Buying a home is a big deal, and buyers are highly advised to have representation when they search for a home and negotiate a deal. Having a real estate agent represent you when making this massive purchase is certainly beneficial for many reasons, but the details of this professional relationship should ideally be outlined in a contract, known as a Buyer’s Representation Agreement.
What is a Buyer’s Representation Agreement?
A Buyer’s Representation Agreement is a contract that both buyer and agent sign that essentially makes the business relationship formal. Since it’s a contract, it is legally binding, which means both you and your agent have a legal obligation to fulfill the duties that are stipulated in the agreement. By signing a buyer’s representation agreement, you agree to work exclusively with that particular agent and brokerage for an agreed-upon time period.
This might sound like you’re making a major commitment, but signing this contract means that your agent and the brokerage promise to be fully committed to helping you find a home at a price you can afford, all while keeping your best interests in mind. Their loyalty lies with you, and not the seller, which means your agent will work diligently to ensure that you are top priority over any other party involved in the transaction.
Why Sign a Buyer’s Representation Agreement?
The idea of signing a contract and entering into a legally-binding agreement can sound daunting. But in the case of a buyer’s representation agreement, you’re actually being afforded with certain benefits that protect you throughout the home purchasing process.
By signing this agreement, you become a bonafide client. As a client, you are owed a fiduciary duty from your real estate agent and brokerage. Without this signed agreement, your agent has no fiduciary duty to you, which means they don’t necessarily have the obligation to keep your best interests in mind when showing you homes or negotiating with a seller.
On the other hand, a buyer’s representation agreement means that your agent must disclose all pertinent information to you and negotiate on your behalf. Of course, agents are still obligated to treat customers who do not have a signed buyer’s representation agreement in place with honesty and fairness.
Without signing this contract, you are essentially a customer rather than a client, which means your agent doesn’t exclusively represent you. Instead, any pertinent information does not have to be kept confidential and can actually be communicated to the seller. This obviously doesn’t allow your best interest to be upheld, which is why it’s very useful for you to sign this type of agreement and ensure that your agent works exclusively with you, and vice versa.
In addition to benefiting from your agent’s fiduciary duty to protect your best interests in a real estate transaction, a buyer’s representation agreement will also help you better understand the role that your agent plays in the process. All services that are owed to you will be clearly outlined in the contract and discussed in detail before you sign it.
This contract will also outline important details, such as the type of home that the agent will help you find, the geographical location of the home search, and the real estate agent’s commission that will be paid (typically by the seller) if and when a real estate deal is reached.
Since your agent and brokerage are fully accountable to you and are obligated to disclose all relevant information, you can be sure that your best interests will be number one priority throughout the home search, at the negotiating table, and at closing.
Do You Have to Sign a Buyer’s Representation Agreement?
You don’t necessarily have to sign this contract to have an agent show you a few homes if the agent is OK with it. Some agents are willing to show homes without an agreement in place, while others request to have an agreement signed before the first showing.
However, you will be obligated to sign this agreement before you put in an offer on a home. Generally speaking, it’s in your best interests to sign a buyer’s representation agreement right from the get-go so that both you and your agent are on the same page about what is expected of the relationship.
It should be noted that you are under no obligation to actually make a purchase. Nowhere in a buyer’s representation agreement does it say that you must make a purchase as part of the contract details.
Can You Break the Contract?
Many buyers might be hesitant to sign a buyer’s representation agreement because they don’t want to be bound to a particular agent and brokerage for a certain amount of time for whatever reason. The good news is that these agreements can be severed before the expiry date if both parties consent.
As a buyer, you don’t really have to worry about an agent refusing to agree to end the relationship if you no longer want any part of it. The majority of buyer agents are fine with ending a buyer’s representation agreement early if the buyer wants out.
The Bottom Line
While buyer’s representation agreements sound very formal and contain a ton of legal jargon, they are really drafted to protect you and allow for a more positive and effective home buying experience. While they will have to be signed eventually if you plan to put an offer on a home, you would be better off having a signed agreement in place right from the start to ensure that your best interests are upheld from start to finish.