If you are looking to buy a home, your chosen Realtor will ask you to sign a “Buyer Broker Agreement” or as it is more formally known, the “Buyer Agency Agreement” in DC & Maryland and the “Exclusive Right To Represent Buyer Agreement” in Virginia. Potential clients often ask us several excellent questions about this agreement, so we thought we’d break them all down for you.
WHAT IS THE BUYER BROKER AGREEMENT?
In Virginia, Maryland, and DC, until a buyer signs a buyer broker agreement, the agent they are working with is legally committed to representing the seller of a home. Buyers and agents who have agreed to work together must outline the terms of their agreement in a formal written document. Enter the Buyer Broker Agreement. Signing this agreement ensures that you have a Realtor legally committed to representing you. With this representation, an agent looking out for YOUR best interests, not the sellers.
Additionally, with the buyer broker agreement in place, your agent cannot share any of your information with the seller, it binds them to confidentiality. For example, your agent could never divulge that while you offered $450,000 for a property, you really are willing and able to go up to $500,000.
Real estate agents must always disclose which party they represent in any transaction. This document clarifies for all involved parties who is representing whom in a deal.
KEY TERMS OF THE BUYER BROKER AGREEMENT
Here is the breakdown on the key sections of the agreement:
Length of Term
The buyer broker agreement is most often drawn up for six months or a year. If your agent is committed to you and your househunt, he or she will want you to be committed in return.
Early Termination / Advanced Notice
This section outlines how the early termination of the agreement is handled. It outlines the number of days’ notice needed to end the agreement early. It will also include a dollar amount that a buyer will owe the agent if the required notice is not given.
There are two main components of the compensation section: the retainer fee and payment.
While common in other parts of the country, retainer fees are not usually part of the agreement in our area. We do not charge a retainer fee for our time. The retainer fee is used to compensate Realtors for their time and related expenses (fun fact: in addition to all of the time spent searching for and showing homes and getting a buyer to closing, each offer a Realtor makes for a buyer takes many hours to write, submit, negotiate, etc). The retainer fee also serves as a way for agents to differentiate casual “lookers” and serious homebuyers.
Perhaps the most misunderstood section of the buyer broker agreement, the payment section, often gives buyers pause. In most cases, 3% commission, plus a few hundred dollars (the amount varies depending on the company and situation), are listed as payment. If the home is entered into the MRIS database, the listing agent and brokerage are offering to pay the commission to the buyer agent and brokerage.
In other words, the seller pays all commission costs to the listing brokerage, who then pays the buyer brokerage their share.
You, as the buyer, are only responsible for the additional fee at settlement. This fee covers the brokerage’s back-end expenses related to the processing of the contract, paperwork, etc. There could be a rare occurrence when you might need to pay the buyer agent commission but that would be fully disclosed to you up front — long before seeing a home in which this would be the case. In our twenty-five years of experience, it has not happened once.
Dual and Designated Representation
Designated representation means that you approve being shown properties listed by the brokerage. In other words, if you sign with an agent of a specific brokerage, your agent is allowed to show you other properties from that brokerage. Dual representation means that you agree to see properties that your agent has listed. You, as the buyer, choose to accept or decline these options. You can also agree to see the properties in the buyer broker agreement and decide later if you will agree to that form of representation when you are ready to put an offer in on a property. It will require a separate agreement at the time of the contract.
WHAT DOES A BUYER’S AGENT DO ANYWAY?
Of course, a buyer’s agent will help you search for and tour homes and neighborhoods. However, they do far more than most people realize! They will work to find properties before they hit the market and will walk you through the process step by step. Your agent will also connect you with experienced lenders (if need be). A side note: be sure to use a lender your agent recommends. These lenders have proven themselves over the years and have a vested interest in keeping buyers’ agents happy. It’s important to note here that our recommended lenders do not offer us any special perks or kickbacks! Unfortunately, we’ve seen our share of troubles in deals with an unproven lender. But that is topic for a whole other post which you can read here.
When you find “the home,” your agent will research the comparable sales (or “comps”) and recommend an offer price and strategy on the other terms of the contract. Your agent will also do any needed negotiating on your behalf. Negotiations include the price as well as all of the other terms of the contract such as the home inspection, appraisal, rent backs, closing costs, etc.
Once you are officially under contract on your new home, your agent will help you through all of the necessary steps to ensure a successful settlement.This is a critical period in which a buyer’s agent is invaluable. She will ensure you understand and comply with all terms of the contract such as contingencies (home inspection, financing, appraisal, and more). She will stay on top of the details and deadlines to ensure you (and the seller) do not inadvertently default on the contract She will likely recommend a home inspector, movers, and more. Your buyer’s agent will attend the final walk through and settlement with you to ensure that everything goes smoothly and that there are no last-minute surprises.
“The Goodhart Group is the way to go if you are looking to purchase a home in Alexandria or nearby. Unfortunately, we put an offer in on a different home a few months prior to beginning our search with the Goodhart Group, and we basically navigated the process alone as first-time Homebuyers. After that experience (and not getting the house) we went with a friend’s recommendation to work with the Goodhart Group. They literally could not have done a better job for us. They helped us every step of the way, made the process so incredibly easy and seamless, and really did a QUALITY job with EVERY aspect of this home buying process.” – Elizabeth
The Bottom Line
Buyers sign the buyer broker agreement in order to establish a working relationship with their Realtor. It’s not intended to scare anyone. In fact, it protects buyers and ensures their Realtor is working in their best interests, not those of the seller. Talk with your Realtor if you have concerns or questions or want to make any changes to the agreement.
If you are looking for your next home and need a seasoned Realtor on your side, please reach out. We’ve helped hundreds of buyers find and successfully secure their dream homes!
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