Should Buyer sign agreement with a Buyer Agent or Realtor ?

Asked by Tonybasu, Minneapolis, MN Sat Jun 2, 2012

We are looking for some agents or realtors in order to buy a house in MN. We have interviewed one realtor so that he can help us in buying. He is asking us to sign a formal agreement. This agreement will last 6 months.
Is it pretty normal to sign buyers agreement ? (I thought only sellers sign agreements with Realtor)
What kind of agreements should I ask for ? (Can some experts give me some some advice regarding buyers agreement: Request a Non-Exclusive Agreement)
Is there any red flags should I look for ?
Thanks, Tony

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20
Chris Block, , Saint Paul, MN
Sun Jun 3, 2012
1) It is normal for buyer's to enter into a Exclusive Buyer Representation agreement when buying a home and use 1 agent or Realtor to help throughout this process. We all have our own time-lines, but in the end the length is not the most important factor. Every contract should give the capability for either party to cancel the contract at ANY TIME with a written cancellation form. It is possible for some agents to change this language, but the best advice I can give is just ASK.

2) For example, I usually write my agreements out with my buyer's timeline. If they need to buy a home within 3 months then I will just write up the contract for that timeline. If you are OK looking at short sales however (that could take 3-6months to close) then I probably will do 6months.

3) The only time it is normal to do Non-Exclusive Rep agreement is when working with investors when it comes to residential real estate. Otherwise you will be hard pressed to find a realtor willing to do that. The way MOST contracts are written a buyer won't pay me anything if they choose to stop looking at homes or buy one. I understand life happens, and although rare it does happen time to time where a buyer changes their mind. I don't want to penalize people for this.

4) So, a buyers agent does a lot of work for their clients with a high risk that it could be all for nothing. If you ask me to do a non-exclusive rep agreement I will just tell you to go find someone else.


5) I think Red Flags you should look out for is someone that tries to manipulate the contract where you can not easily cancel down the road if it just does not work out, and if the company attempts to charge high fees for their service. As I said in your other question most fees should be waived at this price point.

6) I would also say a Red Flag is a realtor who is willing to show you homes without a representation agreement. To me realtors that do this are just throwing gimmicks at you instead of just being honest with how the contract works and how real estate works.

Number 1 realtors who do this rarely ever disclose to the listing agent that they are showing a home with a unrepresented client. They are obligated to do this because they are essentially working for the seller NOT YOU. They also usually fail to disclose to you the ramifications with your relationship.

You need to understand this right now...when a realtor shows you a home and you do not have a contract they are not working for you at all..zip nadda nothing! They are essentially working for the listing agent and owe you NOTHING. Yes we have an agency form with basic representation duties we owe everything, and this should be disclosed to you at the first meeting, however it hardly gives you the full representation you would expect when looking at homes with a realtor.

If you find a home on the first day that you fall in love with and want to write a contract up? That agent that just showed you the house can not act in your best interests. If they do and the listing agent finds out they can be sued and a whole legal mess shall happen. What they do instead is take that time to write up a representation agreement ( completely 100% wrong) with you.

So I will say this: if a Realtor were to disclose all of this to you and say "hey I will show you homes without a contract, but if we find one just know that you have limited representation by me, and my job is to get the best deal for the seller NOT YOU" I have a feeling most buyers would enter an agreement.

7) Which is why short term agreements are also a gimmick. Look, if I am going to work my butt off for you I would like to know you are a little more serious with me than just 2 days or 2 weeks. As I already said a standard buyer rep agreement allows EITHER PARTY to cancel at ANY time. If you want more clarification language wise i will write it into the contract.

Otherwise instances like this on Trulia, and us meeting together and building rapport is what will help you decide to use a certain realtor or not. I have past clients that you can email or call if you want to speak with them, and for the last time I will repeat 99% of buyer rep agreements written put all the risk on the realtor side not you, and if after looking at some homes you do not like that person just cancel the agreement. If a realtor does not understand contracts and representation as simple as this then that is a red flag!

8) And lastly Realtors that inflate numbers and say they have closed xxxx amount of transactions and whatever are usually lying to you. If they can show you how many transactions they have closed then I am all for it, but when people use "round numbers" for example that is a sign they are usually bending the truth.

In my opinion first time home buyers are very information hungry as you have shown by asking two different questions on Trulia. The right agent should take the time to give you all the information you need.
10 votes
As I said before I would prefer just working directly with the one selling the house so I don't keep bothering her. She apologized for the house being sold and I said it was OK andt asked her how long the contract was for. I believe it has been over a year already. She has not responded to me. How long are these contracts good for 1 year?
Flag Thu Dec 1, 2016
I have a question. I agree with #7. But what if I don't want to continue wasting the realtor's time? And I prefer to schedule an appointment to see a property directly with the Seller's agent? I started looking for places for my mother but she never liked except for 1 that got a better offer. I recently started looking for a property for myself and I feel like the realtor who I signed the Exclusive Buyers Agency Contract with is tired of working with me and I don't blame her, that is why I just started going to open houses. I went to an open house and found a place I liked but wanted to get comps (she was usually quick responding to my messages in the past). It took her one day to get back to me (again I get why). And she could no longer find the property because it went under contract, which I told her when I looked at a different site. I told her a couple of days back that I did not want to bother her and wasting her time to go see a house and she didn't really respond to it.
Flag Thu Dec 1, 2016
My NC Homes…, Agent, Chapel Hill, NC
Sun Jun 3, 2012
You've posted a great question and one I hope many buyers read.

To begin with buyers absolutely should have dedicated buyer brokers, representing them the way the listing agnet was hired to represent the Seller. A buyer Broker hs a fiduciary responsibility to you his client and should be focused exclusively on helping you locate, determine market value of and sucessfully negotiate and close on properties meeting your specific needs. They should help you get the best possible terms and price on the property as well as assist you with locating the right mortgage lender who is honest and will treat you fairly, as well as help you locate top notch inspectors, tradesmen (if necessary), real estate attorneys and any other professionals you may require throughout the transaction. When the job is done right a buyer will absolutely appreciate how much easier the entire process was having a buyer broker assist them and that their buyer broker added tremendous value to the transaction by making certain everything that needed to be done was done in a timely and professional manner and by keeping everyone who needed to be well informed the entire time.

Buyer Brokers are hired when a buyer signs an agreement (contract) with them.

Real Estate is different throughout the country and there's no national policy regarding how and when a buyer should sign such an agreement nor for how long or what ther terms might be.There are state laws developed by individual state real estate commissions that dicate these buyer broker agreements.

That said my own opinion as a highly successful Realtor for over 21 years and as someone that specializes in working with buyers I do have some strong thoughts on these agreements. To begin with I think it's dead wrong to ask a buyer to sign an agreement at first meeting. Agents who do this should realize they are in my opinion asking someone they've just met to trust them with what will be the largest financial transaction their likely to ever make without having earned their confidence. I go over my buyer broker agreement with any potential buyer clients at first meeting and tell them then, "I have no desire to sign a contract with you right now. I don't know you and you don't know me. We can go out together for a few days and then if we both fell like we're a good fit for one another we can sign a contract then."

My typical contract last for 2 weeks. I don't believe it likely that a buyer will buy in the first two weeks, but we can always renew it. I have no need to trap anyone into working with (I'm that busy) and either I will have earned my buyers confidence and they'll renew or I don't deserve their business. I also have been known to fire buyers, and having a shorter contract allows me to move on if for any reason I decide my clients are either unrealistic or wasting my time.

I limit my commission to no less than 2.5% and no more than 3%. Should the commission be higher than I rebate the difference as a closing cost credit. Should it be less than my buyer agrees to pay the difference up to the minimum 2.5% I will work for. I explain that FSBO properties may require the buyer to pay my commission but if this is the case they will be told this in advance and must agree to do so separately before we view the property. To date I've never had a buyer pay me, and I've closed nearly 1000 transactions since buyer brokering began working like this.

I've attached below a link to one of the more popular blogs I've posted here on Trulia on how to find a great buyer broker wherever you live. I hope you find the information useful.

I wish you the best of luck and happy house hunting.
8 votes
I like your thinking, it gives the client/buyer freedom to not feel forced to sign at the very start, having not even worked with or had the chance to sense the chemistry between the agent and themselves.
Flag Fri Dec 1, 2017
Thank you for answering the question while everyone else talks around it. However, I've never heard of a buyer paying a commission.
Flag Wed Oct 4, 2017
Very informative. Thank you for your insight!
Flag Sun Jul 24, 2016
Hunting, Home Seller, Arvada, CO
Mon May 2, 2016
Don't do it! If you don't like their service you're stuck. If you find a for sale by owner, you stuck paying that agent even if that homeowner won't write it in their contract. It can turn into hell. Trust me, I know from experience!
3 votes
Excellent response and to the point.
Flag Wed Oct 4, 2017
leginnie69@y…, Home Buyer, New York, NY
Wed Sep 23, 2015
We have bought and sold houses all over the country because of my husbands job.
We have never signed a contract with any agents. We were only asked to recently , but refused.
There are plenty of agents out there that will find you a house without asking you to sign a legally binding contract.
You are basically giving that agent full control over your house buying and how to go about it. What if you don't like the person after you get to know them or they are not really looking to hard for you or listening to what you want? You are stuck because you signed your rights away.
Never sign your right to choose away ......
Another thing , in your contract when you do make an offer, they have an option you should always choose. Its an option that will only cost a small fee like 100- 300.00. It gives you the right to back out of the contract for any reason you choose if done in a pre determined amount of time. When you make up the contract just have them put in a week or so. If anything at all doesn't work out , you can then back out of the contract and just lose the fee you paid.
Another bit of advise , always put your own team of inspectors together. Never use the Agents. We have an Engineer come in to Inspect the Foundation, The house inspector and a Termite Inspector that are Independent of the Real Estate Company the Agent works for.
The Agent does not even need to be there the day of your Inspections and I advise to always have that time alone at the house with just you and your Inspectors. They are not required to be there in most states.
Beware of Mandatory HOA's too. More and more people are getting away from these. We never buy a house with a Mandatory HOA. they have Voluntary ones that are okay. Again though, you are signing your rights away. If you would become unable to pay a high HOA fee ( and some of them can be very high) the HOA has the right to put a lien on your property and foreclose on it.
Just be informed , don't just take an Agents word for everything. Educate yourself and know what your rights are and what you are signing. Most of the time we are signing our free will to choose and our rights away.
Good luck
Peyton
We have a Real Estate Attorney too. He reviews all the contracts and inspections etc.....Always be well covered.
Buy a book and educate yourself first.
3 votes
MJ Olsen, Agent, Rockport, TX
Sat Jun 2, 2012
Yes, its pretty normal. You would want a Realtor who is going to represent you ... there are so many choices & changes in real estate and lending ... Vicky's blog really defines why you should sign a buyers agreement ... and as with any agreement... ask questions, get answers... hire a Realtor that works for you. Congrats on your new home!
2 votes
Vicky Chrisn…, Agent, Purcellvile, VA
Sat Jun 2, 2012
Ironically, I just wrote a blog post that sort of address this issue - see the link below. But to answer your question - yes, it's normal. It's a best practice. It's in your favor, as well as in the favor of the agent. They have a standard agreement - review it and address any concerns but it's probably a regional agreement and widely used to balance interests of the buyer and broker. Good luck.
2 votes
The only thing I will add is that I typically do buyers agreements for 3 months... unless there is a unique situation that makes me think it may require an extended period of time to find something... Like that someone has combed the "available market" and likes nothing and is looking for a very specific property which is likely to require me to hunt down properties not on the market to find one which will be suitable to the buyers. Then I require longer and sometimes even require a non-refundable retainer fee. These agreements are not commonplace and are for very unique circumstances.
Flag Sat Jun 2, 2012
Venkyreddy.2…, Home Buyer, Minneapolis, MN
Mon Apr 18, 2016
The buyer will usually ask this individual to provide the seller with formal written notice that the contract has been completed.
1 vote
Karen and Pa…, Agent, Cameron Park, CA
Tue Feb 2, 2016
It is legit and it is really used for confirming the relationship between the buyer and the agent. It protects the agent from a buyer writing an offer with another agent after the agent has dedicated many free hours of service. My concerns to buyers is if you sign the agreement you are stuck with your agent even if they are not very good at their job. There are only a small percentage of qualified realtors in my opinion and lets say after looking at a few homes you realize your realtor will not be representing you well, what do you do? Buying a home is a big time investment and you want the right realtor working for you. You are locked in with that dud realtor if you like it or not. I say go look at a few homes together and ask plenty of questions. If you like your first date, sign the form or assure your new agent you are a loyal buyer. If not move on to another realtor. Personally I'm not a big fan of signing buyer-agent agreements up front. I like to gain my new clients loyalty with my great service and real estate knowledge.
1 vote
Aaron Smay, Agent, Pittsburgh, PA
Sun Jan 31, 2016
It is normal. You do this using an Exclusive Buyer Agency Contract. The length of the contract is negotiable.

Not only will this agent be more inclined help you accomplish your goal of owning a home, when you sign a Buyer Agency Contract you then have certain rights and your agent has certain responsibilities owed to you.

These rights and responsibilities are outlined in the Consumer Notice which should be provided to you by the agent when you have your first substantive conversation about real estate.

information deemed reliable but not guaranteed.


Aaron Smay
Northwood Realty Services
Airport/w. Suburban Office
995 Beaver Grade Road, Suite C-1
Moon Township, PA 15108
Office: 412-329-3622
Fax: 412-264-3471
Cell: 412-916-3773
Email: asmay@northwood.com
Web: myagent.northwood.com/AaronSmay

The real estate law requires that I provide you with a written Consumer Notice that describes the various business relationship choices that you may have with a real estate licensee. Since we are discussing real estate without you having the benefit of the Consumer Notice, I have the duty to advise you that any information you give me at this time is not considered to be confidential, and any information you give me will not be considered confidential unless and until you and I enter into a business relationship. At our first meeting, I will provide you with a written Consumer Notice which explains those relationships and my corresponding duties to you.
1 vote
Scott Hulen, , 64068
Sun Jun 3, 2012
In our area of the county it is considered “normal” I will not show buyers without them signing the form. Having said that, I don’t tie clients down with a 6 month contract, I offer a one day get to know me contract for only the homes we see that day. Then if all goes well I offer a 60-90 day contract. This is an area of real estate which brings forth lawsuits between brokers, agents and clients and many states are leaning towards laws which will not allow agents to show unrepresented clients. Picking a Realtor®; you should interview several Realtors® before making a decision. Do not solely rely on a referral! Do the work yourself and interview several. Here’s a short check list of questions to ask & things to consider:
1) The paperwork involved in this process is extremely complicated, having stated this It is important that a Realtor be “practiced at our trade” pick a Realtor® which has completed 15+ transactions the previous year
2) Interview 3-5 full time Realtors® (very few part-time agents have the same skills as a person who works Real Estate on a full time basis)
3) Do not choose a Realtor® who proclaims themselves as “EXPERTS” because they have taken a seminar and have a designation on their business card. (CDPE, ABR, CRS and others) many of these expert classes require less than 16 hours of training and everyone who pays the fee passes. The experts are the ones who run the race not just buy the t-shirt.
4) Do a basic back ground check on your Realtor® use a site like PIPL or just goggle their name, this usually turns up items such as lawsuits, bankruptcies or other items which you feel might interfere or conflict with a Realtor® representing your best interest. Ps: this does not work for a John Smith
5) Once you have interviewed your potential Realtors® and if you are still unsure and want a “trail run” sign an exclusive buyers agency for 48 hours with the Realtor® and explain if all goes well in the beginning then you will be willing to commit for 1- 3 months.
6) Work with a Realtor® which is local to your area. Meaning a 10-20 mile radius, they will know the schools, shopping and the growth potential of the area without having to go look it up!

Before you even start this process consider purchasing the book by Dave Ramsey “The Total Money Makeover” this will provide valuable information in regard to having a successful financial life & make a prudent home purchase!

That’s your list! Good Luck!
1 vote
Jacqueline C…, Agent, Jersey City, NJ
Thu Apr 20, 2017
Hi Tony,

It is perfectly fine to work with one agent if you like them. I have my clients sign an exclusive in NJ all the time for a 6 or 12 month term depending on the goals they have. Usually seller pays anyway so the document is mainly to ensure that all the hard work your agent does will pay off and that you won't run off to another agent after spend X amount of time working for you. I hope this helps! Happy house hunting!
0 votes
leginnie69@y…, Home Buyer, New York, NY
Wed Sep 23, 2015
You are not going to get an objective answer here because it is mostly Agents here. You need to get more feedback from Buyers with experience in buying homes.
Have you checked to see how long an Agent trains for a License? I read it way 160 hours and $300.00.
You can hire an Attorney for $600.00 and he will advise you on all aspects of buying a home and what is in your best interest or not.
I asked an agent today if he would sign a contract that my Attorney made up to protect me, He didn't answer me.
Good Luck
0 votes
It is true that the barrier to entry into real estate is not enough and there are a lot of incompetent brokers who give the rest of us a bad name. That being said, good luck finding an attorney who can help you negotiate a price, be present for your building inspection, negotiate issues that come up during your inspection, coordinate quotes and opinions on those issues, as well as communicate with the lender and get to the closing for $600. Oh not to mention an attorney who can accurately review comps and provide you with an accurate market analysis.
Flag Tue Sep 13, 2016
Deb Bounds, Agent, Grand Rapids, MN
Tue Feb 4, 2014
The short answer is YES! If you have a knowledgeable real estate agent, they should be able to explain the contract where you will feel comfortable signing it. You would never want to go to trial without representation and you certainly do not want to enter into a contract to purchase a home without representation!
0 votes
Adair Field, Agent, Eatonton, GA
Mon Jun 4, 2012
Yes, if you are working with a Realtor (member of National Association of Realtors) who works for a qualified company, it is most likely a normal practice. It is here in Georgia.
WIth a brokerage agreement, your agent is able to give you services he would not otherwise be able to provide. Such as: developing a negotiating strategy, alerting you to violations of applicable local zoning restrictions etc.,provide you with a compettive market analysis, assist you in making an objective comparison of properties, tell you how long a property has been on the market. And many more that will make your search much easier, more informed and productive. Good luck in your search!
0 votes
Any agent can provide all of these services without locking you in for a long duration.
Flag Sat Jun 1, 2013
Janice Groun…, Agent, Oregon City, OR
Sun Jun 3, 2012
Here in Oregon, I always use a Buyer's Agreement with my customers. I look at it this way, I wouldn't promise to market a home, pay for ads and signage of a home, hold open houses, and aggressively seek out buyers for a seller and then work the transaction without a signed agreement between us.

It sounds like this agent has not explained what this is to you and you are left with a lot of questions and an unsettled feeling. Talk with them again and again and again until YOU feel comfortable.

I feel the same way about my buyers - I am loyal and committed to them and I want to know I have the same committment and loyalty from them. This is really what I believe about a buyer's agreement.

For me, both my listing and buying agreements have a minimum 6 months HOWEVER, I always include a 'fire me' clause - I don't charge a cancelation fee of any kind. If my buyer decides for whatever reason that they don't want to work with me, I am fine with this. It's hasn't happened in all the years I've been a Realtor!!!

I am going to invest a large amount of time, gas, and money to help a buyer find the home they want, write up and negotiate their offer, negotiate the home inspection and any issues, track and monitor the title company, loan officer, surveyor, etc.

.
0 votes
Christopher…, Agent, Methuen, MA
Sun Jun 3, 2012
Buyer's agent agreements are not required here in MA, but they are used. I think they are good for making sure that the relationship and compensation is clear, but they are not always that easy to enforce. I would make sure you are comfortable with using that agent before you sign and you don't have to sign it.
0 votes
Debra (Debbi…, Agent, Livingston, NJ
Sun Jun 3, 2012
Just as a point of information - buyer broker agreements are not used in my area, and I read below from a NY agent, the same goes for her area.
A buyer is free to look at homes with me on Tuesday, and go out with another agent on Wednesday. Nothing in writing to bind them to us.

We hope to build a loyalty that comes after developing a relationship and trust.

Now, that being said, I think the concept of a signed agreement is a great idea - but what I'd like to ask the agents who do use these agreements is....how do you track your buyers?

I am sure once in a while you stop hearing back from someone.............usually a red flag that something else is going on..............or, they tell you they decided to stop looking for the time being........we can easily track a listing, but how do you know the buyer isn't out there with someone else buying in the next town (maybe they stopped by an open house, or someone told them about a home, etc)..........is this an issue that comes up?
How far would you or your company go to go after a commission if the buyer bought through someone else while still "under contract" with you?
Do your agreements have "out" clauses if the buyers are not happy with your services?
I am just curious.

Thanks
0 votes
With the information buyers have available to them many head off on their own in search of the real estate deal, attend open houses on a whim and return to properties without their agent for the purpose of a second look. Now we get to the argument of procuring cause & realtor ethics. One of the first questions I ask a potential client is “are you actively working with a real estate agent?” If the answer is yes I assume they have I buyer’s agency agreement in place and they are someone else’s client. Many will respond they have been looking for a while and a couple of agents have shown them properties in the past and they have not signed a buyer’s agency agreement. My policy is I will not show properties without the agreement in place, I will allow them to cancel the agreement at any time but if they purchase a property which I have previously shown them without me as the agent I am still entitled to the full commission aka procuring cause. I will aggressively pursue breach of contract in this matter. This happens often in our area and if the agreement is in place the other broker (almost 100% of the time) generally surrenders the commission without litigation. If the agreement is not in place it gets messy even though procuring cause is evident. If the buyer bought a home that I had not shown them while under contract with me I would not be happy about it (under state law I would be entitled to a commission) but I would probably not pursue the matter although my broker most likely would as an ethics violation against the other firm. The buyer’s agency contract asks for commitment on both parties, the agent must perform and the client must be loyal.
Flag Sun Jun 3, 2012
As far as going after a client that decided to use another agent and write an offer? It has never happened to me in my business, but if it did I would not pursue the client. Life is too short and some things are not worth it in my opinion. Yes our standard agreement allows either party to cancel at any time.
Flag Sun Jun 3, 2012
It is very easy to track my buyers and our business relationship, because if my client's are working with me it means they are happy with my service and we are communicating effectively. I can also track when they are looking at properties online. We have a very upfront conversation about looking at homes without me and the ramifications of what will happen if they try to use another realtor. I simply tell them that if they are not happy with my services lets cancel the agreement, which will make it a lot easier on everyone. In other words, what you have described more often than not is an accident with buyers not knowing because a realtor did not communicate this to them, versus a buyer intentionally doing this. I will say once again the reason why buyer rep agreements are used in Minnesota is because we are are co-op state with our associations. If a buyer is unrepresented they must understand that the person showing them homes is working for the seller and not in their best interest
Flag Sun Jun 3, 2012
Roland Vinya…, Agent, Sprakers, NY
Sun Jun 3, 2012
Real estate practice varies considerably by location. That is not normal here. Regardless, do not ever sign something you are uncomfortable with. And know the fine print and the implications of what you sign.
0 votes
Cameron Piper, Agent, Forest Lake, MN
Sat Jun 2, 2012
Tony,

Short answer, yes this is normal and it wouldn't cause any red flags for me. I would go so far to say that an agent who doesn't present you with a contract within your first couple of meetings is either, not serious about their business, lazy, or unable to articulate why this is important. Any of these three attributes would cause me to question their ability to respresent me adequately.

Non-Exclusive agreements are not all that common in MN.

I might push you a bit, and ask whether or not the agent you have interviewed is truely the best agent for you since it would appear that you are reluctant to sign on with them. Just food for thought.

If you have more specific questions about the different types of representation available in MN or any of the terms of the MNAR Exclusive Right to Represent contract, I would be more than happy to act as a sounding board for you - no obligation of course.

Cameron Piper
Coldwell Banker Burnet
licensed MN Broker
612-839-4202
Web Reference:  http://www.CamPiper.com
0 votes
Don Maclary, Agent, Virginia Beach, VA
Sat Jun 2, 2012
In Virginia it is becoming mandatory soon
0 votes
I have bought many houses, and until yesterday, I was never asked. I won't do so and advise others not to, either. First of all, you are giving the agent and broker grounds to sue you. Period. Second, there are already too many ways lawyers have insinuated themselves into real estate transactions. I will not be a part to encouraging litigation.

Agreement or not, I believe you have an ethical obligation to let the agent earn the commission if a) they have been showing you houses in good faith and b) let you know before you have made an offer that the seller or his/her agent is unwilling to pay a commission. However, you should not be held responsible for this problem after the fact if you had no foreknowledge of it. Nor should you be held responsible if there is a collection issue with the other. broker.
Flag Sun Mar 26, 2017
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