Understanding the New Buyer Broker Agreement Requirement: What Homebuyers Need to Know
As of August 17, 2024, a significant change has taken effect in the world of real estate. Members of the National Association of REALTORS® (NAR) must now have a signed buyer agreement in place before they can show homes to prospective buyers, including during live virtual tours. This shift is part of a broader effort to bring greater clarity and transparency to real estate transactions, following the settlement of litigation involving broker commissions.
So, what does this mean for you as a homebuyer? Let’s break it down.
What Is a Buyer Broker Agreement?
A buyer broker agreement is a formal, legally binding contract between you and your real estate agent. It defines the scope of your working relationship, including the services your agent will provide and how they will be compensated. Essentially, it lays the groundwork for a clear and professional partnership throughout your homebuying journey.
Why This Change?
The new requirement is tied to a legal settlement concerning how real estate agents are paid. The goal is to make commission structures more transparent and ensure that buyers fully understand who is representing them, what services are being offered, and how those services will be paid for.
When Will You Be Asked to Sign?
You’ll generally be asked to sign a buyer broker agreement before viewing any homes—whether in person or through a live video tour. However, signing one is not necessary if you’re just attending an open house on your own or having an initial conversation with an agent to explore your options.
Key Elements of a Buyer Broker Agreement
Here’s what these agreements usually include:
Exclusivity: Many agreements specify that you agree to work solely with one agent for a set period or for a certain type of property or location.
Agent Services: The agreement outlines what the agent will do for you—searching for homes, scheduling tours, preparing and negotiating offers, and guiding you through closing.
Compensation: It clearly states how the agent will be paid. While commissions have traditionally been offered by sellers and their agents, those figures may no longer be advertised upfront. The agreement will show how your agent earns compensation and how any seller-paid commission would apply toward that amount.
Time Frame: Agreements are time-bound. You and your agent can negotiate the length—anything from a month to several months, depending on your needs.
Termination Terms: The contract should spell out how either party can end the agreement if the relationship isn’t working out.
Why This Benefits Buyers
Although it may feel like just another form to sign, a buyer broker agreement actually offers several advantages:
Clarity: Everyone understands what to expect, including responsibilities, services, and payment terms.
Dedicated Representation: It formally establishes your agent’s role in representing your best interests.
Transparency: You get a clear, written agreement that outlines all terms, reducing the chance for misunderstandings later.
Talk It Through—Everything Is Negotiable
Remember: the terms of a buyer broker agreement—including compensation, duration, and scope—are fully negotiable. Don’t hesitate to have an open conversation with your agent. A good agent will walk you through the agreement and make sure you’re comfortable before moving forward.
Final Thoughts
This new requirement is more than just a legal adjustment—it’s a move toward a more professional and transparent homebuying experience. By formalizing your relationship with your real estate agent from the beginning, everyone starts on the same page. It’s your chance to ask questions, define expectations, and ensure you’re getting the level of service you deserve.
If you're planning to start your home search, make sure you understand the buyer broker agreement and how it works. A little preparation now can lead to a smoother, more confident buying process down the road.
