Does a Buyer’s Agent Agreement Guarantee the Agent’s Paid a Commission?
Does the buyer’s agent agreement guarantee payment of a commission to your real estate agent? This question may arise in situations where you have hired a buyer’s agent to help you purchase a property, but things are not going exactly as planned.
In most cases, it’s pretty simple. If this agent finds a home for you and facilitates the transaction, he should be paid for his work through a commission (paid by the home seller).
But what if you find a home on your own without the assistance of an agent, or if you no longer want to work with your agent? Should this broker still be paid a commission? That depends on the fine print in your buyer’s agent contract. So here’s how to read between the lines.
Buyer’s agent agreements: What they mean for home buyers
When you hire a buyer’s agent, you will sign a buyer’s agent agreement that sets out the terms of the agent’s commission, how long the contract lasts (usually three to six months), and how to cancel the contract before the termination date. While it is tempting to skim and sign the agreement, be sure to read this document thoroughly.
One provision to note is that some buyer’s agent agreements are exclusive – meaning that you owe this agent a commission for any home you purchase within the time frame of the agreement. Because this is a restrictive clause, most home buyers are better off signing a non-exclusive agent agreement, and if you change agents during your home search, you will only be required to pay the first agent if you buy a home referred by the first agent. If you buy another house that the original agent never introduced to you, then you do not owe that agent any money and the second agent gets the commission.
Buying new construction? Your agent must take extra steps
If you’re buying new construction, the rules may change a bit. According to Michele Lerner, author of the book “Homebuying. Hard Times, First Time, Anytime,” real estate brokers usually only get a commission if they follow specific rules set by the builder.
“Generally, your [real estate agent] must accompany you to the new home sales center on your first visit in order to represent you,” Lerner says.” Many builders require [agents] to register on their website with the names of the clients they represent. Buyers who are looking at new homes and working with a real estate agent should be sure to let the sales consultant or builder of the property know from the beginning that they have a buyer’s agent and find out if there is a required registration process.”
Admittedly, you don’t need a buyer’s agent to purchase new construction; you can also work directly with the builder’s on-site agent. However, it is wise to have a buyer’s agent for new construction because you will have someone representing your interests. The builder’s agent is representing the developer and not you.
How to terminate a buyer-agent agreement
Sometimes, after you sign up with an agent, you find that the relationship doesn’t work. If you feel like your agent isn’t doing enough for you, that’s one reason to consider staying on board.
There’s more to a buyer’s agent than just writing an offer for you,” Lerner says.” Often, a buyer’s agent can help you narrow your priorities for a home, recommend lenders, identify potential homes, help you understand the value of one or the other, and then represent your interests throughout the transaction.”
So what do you do if your agent isn’t as good as you’d like and you want to find another agent? Most buyer’s agent agreements have a two-way guarantee that allows either the agent or the buyer to rescind the agreement.
In most cases, “you should be able to terminate the agreement with a letter of cancellation or termination,” says Beverley Hourlier, a Realtor® with Hilltop Chateau Realty in San Diego.” Often, either party can terminate in this way.”
Another option is to simply wait until the contract expires; at that point you can sign with a new agent. But if you don’t want to wait, it’s best to address the issue head-on. Here’s more information on how to terminate a buyer’s agency agreement.
Finally, you should not feel trapped by a buyer’s agency agreement. Its purpose is to protect you and the broker, not to make you feel like you’ve sold your soul.
“It helps the buyer know what their broker will do for them and what their rights are, just like the seller’s listing contract,” says Sean Keane of The Keane Group in Oregon.” It also helps brokers weed out the people who will just waste their time.”