What is a Buyer’s Representation Agreement Anyway?
You are in the market for a house. You find a Realtor. They are a family friend, or a referral from a friend, or you found them on the internet. You meet with them and they ask you to sign a contract to represent you. Wait, you haven’t even found a house. What is a Buyer’s Representation Agreement anyway? What does it mean, and should you sign it?
First let’s look at the different types of Buyer representation agreements. (Disclaimer: This is for the State of Tennessee. You will want to check with your state to find out what types they use.) There are two main types with two sub-types. There are Exclusive and Non-Exclusive as well as Buyer Agency and Designated Agency.
- Exclusive Buyer’s Representation Agreement: This is an agreement that says the agent or company is the only agent or company that has the right to represent the buyer in a residential real estate transaction.
- Non-exclusive Buyer’s Representation Agreement: This agreement allows a Buyer to hire more than one agent or company to represent them in a residential real estate transaction.
- Buyer Agency: Under this type of Buyer’s Representation Agreement, the entire real estate company technically represent the Buyer.
- Designated Agency: This type of Buyer’s Representation Agreement will designate one agent in a company to represent the Buyer.
Why would you sign them?
- Exclusive Buyer’s Representation Agreement – Buyer Agency/Designated Agency: A Buyer has one agent or one company working for them. Some buyers may think they will get more results if they hire more than one agent. In my experience, agents/companies tend to work harder for the buyers that are working with them exclusively. This type of agreement obligates both parties to each other which typically forms a loyalty from day one and will cause an agent/company to put every effort into finding the perfect property for the buyer, knowing that if/when they do, they will get paid.
- Non-exclusive Buyer’s Representation Agreement – Buyer Agency/Designated Agency: Some investors decide that this is the best agreement to sign because agents/companies may have access to different off-market properties. This may be true for some, however, my opinion is that a buyer will typically get the best service if the agent/company knows they have their client’s loyalty.
Should you sign it?
In the state of Tennessee, in order for an agent/company to work for you, there must be a written agreement, so, yes, you should sign it. However, the fact that you sign it, doesn’t mean you are stuck if the agent/company does not perform their duties. Either party may terminate the agreement. If you don’t feel you are receiving the best service, speak to the agent/company. If you can’t come to a solution to rectify the situation, ask to be released from the agreement. WARNING: If you have signed a Buyer’s Representation Agreement that is still valid, DO NOT sign another one with another agent/company. A Buyer agrees to make sure the agent/company gets paid. If you disregard the agreement and work with another agent/company, you can be held liable for a commission to the other agent/company even if they did not represent you in the real estate transaction.
In a nutshell, these agreements are good. They protect the consumer and the agent/company. They allow a Buyer to be represented in a real estate transaction. Most consumers don’t know enough about the real estate process to represent themselves well so it’s best to leave it to the professionals.
Michelle Froedge is a residential Realtor and Principal Broker in the Greater Nashville and Williamson County areas of Tennessee. “Mom” to four-legged fur baby, Tyler, Auntie to Zelamie, she is a vegetarian and sings in her spare time. Michelle has lived in Nashville and Franklin since 1997 and has been selling homes since 2004.