What is a Buyer Agency Agreement?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 08 November 2019
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A buyer agency agreement is a legal contract between a prospective buyer of real estate and a real estate agent who agrees to represent the interests of the buyer. Without such an agreement, a real estate agent could potentially be more concerned with the interests of the seller, especially since commissions usually are based on the sales price of the property, providing a clear incentive for getting buyers to pay more. Real estate agents may be amenable to signing a buyer agency agreement or may recommend it, in some cases. As with all legal contracts, it should be read carefully before signing.

This legal agreement establishes a fiduciary duty on the part of the agent. While representing the buyer, the agent cannot disclose information that might harm the buyer's position in the sale and must work to create a deal amenable to the buyer's interests. For example, if someone intends to buy a home with proceeds from an insurance settlement but wants to keep some money back for savings, the agent cannot tell the seller about the full amount of the settlement, as this might lead the seller to counter with a higher offer to exploit knowledge of the buyer's financial circumstances.


The contract can be exclusive or open. In an exclusive buyer agency agreement, the buyer agrees to go only through the agent on any real estate transactions, including for sale by owner transactions, in a set period of time, such as 90 days. The buyer cannot work with any other real estate agents during this period and the buyer's agent is bound to act responsibly in terms of making and negotiating offers. Abusing the exclusive nature of the agreement can be grounds for penalties, including removal of a real estate license.

An open buyer agency agreement creates a fiduciary duty on the part of the agent, but does not restrict the buyer to only working with that agent. If the buyer finds a for sale by owner, the transaction can be handled privately. Likewise, the buyer could work with another real estate agent on looking at property and writing an offer. This creates a clear disadvantage for the real estate agent, who wants to increase the chances of getting a commission, and this option tends to be less common.

Conflicts of interest in real estate can become tangled, as agents work with each other and in opposition to each other on a regular basis. Having a buyer agency agreement can ensure the best chances of being represented fairly as a buyer, although it will not necessarily eliminate conflicts of interest. Real estate agents are bound to expose these; for example, if someone wants to make an offer on a home owned or listed by the buyer's agent, this information has to be provided.



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