These days many agents will ask their buyers to sign a buyer broker agreement. But what does the contract mean for the buyer and the agent? Is it really a win-win situation for all?

“A buyer broker agreement creates no obligation on the part of a buyer to purchase a home; it only creates an obligation for a commission in the event a buyer purchases a home,” explains Mike Spilger, a Real Estate Attorney.

There are three basic versions of the agreement and the specifics often vary from state to state and brokerage firm to brokerage firm. Two of the more widely used versions create an agreement for commission in addition to detailing responsibilities of the agent and the buyer. The third version leaves off the commission entirely and merely details the responsibilities of a buyer and the agent if an offer is accepted.

“The third version of the buyer broker agreement is a non-exclusive agency agreement that would allow the buyer to buy direct from a for-sale-by-owner or work with other brokers as well,” notes Spilger.

The other two versions of the buyer broker agreement create an exclusive representation of the buyer that would stipulate that if the buyer buys property in an area specified in the contract, then the buyer owes a commission to the agent. But Spilger points out that generally commission is paid by the seller, “For the most part, the buyer doesn’t pay anything anyway. Anything that’s listed through the multiple listing service, for the most part, it’s the seller who pays the commission.”

However, some buyer broker agreements commit the buyer to making up the difference in commission should the seller pay less than the customary full 3% commission fee.

But those opposing buyer broker agreements say some versions of the contract can hinder buyers when dealing with for-sale-by owner properties because those types of sellers usually do not want to deal with agents nor pay their fees. Opponents also argue that some versions of the buyer broker agreement lock in buyers to pay commission even if the buyers find the property on their own. It’s important to note, however, that finding the property is only part of a real estate agent’s job; helping the buyer through the transaction is also a very vital part of their job.

Despite the arguments, the buyer broker agreement has advantages that make it worthy of consideration.

One advantage of signing a buyer broker agreement is the understanding it creates between a buyer and real estate agent.

“The benefit of the contract is it makes it very clear as to who does what so that there’s no mistake at the end of the transaction,” says Spilger. “The buyer can then hold the realtor accountable for performing all the services, some of which they would not be aware of without the contractual definition,” says Ann Throckmorton, Chief Compliance Officer of Century21 Award.

“It’s perfectly permissible for a buyer to negotiate a shorter period of time or work with one agent in one particular market and if [the buyer] is looking in another market to work with an agent who is more knowledgeable in a different market place,” says Spilger.

“The buyer broker agreement does create a duty on the part of the agent to use due diligence in pursuing and finding appropriate properties. The agent’s obligations start at the signing of the contract,” says Spilger.

“In today’s market…the right home to buy is becoming more and more difficult to find. I think it certainly would benefit a buyer to have some kind of an agreement and have an agent checking the hot sheet, checking the things on the computer on a daily basis, which is something most buyers are not equipped to do,” says Spilger.

“Obviously someone who has a contractual relationship is more committed to you. Right now we have a surplus of buyers. Why wouldn’t I want an agent that knows that they’re going to be compensated and therefore I am a priority with them?” says Throckmorton.

Throckmorton also said it used to be that only sellers had representation and contractual obligations from their listing agents. Throckmorton says signing a buyer broker agreement, “elevates buyers, they become a full participant contracted in the transaction.”

As with any contract, be sure to discuss the agreement with your agent so that you have a full understanding of it and are comfortable with its content.

Published: August 9, 2004

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Phoebe Chongchua is an award-winning journalist, an author, customer service trainer/speaker, and founder of Setting the Service Standard, a customer service training and consulting program offered by Live Fit Enterprises (LFE) based in San Diego, California. She is the publisher of Live Fit Magazine, an online publication that features information on real estate/finance, physical fitness, travel, and philanthropy. Her company, LFE, specializes in media services including marketing, PR, writing, commercials, corporate videos, customer service training, and keynotes & seminars. Visit her magazine website: www.LiveFitMagazine.com. Phoebe's articles, feature stories, and columns appear in various publications including The Coast News, Del Mar Village Voice, Rancho Santa Fe Review, and Today's Local News in San Diego, as well as numerous Internet sites. She holds a California real estate license. Phoebe worked for KGTV/10News in San Diego as a Newscaster, Reporter and Community Affairs Specialist for more than a decade. Phoebe's writing is also featured in Donald Trump's book: The Best Real Estate Advice I Ever Received and The Complete Idiot’s Guide to Buying Foreclosures. She is the author of If the Trash Stinks, TAKE IT OUT! 14 Worriless Principles for Your Success. Contact Phoebe at (858) 259-3646 or . Visit PhoebeChongchua.com for more information.