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What is a Buying Agency Agreement?
A buying agency agreement, sometimes called a buyer's broker agreement or a buyer representation agreement, is a legal contract used in real estate between a potential home buyer and the buyer's agent.
This agreement is used to protect both parties that sign the agreement. The home buyer is guaranteed that the agent will be committed to them and be held responsible for the work they do. The buyer's agent is expected to work with the buyer's best interests in mind.
The buyer's agent is ensured that they are not wasting their time with a potential home buyer who may leave and work with another agency. A buying agency agreement will provide a buyer's agent with some compensation for any time, effort, and expenses they expelled while working with a home buyer if they choose to purchase a property with a different agent.
Check out this article for more information about buying agency agreements.
Types of Buying Agency Agreements
There are three different types of buying agency agreements. These agreements must include an expiration date, a fair housing statement, a blockbusting statement, and a signature line for both the broker and the seller.
Below are the different types of buying agency agreements:
Exclusive Right to Sell: The exclusive right to sell, sometimes called a lease listing agreement, is the most common type of agency agreement. This agreement grants the buyer's agent the exclusive right to represent the seller. This means the buyer cannot go and hire another agent while under contract. The agreement also ensures that the broker will be compensated if the sale is completed during the duration of the agreement.
Exclusive Agency Agreement: The exclusive agency agreement is similar to the exclusive right to sell agreement, but it differs in how the broker is compensated. Under this agreement, the broker must produce the purchaser or tenant. If the property is sold through the efforts of the seller, the broker doesn't get compensated.
Exclusive Buyer Agency Agreement: Under an exclusive buyer agency agreement, the broker is granted the exclusive right to represent the buyer. The broker is entitled to compensation when the property sells unless the property is specifically exempted. This agreement will specify who is entitled to compensation, and sometimes the broker receiving payment differs from the broker representing the buyer.
Buying agency agreements allow flexibility and negotiation so both parties can come to an agreement that suits them. Sometimes buyers choose to waive specific broker duties in an agreement called a flat fee listing or limited-service agreement. In this case, the buyer would complete a waiver of obligations statement that details the broker's duties they are waiving.
What's Included in a Buying Agency Agreement?
The terms included in a buying agency agreement will vary based on the type of agreement and the needs of both the buyer's agent and the buyer. These agreements are flexible and able to be custom-tailored to fit the needs of each party.
Although the agreements vary, they should include the following basic terms and information:
- Term Length: The term length defines how long the contract is valid. Most buying agency agreements have set terms around 90 days; however, if both parties agree, the period can be set for any amount of time. This section of the agreement should also detail what happens when the contract ends.
- Termination Rights: Termination rights dictate how the contract can be canceled before the set term length. There usually needs to be grounds for termination. The termination clause will also dictate how the broker is compensated if the buyer terminates the contract and how much notice is necessary.
- Compensation: Generally, the party selling the home is responsible for paying the seller's and buyer's agent's commission; however, this is still an important section to understand. There may be terms about what happens if the seller refuses to pay or the buyer breaches the contract agreement.
- Buyer Exclusivity and Representation: The exclusivity clause commits the buyer to work only with the broker they sign with for the agreed-upon term.
Property Description: Most buying agent agreements will include a section that describes the type of property the seller is looking for. This will include information like:
- Price range
- Type of property
This section allows the broker to look back and refresh their memory to find properties that fit the buyer's wants and needs.
Another important section in the agreement will be a list of the buyer agent's duties. This list will include things like:
- Finding and showing potential homes
- Writing offers
- Negotiating offers
It is crucial to go over all sections of the buying agency agreement with your broker to ensure you are on the same page and all expectations are clear.
For an example of a buying agency agreement, click here.
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Should I Sign a Buying Agency Agreement?
Buying agency agreements are not mandatory for purchasing a house, so if you don't feel comfortable signing a contract , you shouldn't. However, you should understand the advantages you may benefit from if you choose to enter an exclusive agreement with a buying agency.
Buyers who sign buying agency agreements are usually treated with top priority. This contract doesn't only protect the broker; it protects the buyer as well, ensuring that the broker will act in their best interest.
When a contract is signed with a buying agency, that agency cannot represent the seller in a transaction. This avoids any type of conflict of interest between the buyer and seller during a real estate deal.
A buying agency ensures that the person purchasing a home has an advocate on their team. The broker knows common issues to look for in a walk-through, writes and negotiates offers, and is familiar with closing. Typically, the seller is responsible for paying all commissions, so a buyer really can't lose when working with a broker.
Getting Out of a Buying Agency Agreement
Although buying agency agreements are legal contracts , there are some ways to get out of this agreement. If a buyer isn't satisfied with the service they are receiving or would like to work with a different broker, they have a couple of options.
All buying agency agreements are required to have a set term length. This term is generally 90 days. The easiest way to get out of a buyer agency agreement is to let the term length expire. After the term, the buyer can work with another agent and has not breached the contract.
This only works, however, if the buyer isn't under a time crunch. Sometimes, the buyer is in a rush to purchase a house and cannot afford to wait out the agreement term.
Most buying agency agreements have termination clauses that give instructions for each party to terminate the contract . The buyer should contact the buyer's agent in writing to inform them of their intent to terminate the agreement. In these cases, the buyer will most likely be obligated to compensate the broker as laid out in the termination clause.
Get Help with A Buying Agency Agreement
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