If you’re buying a house, you may hear the term “Buyer Agency Agreement.” But what does it mean? Don’t worry — we’ll answer this question in detail in the article below. Read on to learn more.
Related: Buying a house? Understand the process by reading our complete guide on how to buy real estate.
A buyer agency agreement is a signed document between a property buyer and real estate agent. Usually lasting 3-12 months, the agreement specifies the responsibilities of the agent and ensures they receive commission once the sale is completed.
The agent uses it to lay out the agreement’s requirements, and it provides them with the guarantee of compensation when a sale occurs. Typically lasting 3-12 months, a buyer agency agreement commits a buyer to work exclusively with that agent.
Why Get a Buyer Agency Agreement?
It may not be commonly known, but all agents represent the seller. From the ‘listing agent’ who corresponds directly with the seller to the buying agent who works as a sub-agent to the listing one, without a signed agreement they have zero allegiance to you.
Since most people don’t know this, they assume that the agent is their representative, when in fact they’re not. An agent’s objective is to get the highest value out of a sale.
That doesn’t always work in line with a buyer’s goal for purchasing a property at the lowest price possible. In fact, they are direct rivals competing through negotiations.
Because of this, there are certain things an agent cannot tell you legally, such as:
- The reason for selling (unless authorized to do so)
- Any private conversations they’ve had with the seller
- Information that can be damaging to the standing of the seller
- Any compromise in price the seller may be willing to make
What A Buyer’s Agent Does For You
By signing a buyer agency agreement, you as the buyer will receive more benefits than a rival purchaser would. That includes a level of loyalty and professionalism offered solely to you in an effort to find your ideal home.
This agreement ensures the buyer is well regarded and provides full confidentiality and absolute disclosure. Once signed, as the principle you have access to the following information:
- Details of the property, including its strengths and weaknesses
- Contract contingencies and their legal consequences
- True value of the property
- Seller’s current financial situation and their motives
- How commissions are split with co-brokers
- Cost market analysis information
- Current property value trends in the area
- If there are any other offers
- Relationships between the agent and other existing factions
Along with the list above, having your own agent guarantees better and honest service. You as the buyer will know that every home you’re shown is being done in your best interest, rather than for the property owners.
The buyer now trusts the agent and will continue to work with them for the duration of the agreement. That provides the agent with a sense of comfort, but also gives them the motivation to find you the right home, at a price you can afford.
In searching for your dream property, it’s easy to become confused and get sidetracked by the fast pace of the industry and how friendly agents are. It isn’t entirely your fault if you become attached to them and let your guard down.
But remember, they work for the seller, not you. Unless you sign a buyer agency agreement, that remains the case. Once you’ve signed a buyer agency agreement, the odds will shift heavily in your favor.