NOTE: The following briefly explains the Buyer Representation Agreement.
It does not constitute legal advice. Ask for a Buyer Representation Agreement if you want to be sure that your agent represents you rather than the seller.
The “Buyer Representation Agreement” is an agreement between a buyer and a real estate brokerage. Purchase of real estate may be the largest investment a buyer will ever make. It can be complex and demanding. To assure a successful transaction between seller and buyer, a buyer may desire formal agency representation in writing. It states that the agency will exclusively represent the buyer by providing professional real estate services, that our loyalty will be to the buyer, and that the agency will make every possible effort that is legally and ethically sound to make sure that the buyer's best interests are served.
In return for this representation, the buyer agrees that a commission should be paid to the broker for services earned, although not necessarily by the buyer. Normally, the seller agrees to pay any commission, so buyer representation usually costs buyers nothing. The buyer agrees to work through this broker for acquiring properties shown by the brokerage and will negotiate the acquisition of property in the market area only through this broker. The buyer agrees to inform other brokers, salespersons, sellers, and landlords with whom they may have contact that the broker represents them for the purpose of acquiring properties shown and will refer all such persons to the broker. The buyer agrees that transactions for properties shown to the buyer which the brokerage is able to place offers with the seller, which the buyer may subsequently decide to purchase, will be conducted by this brokerage.
The agreement may require a buyer to reimburse the brokerage for any commission it would have received, if the buyer purchases a property from a different agency or directly from the seller -- providing 1) that the property was legally and properly shown to the buyer while the agreement was in effect, and 2) either the agreement or “protection period” is still in effect. The protection period is an agreed upon period of time after the agreement ends during which compensation is provided to the representative broker if the buyer purchases through another agency or directly from the seller. To provide accounting for such an event, documentation is kept of all properties shown to the buyer while the agreement is in effect, and is provided to the buyer when the agreement expires. HUD properties are sold through currently registered HUD brokers only, who may submit offers and obtain commissions for their sales from HUD. For more details, you may download the agreement.
Buyers using HUD's Good Neighbor Next-Door Program must sign a buyer's rep agreement. This is because HUD does not pay commissions on this type of sale, so the brokerage becomes the buyer's paid agent, asking the buyer to provide the normal commission of 5% of the offer amount. Using an FHA loan with the GNND program, the buyer can roll the commission and closing costs into the loan.