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Whether you're doing a full property search for a buyer or just negotiating on a single property, it's a good idea to get a written agreement that sets out the expectations of all parties in advance.
Read on to find out the key points of how Buyer's Agent Agreements work and where to get help crafting your document.
What is a Buyer's Agent Agreement?
A Buyer's Agent Agreement is a contract between a home buyer and a buyer's agent. It will set out how the two will work together, so the agent can find suitable properties for the buyer, negotiate the price with the seller and bid at an auction. Think of it as a document that establishes the rules of the relationship, so both the buyer and the agent are protected if anything goes wrong.
When should I use a Buyer's Agent Agreement?
As a buyer's agent, you'll want to use an agreement before you provide services to a buyer. It doesn't matter if you're offering the full search service, appraisal and negotiation or just bidding at an auction. It's important to get the agreement in writing setting out the terms and conditions of your service. That way, if any problems arise the agreement will help the agent and the buyer resolve them.
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Buyer's Agent Agreement vs Real Estate Agency Agreement
A Buyer's Agent Agreement is used when a prospective home buyer appoints an agent to purchase a property. It will set out the services the agent will provide and the terms and conditions of the agreement.
In contrast, a Real Estate Agency Agreement is typically used when you sell a property. It will state the terms and conditions under which a selling agent will market the property and negotiate the price on your behalf.
What does a Buyer's Agent Agreement include and not include?
A buyer's agent agreement can vary depending on whether the agent is providing the full service or working on a particular property transaction.
- Level of service. A buyer's agent can help in a number of ways from doing the full property search to just bidding at an auction. The agreement should state what level of service the buyer requires from the agent.
- Commission, fees and expenses. The agreement should state how much a buyer's agent charges for the service. It may be a fixed fee or a percentage of the property purchase price.
- Geographical and time limits. If a buyer's agent is offering a full buying service, it may state geographical and time limits.
- Entitlement to the buying fee. If the buyer agrees to work with an agent exclusively for a period, it can contain a clause that entitles the agent to a fee even if the buyer finds a property from another source. This will protect the agent in situations where the agent does all the hard work but the buyer chooses not to go through with the agent's recommendations.
If the buyer engages an agent to provide the negotiation or auction bidding service on a single property and not working with the agent exclusively, it's unlikely that the agreement will contain a clause that allows the agent to collect the buying fee if the buyer purchases a property through a third party.
How effective is a Buyer's Agent Agreement?
A signed buyer's agent agreement will generally be effective in enforcing the agent and the buyer's rights. So, if the buyer refuses to pay for the services provided by the agent, the agent can seek payment through the court system.
However, the agreement will not be effective if it contains unfair terms for the home buyer. This is why many people decide to get their agreement legally reviewed to make sure it is effective.
Do I need to use a lawyer?
Strictly speaking, you don't need to be a lawyer to draft a buyer's agent agreement. You may be able do it yourself by downloading a template online and customising it. However, it's generally a good idea to have a lawyer look over your agreement to make sure it doesn't contain unfair terms and it complies with the specific laws of your state or territory.
How do I write a Buyer's Agent Agreement?
To draft a buyer's agent agreement you might start by gathering basic details such as the agent and the buyer's information, the description of the property, the period of the agreement, the price range of property and the commission, along with the fees and expenses you charge.
The agreement may also contain additional terms if the buyer agrees to work with you exclusively for a set amount of time. For example, it may state the agent is entitled to a buying fee even if the buyer finds a property through another source during the period of the agreement.
Where to get free legal documents and templates like a Buyer's Agent Agreement
It can be tricky to draft your own Buyer's Agent Agreement. That is why many agents choose to use a template and customise it instead. Here are some of the options:
- Sprintlaw. Springlaw offers a fixed-fee package for a custom Buyer's Agent Agreements.
- Legal.Vision. Legal.Vision can draft or review an agency agreement for buyer's agents and real estate agents.
- REBAA. The industry body provides a free template for all members who join.
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