What is an Exclusive Buyer Representation Agreement?

Has a real estate agent asked you to sign an Exclusive Buyer Representation Agreement? Or maybe an “Exclusive Buyer-Broker Agreement” or an “Exclusive Buyer’s Agency Agreement” if you’re located outside of California.

If this is your first time buying, being asked to sign an agreement so early in the process might come as a surprise. But it’s common practice to sign an Exclusive Buyer Representation Agreement soon after meeting a real estate agent.

So, in this article, we’ll answer your FAQs, including:

An Exclusive Buyer Representation Agreement is a contract between a homebuyer and the real estate agent representing them to confirm the business relationship between the parties. The agreement is “exclusive” because the buyer is agreeing to work only with the named agent. While you have a signed agreement with one agent, you cannot hire a different agent to represent you in a home purchase.

To understand why an Exclusive Buyer Representation Agreement is necessary, you need to understand how buyer agents get paid. The vast majority of real estate agents aren’t employees; they don’t earn hourly wages or annual salaries. Instead, agents typically earn a commission (a pre-arranged percentage of the home’s sales price). Agents only receive their commission checks when the deal closes. This means that your buyer’s agent might work for you for weeks or months without any compensation. You can see how this creates a risk for the agent. If you don’t buy a home, they don’t get paid. Worse, if you buy a home using another agent, your agent might have invested all this time in helping you find a home, only to lose their commission to a competing agent. This is why most buyer’s agents require an Exclusive Buyer Representation Agreement. They want to be sure that they can legally claim the commission that they earned while helping you find your new home.

The main purpose of the Exclusive Buyer Representation Agreement is to outline the business relationship between the sellers and their agents. And the agreement goes into additional details to help ensure fair dealings by all parties.

Here are some of the terms covered by the agreement:

Absolutely – as long as you’re comfortable with the agent. You can’t fault agents for asking for exclusivity upfront. This is their livelihood, and they have to protect themselves. However, you have the right to interview multiple buyer’s agents before committing to one. You also have the right to request a shorter contract term if you are uncertain about the agent. The agent might agree to the shorter term, or they might not, but you can always ask. Experienced agents will often ask for the agreement at the first meeting. They may have been burned at some point, so now they require an agreement before they will start showing properties. Newer agents and agents who are struggling to find clients are more likely to work without a signed agreement. It’s important to note that the agreement also ensures that you’re getting the best possible service. Agents who work without an agreement can’t be sure that they will be compensated. So they may be less likely to invest the time in finding you the right home.

Your buyer’s agent does so much more than show you properties. They also run comps to determine a fair offer price and negotiate on your behalf to help you get the best terms possible. Then they coordinate your purchase through the escrow process, helping you with the inspection, appraisal, and all that paperwork. If you’re in the market for a new home, contact Sequoia Real Estate to connect with an exceptional real estate professional today!