What to know before signing a buyer-broker agreement.

Get your home-buying journey off on the right foot by knowing what to look out for when signing a contract with your realtor, sometimes called a ‘buyer-broker agreement.’

Buying a new home is an exciting — and potentially nerve-wracking — process. If you’re using a buyer’s agent, you may be faced with the decision to sign a type of real estate contract called a “buyer-broker agreement.” But what exactly is this contract? Let’s explore how a buyer-broker agreement sets out the terms and conditions in the home-buying journey while providing clarity and structure to the process.

What is a buyer-broker agreement in real estate?

When signing a contract with a realtor to buy, you’ll come across a buyer-broker agreement. This is a contract between you (the buyer) and a real estate agent (the broker) who will act on your behalf to help you find the perfect home. However, there are some things you should know before signing on the dotted line.

Top 3 things to know before signing a buyer’s agent agreement.

Buyer agents are your representatives in the home-buying process. Before entering a contract with a buyer’s agent, read the agreement carefully, consider your agent’s background, and know a few things about the relevant laws in your area.

Here are the three most important things to know before signing:

1. Not all states or brokerages require a buyer-broker contract. If your state requires one, you’ll have to sign it, but depending on the state or brokerage you work with, you may have an option not to sign.

2. Signing with a buyer’s agent may limit your choices. If you do sign with a buyer’s agent, you may be limited to only properties or areas that their brokerage knows best. Also, you may not be able to sign with a new agent if your current relationship goes south.

3. A buyer’s agent can either help or hurt the process. Just like a talent agent, when depending on the skill and dedication of your buyer’s agent, you may get more opportunities and stellar assistance, or you may be left asking yourself, “What exactly am I paying you for?” "

Thankfully, the decision to sign the contract is far more difficult than the signing itself.

How long does a buyer-broker agreement last?

Buyer-broker agreements typically have a specified duration, ranging from 30 days to several months. During this time, the buyer is bound to work exclusively with the designated real estate agent or brokerage. Some agreements may automatically be renewed unless terminated within a specified period, while others include termination clauses that outline the conditions for ending the agreement prematurely. Understand the duration and any associated clauses before signing to make sure they align with your home-buying timeline and preferences.

Is it easy to terminate a buyer’s agent contract?

Terminating a buyer’s agent contract can vary depending on the terms outlined in the agreement. Usually, the process involves providing written notice to the agent or brokerage and citing the reason for termination per the contract terms.

Always review the termination clause carefully to understand any associated penalties or conditions for ending the agreement early and communicate with the agent or brokerage to ensure a smooth transition and avoid any misunderstandings or disputes. They may also be able to advise whether or not you can back out of a purchase agreement as a buyer instead of navigating it yourself.

Disadvantages of signing a contract with a realtor to buy.

Signing a contract with a realtor to buy a property can have downsides worth considering. One drawback is the lack of flexibility in exclusive contracts. When committing to work solely with one realtor for a set time, buyers might miss out on other options. There’s also a risk of conflicts of interest if the realtor represents both buyers and sellers, which could impact the buyer’s interests. Financially, buyers may have to pay commission fees regardless of the transaction’s success, which can strain their budget.

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