During Landmark Title Assurance Agency’s final Summer Session for Real Estate, Deanna Bone, CEO and team leader of the Southwest Home team, talked with real estate professionals across multiple states about the rising demand to use the Buyer Broker Agreement. Deanna shared her knowledge from her years of consistently using agreements to ensure strong relationships between buyers and brokers. Deanna has more than 20 years of experience in the real estate industry and is a master at building business through referral.
What is a Buyer Broker Agreement?
The Buyer Broker Agreement is an optional legal contract that outlines the relationship between a property buyer and a broker during a real estate transaction. It is recommended that brokers use this document to set expectations, to outline the process in a clear and precise manner, avoid surprises, ensure payment and protect both parties if something goes wrong. Buyer Broker Agreements can be exclusive or non-exclusive. An exclusive contract means that the buyer is legally required to work exclusively with the signed broker and can’t hire additional brokers. A non-exclusive contract gives the buyer the option to work with multiple brokers. The Buyer Broker Agreement differs slightly from state to state, but the responsibilities are the same throughout.
What is included in a Buyer Broker Agreement?
1. Duties
During the real estate transaction process, buyers and brokers both have duties they are expected to uphold. Brokers are typically responsible for finding properties, conducting visual inspections, preparing offers and handling paperwork. Buyers are typically expected to consider the homes the broker presents, to be qualified to purchase the property, to read documents from the broker and to cooperate with the broker. These are the basic duties both parties are expected to uphold, but the agreement can have a significantly longer list of duties.
2. Payment
Brokers make their money purely off fees and commissions through real estate transactions. A retainer fee is used to secure the services of a broker and it compensates the broker for their time, effort and money put into finding the buyer their property.
Commissions typically range from 2-3% of the purchase price of the property and are often covered by the seller of the property – but not always. This is why it is important for brokers to use the Buyer-Broker Agreement to legally ensure they get paid if the seller doesn’t agree to cover the commission.
This is currently a hot topic in the real estate industry due to the ongoing Moehrl vs. the National Association of Realtors, et al. case in which the plaintiffs allege that requiring sellers to pay commissions to buyer brokers violates federal antitrust laws. Depending on how this lawsuit turns out, it could change the way that brokers are paid. Using the Buyer Broker Agreement to clarify how the broker gets paid is important while the discussion is up in the air.
3. Term length and termination
Brokers and buyers also need to establish a term length for the agreement and how to terminate the contract. The term length defines how long the buyer and broker agree to honor the contract and work together. This section is negotiable and there is room for both parties to determine a term length they are comfortable with.
If the agreement isn’t working out for a buyer or a broker, they have a right to terminate the contract. This section documents the process for terminating the contract. Elements such as how the contract can be terminated, how much prior notice is needed and how much the buyer will have to pay the broker for terminating the contract early.
4. Representation
In some cases, the broker must detail the kind of representation he or she will provide the buyer. Designated representation limits the broker to presenting properties listed by other real estate agents. With this type of agreement, the broker only represents the buyer. In many states, there is also an option for dual representation that gives the broker the freedom to present homes he or she has listed with sellers. With this type of agreement, the broker represents both the buyer and the seller.
5. Property description
Buyers have the option of outlining the type of property they are looking for in this section of the Buyer Broker Agreement and requiring certain elements. Details can include the physical description of the property, the property location and the price range.
Once the broker and buyer put an offer on a property, Landmark Title Assurance Agency is here to facilitate the title process. We have a talented and experienced team of title and escrow officers whof will ensure a timely and seamless closing on your property. Our team is available to answer any questions and we work with reputable realtors that can assist with questions regarding the Broker Buyer Agreement. Please contact us to speak to one of our team members and learn more about our services.