Why is it important to get a buyer’s rep agreement in writing?

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04/10/2015 | Author: Editorial Staff

Is having a signed written agreement, such as TAR’s Residential Buyer/Tenant Representation Agreement, the only way for a broker to create an agency relationship with a buyer?

No. Although agency relationships can exist when you’re acting on behalf of the buyer without a written agreement, the best way to create an agency relationship is to put the rights and obligations of a broker and his or her client in a signed written agreement,.

In addition to being a good business practice, there are several other reasons why broker-client relationships should be in writing:

  • You cannot enforce your right to collect your commission from a seller or buyer unless you have a signed written agreement with them agreeing to pay your commission, according to Section 1101.806(c) of the Real Estate License Act.
  • Section 1101.559 of the Real Estate License Act requires brokers who act as intermediaries to obtain the written consent of each party in the transaction and that written consent must also state who will pay the broker.
  • Article 9 of the Code of Ethics requires that REALTORS® shall assure whenever possible that agreements shall be in writing for the protection of all parties.

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Categories: Forms, Legal
Tags: legal, legal faq, forms, agency, buyer's representation, representation agreement


Rick DeVoss on 02/20/2016

From what you have described, I do not feel that your Agent is doing a full-time job like I would expect to do for any buyer who signed a Buyer’s Rep Agreement with me.

You mentioned that you are a first-time home buyer, but we don’t know what price range you are looking in.  If it is a lower range, there are some agents who are not willing to invest the same amount of time that they do on “million dollar” properties.  Personally, I feel that the buyer has the right to my full attention, and the price of the house has nothing to do with it.

Unless you are looking for something really strange and hard to find, the agent should be able to show you a longer list of houses, and not act lazy by telling you to go to an “open house” on your own.  ~If she doesn’t show you the house, she doesn’t deserve the commission!

Perhaps it is time for you to write a letter to the Broker of the office, and ask that you be released from the contract called a Buyer’s Rep Agreement.

My opinion is that we are not all working that scenario the same way, and it needs some improvements.  I think the buyer should pay a “retainer fee” up front, and then an agent would not feel like they were working for nothing.  (That might make it easier to “fire” an agent you weren’t getting along with.)

It sounds like you need to start over, Jennifer.  You need an experienced agent who will listen to what you want, and then show you the reality of what’s available in your price range.  Don’t pick out an agent who is working part time, and has no need to make the money because their spouse provides for the family.  Select an agent who is committed to work hard for you on a full-time basis.

I have a special outline or checklist for First Time Home Buyers.  Let me know if you’d like a copy of it.

Jennifer on 02/20/2016

Myself and my husband are shopping around for homes, ( first time )I found a home that we fell in love with. We made an offer so our Realtor had us sign the Buyers Tenant Representation, that next morning after my husband signed the paperwork ( because he works nights ) my realtor informed me that they had a better offer, and left it at that.  ( we could of made a higher offer as well ), So then she showed us 3 homes,  they were nice homes, she did do a good job showing us these homes.  But we are not happy with a few things,  I’ve asked if she can show us more homes and she hasn’t responded,instead she asked if we wanted to go to the open house of one of the homes that we liked. It’s a 6 month contract that we signed and we’re not happy with the way she is working with us in finding the right home, again this will be our first home,  I don’t understand why she is in such a hurry to sell us a home if we’re not to happy about a few things.  How can we get out of this contract, I like better options for a Realtor?

Carmen on 09/01/2015

Its important to get it signed because it does offer the client some protections.
Fewer commission protections for us though if you sell an in house listing.
It is a very flawed system. Most of my clients want to sign it. I haven’t had
to work with out one although when I did hit a snag with a buyer and an inhouse listing the result was shocking.

Pam Bratcher on 05/11/2015

Although this is late in the discussion, I agree with many comments.  Rick DeVoss wrote what I’ve though for some time.  If buyers paid a fee up front, it would possibly be motivation for them to not go to another agent on a whim.  It could also cut down on the number of houses they insist on seeing, even though they pretty much know they won’t be buying it.  If they close, I would have no problem with the fee being deducted at closing from my commission.  However, if they go to another agent, I would at least have been compensated for the time I spent with them.  One would think that when an agent educates his/her clients about the buying process, and has integrity that the client will be loyal.  Unfortunately, that’s not always the case. 

Brenda Barnwell, and a few others,  hit the nail on the head about the Buyer’s Rep Agreement needing to be simplified.  I think the idea of using it is good, but it is intimidating.  It seems like it could somehow be cut down to 2 pages, and still have the necessary information.  Maybe the commission section could be redone or eliminated.  I don’t have answers, but you all brought up topics that definitely need to be considered.

I enjoyed reading your thoughts.

Rick DeVoss on 04/19/2015

Everyone can choose to run their business as they see fit, providing we all abide by the Code of Ethics and follow the rules of our organizations.  I, for one, would challenge some of the ways agents have been practicing real estate for a long time.
We need to get paid for our efforts, and I think the public would agree with that if we demand it.  ~None of your customers goes to work at their job and expects to work for free, and not get paid when the task is completed.  What if they worked all month, and then got no paycheck on the 30th!
So why are agents so willing to work for free?  Do we not respect our own expertise?  Do we not value our own efforts?  Do we not think we should get paid for our time?
Why would it be OK to make a Seller commit to a 6-month contract (Listing Agreement) and not expect a Buyer to do the same thing?  We are asking for their loyalty to work with us until the transaction closes so we can get paid.  ~Is there anything wrong with that concept?
Perhaps if the buyer and seller had to pay us a fee up front, they would tend to be more loyal.  Perhaps if every real estate agent were totally competent and showed their integrity, then the clients wouldn’t be so apt to switch to another agent.
Maybe if we charged the Buyer a retainer fee up front, they would not go looking at a house with another agent.  And even if they did eventually purchase a house with another agent, I would feel like I had been compensated for my time & gas.  (If I got paid by the hour, I think I would make more money!)

The whole concept of the BRA is to have an employment contract between the Buyer and the Agent.  ~Aren’t you an Independent Contractor?  Well, who are you working for?  (Who do you expect to pay you?)  The problem may go back to the fact that the buyer’s agent expects to be paid by the Seller (or the Seller’s Broker).  But we don’t work for the Seller!  ~When you represent a buyer, you are working for the Buyer.  Why then doesn’t the Buyer pay you for your time and expertise?  Why should we expect the seller to pay us at all…??

My opinion is that the whole system is broken.  It has had a defect in it since Day #1, and we have failed to correct it when we invented the concept of “Buyer Brokerage”, or “Buyer Representation.”  The Seller should contract with a Broker to sell his house, and agree to pay him a fee for doing so.  (Whatever that might be.)  And the Buyer should contract with a Broker to buy a house, and pay him a fee for doing so.

Every Broker (agent) should then be able to set their own fee schedule, according to what their services are worth to the public.  It would be just fine for a Broker to say “I will sell your house for 2%.”  But if the Buyer’s Broker says I will help you buy a house for 3%, then there is no way the seller’s Broker can tell me what I am going to get paid for producing a buyer under contract.  ~Each Agent should set their own fees, and each party should pay their own Agent.
I think it is ludicrous that the REO Listing Agents think that they can contract with the Seller (Bank) for any fee they want, and then I, as the Buyer’s Agent, am supposed to agree to split it 50/50.  ~Who came up with that “50/50” concept in the first place??  The efforts of the Buyer’s Agent may be a lot more demanding that the efforts of the bank’s listing agent.  (or vice versa)  Let’s lay our business plan on the table, and then get the principal parties to pay us what we are worth.
In most businesses, the more senior, more experienced employees make more money on the job.  Why shouldn’t an experienced Realtor make more money for his/her expertise than a brand new agent?  Or… maybe we should get paid a flat amount for the work that we propose to do.  I have never understood why an agent should get paid $9,000 (3%) for selling a $300,000 house, and only $3,000 (3%) for selling a $100,000 house.  The amount of work is about the same.  The paperwork is about the same.  In fact, it frequently takes more work to sell a cheap house than it does for an expensive one.  (Foreclosures are a pain in the butt, and we should get paid MORE, not less, for selling them for the banks.)    Maybe a first-time buyer should pay us more than an experienced buyer who has purchased & sold 3 or 4 houses.  (There is a lot more work involved with getting them qualified, and they need more education about the process than an experienced buyer does.)  Why shouldn’t we be paid for the amount of work that we actually do, instead of some magic percentage of the sales price of a house?

It is time for the industry to re-evaluate how we work and how we expect to get paid.  Forget the FTC.  Each Broker has the right to set the manner in which he expects to get paid.  Each Broker should be hired by the principal party that he is going to work for, and establish what his fee schedule is.  ~You are free to work for anything you want to; I know what my time is worth!


Lilly Hughes on 04/19/2015

Just because it once didn’t secure your commission or their loyalty is not a case for not using one.  There are far more reasons than that to use one. Be sure you get them to acknowledge the notices in bold somehow if you don’t use that form. The IABS is not a substitute. It does not spell out a broker’s duties other than confidentiality in my opinion. I also let them know that if at anytime they think I’m not doing the job described in the agreement or fulfilling any other promises made, I’ll terminate it with seven days written notice. This gives them comfort because many of them hesitate to lock-in with someone they don’t know, which is completely understandable.

We do business the way we think is best while keeping in accordance with all laws, regulations, codes of ethics, and broker’s policies and procedures. My first broker was not in favor of the BRA. While he was brilliant and to this day, I’m thankful to him for what he taught me, I don’t agree. We know what we are supposed to do, but the consumer, especially the first-time home buyer, does not. This is how we tell them. We secure our loyalty by delivering what we have agreed to/promised.

Spend most of the time on the commission paragraph. They get it if you can explain it. I expect to receive my fee just like everyone else who works for a living. I let them know that if the MLS offering is less than my fee, they are responsible for the difference; in that conversation I also tell them that I will always let them know when that difference occurs and do it. Invariably, the property is deleted, not me.  Indirectly, the buyer pays it.

Brenda Barnwell on 04/19/2015

Buyer’s Rep. Agreement needs to be simplified.  It is entirely too long.
I would never want to encourage anyone to sign and strictly use me…
because - they will use me - if they want to anyway. My commission is
fully explained in the Listing Agreement, the different ways to
represent the parties is explained in the Information About Brokerage
Services and The Intermediary Rep. Agreement.  How much more explaining
is necessary?  Treat each party fairly!!!!  Abide by The Code of Ethics!! And
Remember The Golden Rule!!!

Lilly Hughes on 04/16/2015

I always get a BRA signed. I don’t believe in implied representation since everything else has to be in writing. I think it is too long. However, it has important notices in it that the buyer should know. I’m trying to remember if I’ve had anyone go outside the written agreement. If they did I would probably let them go. Why waste time and money? I do think if you take the time to explain it to them, tell them it is your employment contract, and sets forth our duties and responsibilities to Each Other, they are agreeable and will follow the terms.

Deborah B. on 04/16/2015

I had a Buyer’s Rep agreement and an executed contract on a $1.5 Million property.  Lender had sent approval and docs to title and my Buyer backed out at the last second because of “personal family reasons”.  I worked with this Buyer for over a year and with his team of 8 people to get to closing and then he just bailed because he could.  So do my fellow Realtors think he should he compensate me as the Buyers Rep states because he defaulted on the contract?  I’d like to know your opinion.

Keith Laursen on 04/16/2015

I have never had an issue getting a buyers rep signed except by buyers who didn’t want to be committed.  Those I wish good luck to and move on.  I simply explain that it is the opposite of a listing agreement which everyone seems to understand & it’s how I get paid.

Agree that it is way to long and the commission part is a joke.  First of all,  I explain what the BAC means on a MLS printout and the seller has already agreed to pay it. If they are still nervous, just line it out. If the commission is less than normal I don’t sweat it.  My job is to find the buyer the best home.  If it’s a FSBO, I get their agreement to pay me.  I am not going to beat up the buyer for the difference.  Just how I choose to do business, you may be different and that’s OK

Kye Sampson on 04/16/2015

I’ve always gotten a buyers rep signed. Recently a client purchased a home without my knowledge and the buyers rep did not do any good on my behalf. Therefore I no longer use them, whats the point?

Wayne McCoy on 04/16/2015

While I would agree with most Realtors that the buyer’s rep agreement is usually unenforceable, I really enjoy explaining to clients why it is important and also the Information About Brokerage Services.  I usually do not have a problem getting clients to sign my “Whose Side are You on?” forms.  I try to make it clear and simple.

Doris Snipp on 04/16/2015

This form needs amending more than any other form. Neither Realtors nor Buyers are comfortable with the form and it is intimidating and hostile in relationship to the paying of the commission. In actuality I doubt any Brokerage would file a suit to obtain a commission.  This in it’s self makes the statement concerning payment of the commission poorly constructed and unnecessary.  Far too long have TAR, NAR and HAR focused on the listing agent instead of the importance of a Buyer’s agent, while collecting dues from both.  Continuing to market this form instead of a form that is simplified, to the point and remedies that have teeth, is as ludricious as the revenue enhancing online education to obtain a real estate license.

Rick DeVoss on 04/16/2015

Again, I think every person should be required to state their full name on this blog.  We don’t know who “Mr. H” is, and we should have the option to identify the person making the remarks herein.  (Personally, I would like to see their status (B or A), and the length of time licensed shown next their full name.  And maybe it would be nice to see what city or Board they are from.)

Many of the remarks here leave me scratching my head.  When trying to decipher a run-on sentence that contains 68 words, one has to read it carefully several times.  This topic includes “communicating with buyers”, and therefore, we should all strive to be more succinct in our written and spoken communications.  I do not really believe the statement that buyers don’t understand the BRA when signing it.  ~And if that IS the case, then the Agent is at fault for not explaining it clearly, and asking if there are any questions.

How is it that you KNOW that so many agents in the field are failing to make the buyer understand what they are signing?  (Is that because that is what You do?)  How are you privy to the conversations that other agents and buyers have??  (Where did you get this information that you are throwing out here?)

Most buyers only know what the Agent tells them.  So it is OUR responsibility to make sure they understand what they are signing.  The form from TAR is not perfect, and definitely could be simplified, but it IS usable and viable in the real world.  (You can design your own form, as it is NOT a TREC requirement.)

Why are you complaining about the term of the agreement?  You can make the term whatever you and your client agree upon.  Why not use it like you do a Listing Agreement?  Why shouldn’t buyers stick with you for 6 months?  Maybe 90 days is more realistic.  Or, maybe it should say “until the buyer buys a house.”

Your example makes it sound like you are finding a lot of properties where No commission is offered to the buyer’s agent.  I’d like to know what Board area you are operating in.  If we are talking about MLS, a BAC is almost Always offered by the listing agent/broker.  But if you were talking about a FSBO, it is a different story, and you should have prepared your buyer for that when you had your first face-to-face discussion.

Where a problem sometimes arises, is when the BAC in MLS is less than the amount that the buyer’s agent wants to work for.  For example, I want to get paid 3% on most of the properties that I sell.  Some smaller ones should pay more than that because the dollar amount is so low.  But when the listing agent is only offering 2% or 1%, then I have a problem, and I advise my buyer of that Before I mention the address.  He can agree to make up the difference, or we can skip that house and move on to the next one.  (Do the sellers really know how the marketing is being affected by such a low BAC offering…??)

But I totally disagree with you about having a separate written agreement for each property on a case-by-case scenario.    There is enough paperwork and confusion now without having to stop and do more paperwork just because some REO Listing Agent decides they have the power to cut the buyer’s agent’s commission at the same time they agree to work for less.  (If you want the listing THAT bad, cut your own commission, not mine!  ~It would eliminate most of the problems we are talking about herein if the BAC were normal for the market in question.)

When taking a listing, the seller wants to discuss what his house will sell for, and what he will net from it!

Overall, it sounds like you are having problems with your conversations with your buyers and sellers.  Start out by keeping it simple.  Focus on what the customer (client) is concerned about.  Be candid about your expectations right up front, and that should include commissions.  Set your boundaries.  Communicate everything to the person, and don’t make any assumptions, especially when it comes to what they understand and what they don’t understand.  Ask if they comprehend the topic.  Provide a simple written outline or example for them to follow.  Many people like to see something in writing or with a diagram so they can get a mental picture of the concept.

There is really no reason for the Buyer’s Rep Agreement to be confusing, as long as the Agent explains it to the buyer.  (Read every paragraph of the agreement.  If it doesn’t make sense, then either don’t use it, or use a different form.)

Ask your buyer up front if they agree you should be paid for your time and efforts.  If they say “No”, you should move on to another client.  If they say “of course”, then take a moment to explain the possible scenarios where you are worried that you are not going to get paid enough for your efforts.    ~You will find that most people are quite understanding, and willing to make sure you are compensated for helping them find the right house for their family.

Danny P. Ross on 04/16/2015

I agree. most 1st time buyers are scared & nervous about signing anything unless they were referred to you. An agent who worked for me had an Attorney look over the BRA & he put into 1 page highlighting the main points. B4 that most buyers were reluctant to sign it. Now they don’t seem to mind. Again as we all know it’s still hard to Police but it has saved me a few times when my Buyers stray off & go directly to a Builder without me. Builders Usually will honor them.
Gluck. Danny Ross Crs/Gri Broker

Gordon Wright on 04/16/2015

Real Estate Agents should have a comfort level regarding compensation to allow them to negotiate the very best deals for their client.  Get the paperwork out of the way before doing any work. I’m amazed that some of the largest firms in the industry still fumble with getting paid.  Best advice, know who you are dealing with.

Ken Smith on 04/16/2015

I have no problem with the existing BRA. Never gloss over anything. I always explain that the buyer is guaranteeing that I receive my commission, even if it involves paying me out of pocket. Except for the most cash strapped buyer, it doesn’t even matter. Sellers pay commissions with the buyer’s money. The price either does or does not cover the commission. My only wish is that we could get commercial brokers to understand this most basic of concepts. Worth repeating. The commission comes out of the deal. Sellers don’t really pay the commission. The commission sellers pay is with the BUYERS MONEY.

Richard Weeks on 04/10/2015

This blog should generate some interesting comments in the next few days.

Lee H on 04/10/2015

I read a lot of posts regarding BRAs and the biggest issue I have, beyond the length of it which most Agents agree is much too long, is that regardless of what most Agents will admit, the provision for the Buyer paying the Buyer Agent commission if the Seller/Landlord or their Agent doesn’t, is not adequately explained to the Buyer at the time they sign the agreement.  When a Seller signs a listing agreement, the matter of the term of the listing and the commission are always the top points of information and discussion, this is not the case with a Buyer’s Rep Agreement which is usually requested/signed on the fly, while in the field, in conjunction with other paperwork before or at the time an offer is being presented, or under any circumstance where they haven’t been given the time and opportunity to fully read the agreement before signing it.  Buyers don’t expect to pay commissions as nearly all markets rely upon properties offered through MLS where the commission offered is disclosed to all Agents representing Buyers.  It is a very rare and atypical instance where a Seller is not paying a commission to an Agent representing a Buyer.  And when this arises, the Buyer should be specifically made aware of this unique circumstance and not proceed forward in pursuing such a property unless the Buyer specifically acknowledges they will be responsible for their Agent’s commission.  I truly feel that glossing over this provision is unethical on the part of the Buyer’s Agent and it happens all the time.  In short, I don’t think this provision should even be in the BRA.  If the Agent is presenting a property which does not not offer a commission to be paid by the Listing Agent, the Buyer should be specifically told about this in each and every instance and given the opportunity to move on to another transaction opportunity or sign an agreement for that specific property if they wish to proceed with it agreeing to be responsible for their Agent’s commission.  I personally have no problem with striking this provision from the BRA and letting the Buyer know that I can’t and won’t represent them on properties where the Seller’s Agent is not offering to pay my commission.  If they subsequently become interested in a FSBO or other property where no commission is offered, we can agree on compensation on a case basis.

Dena Smith on 04/10/2015

Agents should always follow the policies of their broker. Brokers & agents both should be aware that pursuing a buyer in default of the agreement is not likely to end in procuring the commission due.

Even if you win the case… if the buyer only has one property and has filed a homestead exemption on that property, the buyer can sell the property and you will not likely be paid. You will be required to provide a partial release to the title company so the sale can proceed. An abstract of judgement or judgment lien can damage the buyers credit but cannot cloud the title of a property with a homestead exemption.

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The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on texasrealestate.com. Any legal or other information found here, on texasrealestate.com, or at other sites to which we link, should be verified before it is relied upon.

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