Buyer Agency Agreements on the Real Estate License Exam
The Real Estate License Exam will likely have questions about buyer agency agreements. Traditional real estate brokerage continues to primarily represent sellers; however, as buyers became aware that they didn’t have representation in real estate transactions, buyer agency agreements were developed to enable the buyer to become the principal and thus have all the advantages of being represented by a real estate agent.
The several types of buyer agency agreements differ primarily in the circumstances under which the broker is paid. Here are typical agreements:
Exclusive buyer agency agreement: This agreement makes the broker the exclusive agent for the buyer, and no matter who finds the property that the buyer is seeking, a fee is owed to the broker, if and when the buyer buys the property.
Even if the buyer buys property directly from an owner with no broker involved, the buyer still has to pay the exclusive agent a fee. This type of agreement is also called an exclusive right to represent.
Exclusive agency buyer agency agreement: This agreement makes the broker the exclusive agent of the buyer, but it requires the broker to be paid only if the broker finds the property that the buyer ultimately purchases. If the buyer finds property and buys it without help from the broker, the buyer owes no fee to the broker.
Open buyer agency agreement: This agreement enables the buyer to enter into agreements with any number of brokers and is therefore not an exclusive type of buyer agency agreement. The buyer pays only the broker who finds the property that the buyer buys. The buyer owes the broker nothing, if the buyer finds and purchases a property without help from the broker.
The buyer or the seller may pay the fee in a buyer’s agency agreement. Fiduciary responsibility doesn’t follow the money. A buyer’s agent who owes complete fiduciary responsibility to the buyer can be paid from a portion of the commission paid by a seller to the seller’s agent. This is no different from when a fee is split in a co-brokering arrangement in which both brokers represent the seller.