Signing a Buyer Representation Agreement
As someone looking to buy real estate one of the first tasks you will be required to do is to sign an Exclusive Right to Represent Buyers Agreement. In Central Virginia this comes in two forms: CVR 305 Short Form or a CVR 310 Standard Form.
What is a buyer broker agreement and how does it work?
Signing the agreement creates a fiduciary relationship between the Realtor’s broker and you the buyer. Or in other words a legal obligation from the Realtor to act in the best interest of you, their client. Before any kind of significant discussions are held a signed agreement must have been carried out.
On a Realtor’s side this agreement ensures they are compensated for the work they do and helps in cases where there are any disputes with other Realtor’s about who is getting paid for the transaction.
This agreement is standard within the industry and is required by many brokerages. What this form means to you is that you are exclusively working with your Realtor. Typically, it will be for the duration of your home search and can be for 6 months or longer in some cases. If you are just starting out with your Realtor and unsure if you are going to be a match you can request a shorter term like two weeks. This will allow you to “test-drive” your professional. At the end of the term you can either part ways or sign a longer agreement.
You can even sign an agreement for a single day or even a specific property. If you sign an agreement for a certain property in most cases the Realtor who you signed the agreement with will get compensated at closing, even if you close the deal on that home with another Realtor at a later date.
Signing this agreement means that you are exclusively working with that Realtor. You are legally bound to use them for all communications and services for the duration of the agreement. They (or someone on their team/ brokerage) will show you homes, handle negotiations and communications with other parties, be present at inspections etc. Calling a random Realtor off a website like Zillow to look at a home if your Realtor is busy is frowned upon. Typically, Realtors will ask if you are working with an agent before having any discussions or showing any homes.
This Buyers Brokerage Agreement not only allows a Realtor to represent you, but it also ensures that the Realtor gets paid should you close on the sale. Realtor’s work on commission only so if they take time to help you with your home search it is only reasonable that they get paid for the work.
As a buyer typically the Realtor’s services are at no cost to you. The Realtor will get paid by the seller when you close on a home. There is a section on the agreement for fees. This is where the Realtor will list any fees which you will be liable to pay. This may include a nominal fee for a Transaction Coordinator or an additional charge if you have very specific needs.
The commission rate is listed. This is the guaranteed amount the Realtor receives in commission. Due to RESPA laws I cannot publicly post the standard rate in this blog article. It should be noted if you pick a property where the commission offered by the seller is less than the minimum on the agreement with your Realtor you will have to pay the difference. Example: if your agreement states 3.0% and the seller is offering 2.5% to the buyer’s agent, you will have to pay the Realtor the 0.5% at closing.
Both buyer and Realtor are legally bound to the agreement for the duration of the term. If you are unhappy and wish to break an agreement you should talk to your Realtor. Satisfaction and referrals are key to the Realtor’s business. They do not want unhappy clients. In many cases a Realtor will terminate the agreement and release the buyer upon request without hesitation. This will of course depend on where you are in the process. If you are not enjoying the process with the individual you have chosen, most likely the Realtor feels the same. Large brokerages will often provide the option where you can switch to another agent within the same brokerage office.
Signing the agreement creates a fiduciary relationship between the Realtor’s broker and the buyer. Or in other words a legal obligation from the Realtor to act in the best interest of their client. Before any kind of substantive discussions are held a signed agreement must have been executed.
On a Realtor’s side this agreement ensures they are compensated for the work they do and helps if there are any disputes with other Realtor’s about who is getting paid for the transaction.
Remember… a Buyer Representation Agreement is a legal document. Please read any agreements you receive fully. If you do not understand anything, please seek advice before signing.
As a buyer why should I sign a buyer broker agreement?
It is a requirement in Central Virginia.
In the Central Virginia MLS region it is a requirement for you to sign an agreement. My brokerage (Keller Williams) asks all agents have their clients sign a Buyer Representation Agreement before even showing a single home. My personal process is to show a couple of homes first so we can all meet in person and you can understand my working style and personality. My time is precious. Before any substantive discussions or seeing a further homes, I require an agreement to be signed and in place to protect all parties.
Without an agreement you have no representation.
You are a customer and not a client. If I show you a home and we have no agreement I am legally working for the seller. The Realtor’s responsibility is to represent the seller and get the best deal for them, not you. Any pertinent information does not have to be kept confidential and can be communicated with the seller. This obviously does not allow your best interest to be upheld.
You will get exposed to every available property.
You will have access to the MLS. As properties hit the market which meet your criteria your Realtor can set up notifications to immediately notify you. A lot of buyers search the internet on sites like Zillow and Trulia, but those sites are not updated. You are getting old information. In a sellers’ market with low inventory time is of the essence.
I work at the world’s (as well as local market) largest brokerage. There are 250 agents in my office alone. We have our own dedicated meetings, online groups and communications. I get the heads up on great properties before other agents in the market giving you the buyer an upper hand.
We should all get paid for the work we do, right? The process of buying a house is not simple and is very time consuming for the Realtor. They are not just opening homes for you to see, but there is a lot of paperwork, research, negotiation, inspections, communications etc which take place behind the scenes. Much of this work is done outside of normal business hours and takes time away from a Realtor’s family. Without signing an agreement, it jeopardizes a professional getting paid for the work which they are doing with helping you find and buy your dream home.
The buyers broker agreement is a legal protection not only for the Realtor but also for you so that your best interest in finding your dream home are met. The home buying process can be daunting and scary, which is why its best that you have a documented arrangement with your Realtor.
Does this help clear up any confusion regarding buyer broker agreements? Leave a comment below with any feedback you have.