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Buyer Representation Agreements

by | Mar 19, 2021 | TC Drafting, TC Review

Buyer’s Agents spend a lot of time showing homes. It’s part of the real estate business. Buyer’s Agents are 100% commission-based and rely on their business acumen, excellent people skills, and the good will of the buyer to earn a living. Many Agents would prefer more certainty in their business lives and require their buyers to sign a document often called a “Buyer Representation Agreement.”

Under a Buyer Representation Agreement, an Agent agrees to represent a buyer and the buyer agrees to be represented by the Agent for a specific period of time, often six months. Technically, the parties to the Agreement are usually the buyer and the real estate brokerage (i.e., the company the agent works for). The Agent usually signs the Agreement on behalf of the brokerage.

Once the Buyer Representation Agreement is in force, the client is bound to the Agent and the brokerage for the time period of the Agreement. The brokerage is obligated to the client to fulfill its duties both under the Agreement and under State law. As compensation, the brokerage typically receives half of the commission on the sale – usually 6% of the sale price. In theory, the buyer does not pay anything out-of-pocket for Agent’s services, since the commission usually comes out of the sale price and therefore is effectively paid by the seller.

What if the buyer doesn’t use the services of the Agent or the brokerage to which they are contractually bound? According to most Buyer Representation Agreements, if the buyer purchases property during the contracted time period through a different Agent or brokerage, the buyer still owes the brokerage a commission, sometimes called a “cancellation fee.”

Timely Contract Solution

Before signing, use TC Drafting to have a Buyer Representation Agreement reviewed by an experienced real estate attorney. Better to understand the pros and cons of the document before signing.

After signing, use TC Review to have a Buyer Representation Agreement reviewed to understand the legal position you’re in and what legal options you have.

The information in this Post is not legal advice. Legal advice is based on specific facts. This information is necessarily general in nature.

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