forms and what specific state requirements exist that you should know about. 

Whatever document a buyer or seller signs in connection with a purchase and a sale of a home, we hope that the buyer and seller both understand what they are signing, ask questions before signing and make sure that the terms of the representation are right for them. Thanks again for writing.

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