Buyer Broker Agreement Mandates Will Change Home Shopping
If you’re hoping to purchase a home in the near future, you should be aware of a major change to the home-buying process that has altered how homes are purchased and shopped across the country.
Any prospective homebuyer who plans to purchase through a Realtor (that is, a licensed real estate agent who is a member of the National Association of Realtors) must sign a buyer-broker agreement before that agent can give the buyer a tour of the property.
Disclaimer: The information in this article is for educational purposes only and should not be taken as legal advice. HomeLight always encourages you to consult a legal advisor regarding your situation.
What is a broker-buyer agreement in real estate?
A buyer-broker agreement in real estate is a document that aims to outline clearly what a buyer’s agent will do for you. This can include how much the agent will be compensated, the length of time you might be expected to work with said agent, along with other details.
This legally binding contract lays out the terms of the professional relationship from the start. It is intended to protect both you and the buyer’s agent and, ideally, prevent any potential misunderstandings about what is expected.
These agreements used to be optional when working with a buyer’s agent. However, now you are required to enter into a written agreement before touring a property with a buyer’s agent who is also a Realtor.
Remember, not every buyer’s agent is considered a Realtor, and the terms of these agreements will differ by market, so it’s important to have a full understanding of whether you are working with a licensed real estate agent, a Realtor, or a for-sale-by-owner seller before signing any contract.
Do I have to sign a broker-buyer agreement?
“While buyer broker agreements have always existed, it is now a requirement versus an optional practice,” says David Guthrie, a top-performing Arizona real estate agent who works with nearly 80% more single-family homes than the average Tucson agent.
“What’s new about the buyer-broker agreements is the requirement for real estate agents to enter into written agreements that clearly outline all terms and fees before showing any property or engaging in any meaningful work on behalf of a client,” Guthrie says.
As such, these contracts will vary and could include things like exclusivity terms requiring a buyer to work with a specific agent, terms on how long that buyer must work with said agent, or may even have specific requirements needed to cancel the agreement. The contract should also clearly specify the agent’s commission.
“If a prospective buyer declines to sign a buyer-broker agreement before viewing a property, it means that no formal agency relationship can be established. Agents simply cannot perform any work on behalf of a client without establishing [their terms] in writing,” Guthrie says.
“These upfront written agreements ultimately protect the interests of both the buyer and the agent,” Guthrie adds.
Why have broker-buyer agreements changed?
This shift is a result of the $418 million settlement between The Justice Department and the National Association of Realtors earlier this year, following a series of class action lawsuits related to home-seller commissions.
These changes are intended to “decouple” seller and buyer agent compensation. Industry experts predict this decoupling will likely lower agent fees and allow buyers to negotiate commission amounts directly.
