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Buying a house reveals many new things to you; one of them is the buyer agency agreement. It makes one wonder why I am signing yet another contract before buying the property.
Buying a house is not like buying furniture for the living room. It is a lengthy task with various meticulous aspects to it. The buyer agency agreement is in place to ensure the rights of the buyer or agency are secure.
You would also be amazed at how many people are involved. There is a possibility of involvement of the following people:
- Potential buyer
- Agent representing the potential buyer
- And listing agent representing the seller
They all work together for one aim – getting the right property. Once requirements, terms and conditions, and details are listed in a signed agreement.
In this way, you can be less worried about a lack of transparency since everything will go according to the plan outlined in the agreement.
Planning to buy homes, here is a quick read on investment property.
What Is a Buyer Agency Agreement?
The buyer’s agent is here to make this process easier for you. They ensure they crease out all mortgage details, research properties for you, complete the paperwork, and take you through every step until the property is acquired.
Hence comes the requirement of the buyer agency agreement. The agreement is signed way before they show any property to the buyer. It takes place to protect both buyer and agent.
Also, it outlines the agreement between the buyer and agency on getting a commission based on the successful purchase of the property.
Here is an article on a buyer agency agreement.
Essential Elements in a Buyer Agency Agreement
- Legal names of both parties: This includes the names of the buyer /seller and agency in detail.
- Contact information: This includes the contact detail and addresses of both parties.
- The agreement period: This includes the time frame decided by both parties. Usually, the agreement lasts for 90 days, but this can be edited or extended depending on the sentiments of both parties.
- Compensation agreement: In this section, the percentage of the agency is decided and mentioned. It cannot be changed later until both parties agree.
- Mention if the agreement is exclusive or non-exclusive: Since these two have different sets of terms and conditions, it needs mentioning for clarity.
- List of responsibilities of the buyer: It explains and lists all the buyer's responsibilities, such as reaching the appointments, visitations, signing contracts, and paying the retainer.
- List of services of the agent for the buyer: It gives details of all the responsibilities of the seller, such as researching the property as per the requirement mentioned in the contract, creating and negotiating the offers, filling out the paperwork, chasing leads, and planning visitations.
- Agreement termination: In this section, both parties decide on terms should the agreement need to be terminated.
- Property Description: For clarity and fallback to concrete information, the property's information, description, and requirement are explained here.
- Additional Terms and Conditions: Both parties can add additional elements depending on the case.
- Signatures: Signatures with dates of both parties must be entered by the end of the agreement.
Purpose of a Buyer Agency Agreement
The only purpose of signing a buyer agency agreement is clarity. When working with an agency for buying or selling homes, their only way of earning is the commission they earn from successful sales.
Hence the idea is to outline all the terms and conditions, ensuring no aspect is left out for future disagreements.
The great thing about working with an agency is that they are adamant about success. So, to get the commission, they will ensure that you get exactly the property you want.
Because the agency is not successful in finding the property, they miss out on the commission. Hence, they take their work extremely seriously and ensure success in securing suitable properties.
Image via Pexels by Alexander Isreb
How to Terminate a Buyer Agency Agreement
There are various clauses in a buyer agency agreement. If the buyer is adamant about terminating the contract, they need to highlight the reason for termination.
It mainly depends on the relationship you have with your agency. Often agencies add conditional or unconditional termination in the contract.
When signing the buyer agency agreement with the agency, look for the termination clause. Also, check if the termination is possible without any fee or penalty.
Also, some agreements have a limited clause in reason to terminate. You can also negotiate to add clauses like "failed to secure property in the specified time," etc.
Suppose the agency is not cooperating in terminating the agreement. In that case, you can explore the clauses mentioned, such as deadline and responsibilities, and find any breach of contract.
Then you can explain how some or any of the responsibilities mentioned in the contract are breached. With that information, you can negotiate to get out of the contract with the agency.
Here is an article on how to terminate a buyer agency agreement.
Types of Buyer Agency Agreements
There are two types of buyer agency agreements. With some differences, there is a whole dynamic change in each:
- Exclusive buyer agency agreement
- Non-exclusive buyer agency agreement
Exclusive Buyer Agency Agreements
In an exclusive buyer agency agreement, the buyer hires the one agency to facilitate the search and everything that entails buying the house.
It protects the right of the agency that the buyer or seller will give the commission to only one agency that is handling the case. It is also key to keeping the agency invested in the buyer's process of finding the property they may be looking for.
When an agency has exclusive rights on behalf of the buyer, they handle the whole bargain, communication, and dealing with the property seller.
The agency gets payment in the form of commission from the buyer or seller, depending on the terms. However, these contracts go on for several months to a year and are hard to revoke.
Here is a quick read on the exclusive right to sell listing.
Non-exclusive Buyer Agency Agreements
In a non-exclusive buyer agency agreement, buyers can hire as many agencies as possible. However, it doesn't strike the agency's attention to the fullest due to the competition and prospect of losing the commission.
Also, in a non-exclusive agreement, the agency has limited rights to handle communication on behalf of the client. But the right to commission goes to the agency which was able to secure the property of choice.
There are few terms and conditions to the non-exclusive agreement basis; hence it's very effortless to revoke the agreement.
Here is a list of some real estate lawyers who will help you draw out an immaculate agreement.
Benefits of a Buyer Agency Agreement
The buyer agency agreement safeguards the interest of both parties by writing down all the nitty-gritty details. Therefore, it is indeed the best policy to have everything in writing.
If any party wants to go out of the scope of the services mentioned, the other party can concur or differ.
The convenient thing about this agreement is that it gives you the right to differ and stand your ground because each detail is highlighted and mentioned.
Similarly, if a property buyer is on an exclusive agreement basis and not getting results in mentioned time, they can terminate the contract to hire another or multiple agencies. Again, the agreement ensures that your time and money are valued.
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