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Buying a home is exciting.
At the same time, it can feel overwhelming.
There are pre-approval letters, home tours, inspections, offers, and contracts. Then, somewhere along the way, your real estate broker may ask you to sign a Buyer Agency Agreement.
You may read through it and think, “Okay, where do I sign?”
Before doing that, take a few minutes to understand what you are agreeing to.
A Buyer Agency Agreement is more than paperwork. It explains the relationship between you and your real estate broker. It also outlines the services your broker will provide and how compensation works.
Most importantly, the agreement gives you a chance to ask questions before you are in the middle of buying a home.
What Is a Buyer Agency Agreement?
A Buyer Agency Agreement is a written agreement between you and your real estate firm.
Think of it as a roadmap for your working relationship.
The agreement explains who your broker represents, what services your broker will provide, how long the relationship will last, and how compensation works.
As a result, both you and your broker have a clearer understanding of what to expect.
Why Do Buyers Need One?
The purpose is not to make buying a home more complicated.
Instead, the agreement creates clarity from the beginning.
You should know who is representing you. In addition, you should understand what your broker will do for you and what you may be responsible for.
That way, everyone starts the relationship with the same expectations.
What Are You Actually Agreeing To?
This is the part buyers should pay close attention to.
Before signing, take a look at the major sections of the agreement. If something is unclear, stop and ask questions.
How Long Does the Agreement Last?
Your agreement will have a specific term.
Make sure you know the start date and end date. If you’re unsure about the length, ask your broker to explain it.
There is no reason to rush through something you don’t understand.
Is the Agreement Exclusive?
Another important section explains the type of relationship you are entering into with your broker.
Take a moment to understand what the terms mean for you. If you’re not sure, ask your broker to explain the difference.
Understanding this section can help prevent confusion later.
How Does Compensation Work?
Compensation is another section that deserves your attention.
Real estate compensation is negotiable. It can also be structured in different ways.
Your agreement should explain the compensation your real estate firm has agreed to receive. It should also explain how that compensation may be paid.
Most importantly, make sure you understand what you could be responsible for paying.
For example, ask your broker to walk through the compensation using actual numbers. That can make the agreement much easier to understand.
What If the Seller Is Offering Less Than We Agreed To?
This is one of the questions I think every buyer should ask.
For example, let’s say your Buyer Agency Agreement states that your broker’s compensation is 2.5%.
Now you find a home where the seller is offering 2% toward buyer broker compensation.
What happens to the remaining 0.5%?
The answer depends on the terms of your Buyer Agency Agreement and the offer you negotiate with the seller.
The seller’s offer does not automatically change the compensation you agreed to with your broker. If there is a difference, your agreement may explain whether you could be responsible for the remaining amount.
That is why it is important to understand this before making an offer.
Ask your broker to walk you through a real example. A simple conversation can help prevent an unexpected expense later.
One question to ask is:
“If we agree that my broker’s compensation is 2.5%, but the seller is only offering 2%, what happens to the difference?”
You should know the answer before signing the agreement and before making an offer.
What If the Seller Is Not Offering Buyer Broker Compensation?
This is another important question to discuss.
Not every seller will offer compensation toward the buyer’s broker.
If that happens, you should understand how your Buyer Agency Agreement handles the situation. Your broker should be able to explain your options and any potential cost to you.
Rather than making assumptions, ask questions early.
That conversation can help you understand your options before you find the house you want to buy.
What Are You Getting From Your Broker?
The agreement is not only about compensation.
It also explains the services your broker provides.
Your buyer’s agent may help you:
- Search for homes
- Schedule showings
- Review property information
- Write and negotiate offers
- Coordinate inspections
- Track important deadlines
- Communicate with the listing broker
- Guide you through the closing process
Throughout the transaction, your broker is there to help you navigate the process.
However, your broker is not the only professional you may need.
For example, a home inspector evaluates the condition of the home. Your lender handles your financing. Other specialists may also be needed for roofing, sewer lines, septic systems, or structural concerns.
Your real estate broker is part of your team. They are not the entire team.
Questions to Ask Before You Sign
You don’t need to know every answer before meeting with your broker.
However, you should feel comfortable asking questions.
Here are a few I recommend:
- What services will you provide for me?
- How will you be compensated?
- Could I owe money if the seller does not offer compensation?
- What if the seller offers less than the compensation we agreed to?
- How long does the agreement last?
- Is the agreement exclusive or nonexclusive?
- What happens if I decide not to buy?
- How can the agreement be terminated?
These are smart questions to ask.
More importantly, you should feel comfortable discussing the answers with your broker.
The Goal Isn’t to Avoid the Agreement
Some buyers may feel nervous when they first hear the words Buyer Agency Agreement.
That’s understandable.
However, the goal should not be to avoid signing an agreement simply because it sounds complicated.
Instead, the goal is to understand what you’re signing.
A good buyer-broker relationship should feel clear. You should know what your broker will do for you and how compensation works.
You should also understand what could happen if the seller’s offered compensation is less than the amount you agreed to with your broker.
Kolleen’s Perspective
I don’t expect buyers to understand every line of a real estate agreement on their own.
That’s why I believe these conversations are important.
Before you sign, I want you to understand what the agreement means, how I will work for you, and how compensation works.
If something doesn’t make sense, ask.
There is no such thing as a bad question when you’re making one of the largest financial decisions of your life.
The goal isn’t simply to get a signature. The goal is to make sure you feel comfortable with the agreement you’re signing.
