Buyer brokerage agreements are becoming more popular. Some real estate offices have mandated them for all their real estate agents to start using. Although this date has been pushed back already, it looks like all realtors will start using buyer brokerage agreements in the near future.
How do Real Estate Commissions Get Paid?
When a person lists a home to sell with a real estate agent or Realtor, the seller of that home signs a listing agreement. One of the terms in the listing agreement is that the seller will pay a commission to the real estate agents for the work involved. This is broken down into two components. The first is for the real estate agent who lists the house and puts it on the market. The second is for the real estate agent who find a buyer for the home. Each commission is lumped together but treated differently as to who gets how much. Sometimes the real estate agent who is selling the home also finds the buyer and then collects both commissions, or any amount as negotiated between the seller and that Realtor. So where does the buyer brokerage agreement come in if the real estate agents commissions are already dealt with here?
So What are Buyer Brokerage Agreements?
Buyer brokerage agreements protect the real estate agent who is working with buyers to ensure that they get paid. An agent may spend many days or months with a client trying to find a home. If that buyer does not buy a home, then the real estate agent does not get paid. That is part of being a real estate agent. If, however, the buyer decides that they want to buy a home for sale buy owner, so there is no listing agreement dealing with commissions, or a new home where the builder does not pay very much commissions, or the client the has another realtor help them buy a home that they had previously seen with the first Realtor, then there is no protection for that person who spend many hours working with the buyers.
The buyer brokerage agreements set terms in place that protect the real estate agent who has worked hard for a client to help them find a home and make sure that they get paid. It obligates the buyer to pay the agent if, the seller does not have to and guarantees a minimum amount of commissions for their efforts. The buyer brokerage agreements can be long term, protecting that relationship for several months, or very short lived, if it is only supposed to be with respect to showing one or two homes. This entire contractual relationship is negotiable as between the buyer and their real estate agent.