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To formalize your relationship when you hire a buyer's agent, you'll most likely sign a buyer's agency or buyer's brokerage agreement. (In some states, agency can be based on a verbal agreement, but it's always a good idea to get it in writing.) This agreement specifies that the buyer's agent works for you and spells out each party's responsibilities.
There are countless variations on buyer's agency agreements depending on where you live and the policies and practices of the agency you choose, but a typical agreement addresses these issues:
- Your relationship with the agent. This may be exclusive or nonexclusive:
- An exclusive buyer's agency agreement specifies that you'll work only with this agent to look for a home.
- A nonexclusive buyer's agency agreement places no limit on the number of agents you can work with, but it usually specifies that you can't use one agent to buy a house another agent showed you first. - The term of the agreement. This may cover a period of days from the date of signing or specify an end date. If the agent helps you buy a house within that time frame, the agreement ends when you close on the house.
- The geographic area of the agreement. If you're looking for a primary home in the city and a weekend home three hours away , the same agent probably can't help you. So this section lists the counties covered by the agreement.
- The types of property covered by the agreement. This typically says that the agreement covers any residential property you might buy, whether listed with an agency or by an owner.
- How the agent gets paid. Buyer's agents can get paid in a variety of ways. This section spells out the compensation model. For example, you might agree to pay a certain amount toward the agent's fee if the commission received from the listing agent falls below a minimum threshold.
- Whether you'll accept dual agency. Not all states allow dual agency because of potential conflicts of interest.
- Whether the agent is an exclusive buyer's agent. EBAs represent only buyers and will never represent a seller during the term of your agreement.
- The agent's responsibilities toward you. This section describes what the agent will do for you: find suitable properties, negotiate on your behalf, uphold fiduciary duties to act in your best interests, respect confidentiality, and so on.
- How the agent will handle your earnest money. When you make an offer, you back up that offer with earnest money to show you're not just fooling around and wasting everyone's time. The agent may hold onto your check until the seller accepts your offer; after that, the agent deposits the earnest money in an escrow account.
Don't rely on a handshake to cement your relationship with a buyer's agent. Get it in writing. And if you have any concerns about your relationship with the agent that aren't addressed in the agreement, bring them up. Working with the agent, you may be able to amend the agreement.
