When you are buying real estate, there are times when your agent will ask you to sign a “buyer’s agent agreement”. What is that agreement and should you sign it?
The relationship that sellers have with their real estate agent is clearly defined when they place their home for sale. It defines the relationship with the agent and clearly spells out the commission that the seller will pay to both the listing broker and the selling broker when the sale of the home closes.
In contrast, buyers will often work with a real estate agent without any formal written agreement in place. A buyer’s agent may spend weeks or months helping a buyer to find a home. Sometimes a buyer will switch to a different agent at the moment of signing a contract for a home. It can be an inadvertent change, such as writing an offer directly with a sales office of a new subdivision. It can also be an intentional change, maybe to give a friend the real estate commission or simply to change to a discount broker at the last moment to save money. Obviously the original agent expects to be compensated for their work, so they will ask for a buyer’s agent agreement up front to avoid these situations. A buyer’s agent agreement will specify rights and duties of the buyer and the agent and will also specify how and when the agent will be compensated. In some states (though NOT in Washington), if you don’t specify and sign a buyer’s agent agreement, the agent may by default represent the seller.
Real estate agents are taught to sign these contracts to protect their interests and ensure that they get compensated for their work. In our opinion, asking for a commitment like this is the quickest way to turn off a buyer that we haven’t worked with before. We do not require a buyer’s agent agreement. One of our competitors, in contrast, requires their buyers to sign a buyer’s agent agreement when they make their first offer. That agreement locks them in for 180-365 days for any future offers. This seems a bit excessive to us.
Buyer’s agents do deserve to be compensated, and our hope is that customers recognize the value we provide. We simply don’t believe that the formal agreement is needed to “lock in” our customers. Besides, the negative consequences of trying to enforce such a contract can far outweigh the benefits it provides to us.
If you are considering signing a buyer’s agent agreement, make sure that it covers the following points:
- Shorten the term – If you are unsure about the agent you have chosen, shorten the term so that you are able to switch agents if it doesn’t work out.
- Try out the agent – Offer to sign the agreement after a “trial run” of seeing homes with the agent for an afternoon or two.
- Make sure you both can terminate – If the relationship isn’t working, give both yourself and the agent the opportunity to terminate and move on. In Washington this happens one of three ways. The agreement terminates at its expiration date, the agreement terminates when the transaction is complete (i.e. house purchase is closed), or the agreement terminates when one party gives written notice to the other.