Written Buyer Agreement
With all the changes being made related to real estate transactions things can seem a little murky at best. The goal overall is to make it clearer but to a lot of folks it just seems like a lot more paperwork. Hopefully this article will help decipher the relationship between a buyer and a buyer’s agent. Please reach out to me with any questions. Kelley Schlauch
What is a written buyer agreement and why is the buyer asked to sign it?
This is an agreement outlining the services I will provide and what I will be paid for those services.
The purpose of this document is to ensure buyers are directly involved in the negotiations of the amount their broker is paid.
Obtaining this agreement is a requirement of our local MLS, put in place in order to be as transparent as possible.
I need to have an agreement in place before touring a home with you (the buyer), but I only want you to sign an agreement if you are comfortable with me and the terms.
Before signing the buyer agreement, do you understand the realities of compensation and potential costs?
You can request compensation for their agent from the seller or the seller’s agent, but not all sellers or seller’s agents may choose to pay buyer broker compensation.
Under current FHA rules, agent compensation cannot be financed through a mortgage.
A lender will know more about the financing rules for a Conventional Loan or a VA Loan.
Do you understand your responsibility as a buyer for any agreed upon compensation?
The information included here should help you understand more completely.
If you’re a homebuyer working with an agent who is a REALTOR®, it means you are working with a professional ethically obligated to work in your best interest. As of August 17, 2024, you will be asked to sign a written buyer agreement after you’ve chosen the professional you want to work with. Here’s what you should know about these agreements:
What is a “written buyer agreement?” What does it do?
A written buyer agreement is an agreement between you and your real estate professional outlining the services your real estate professional will provide you, and what they will be paid for those services.
Why am I being asked to sign an agreement?
Written buyer agreements became a nationwide requirement for many real estate professionals as a part of the National Association of REALTORS®’ proposed settlement of litigation related to broker commissions. The requirement went into effect on August 17, 2024.
Are these agreements new?
In some places, yes. Many states have required them for years, while some have not. As a result, it is entirely possible you or others you know have not used them in the recent past. Regardless, they are now a nationwide requirement for many real estate professionals.
Are these agreements negotiable?
Yes! You should feel empowered to negotiate any aspect of the agreement with your real estate professional, such as the services you want to receive, the length of the agreement, and the compensation, if any. Compensation between you and your real estate professional is negotiable and not set by law. In the written agreement, the compensation must be clearly defined. Only sign an agreement that reflects what you have agreed to with your real estate professional.
How do I benefit from these agreements?
These agreements clearly lay out what services you (as a homebuyer) expect your real estate professional to provide, and what your real estate professional will be paid. These agreements make things clear and reduce any potential confusion at the outset of your relationship with your real estate professional.
When do I need to sign an agreement?
You will be asked to enter into a written buyer agreement with your real estate professional before “touring” a home with them, either in-person or virtually. If you are simply visiting an open house on your own or asking a real estate professional about their services, you do not need to sign a written buyer agreement.
Does this mean I have to pay my real estate professional out of pocket?
Not necessarily. While you are responsible for paying your real estate professional as outlined by your agreement, you can still request, negotiate for, and receive compensation for your real estate professional from the seller or their agent.
Do agreements dictate a specific type of relationship I need to have with my real estate professional?
No—you are allowed to enter into any type of business relationship with your real estate professional allowed by state law where you live.
Can I change or exit an agreement?
Yes. You and your real estate professional can mutually agree to change your agreement. Agreements may have specific conditions under which they can be exited, so read the text of the agreement and speak with your real estate professional if you would like to change or exit your agreement.
A real estate agent’s primary responsibility to a buyer is to act in the buyer’s best interest. This is known as a fiduciary duty.
Fiduciary duties
- Loyalty: The agent must be loyal to the buyer’s interests
- Obedience: The agent must follow the buyer’s instructions, unless they are illegal
- Disclosure: The agent must disclose all relevant facts to the buyer
- Confidentiality: The agent must keep buyer information confidential
- Accounting: The agent must account for the buyer’s money properly
- Reasonable care: The agent must use reasonable care and diligence in representing the buyer
How a real estate agent can help buyers
- Researching potential homes
- Negotiating with sellers
- Ensuring all inspections are done properly
- Walking buyers through the closing process
- Preparing an information packet about each property
- Submitting and negotiating offers on the buyer’s behalf
- Helping buyers find a mortgage lender
- Obtaining a pre-approval letter from a lender