What Is a Non-Exclusive Buyer Representation Agreement?
A non-exclusive buyer representation agreement is a mutual understanding between a homebuyer and a real estate agent. The agreement states that the agent agrees to assist the buyer in the purchase of a home or other property, and the buyer has no obligation to work exclusively with that one agent. Instead, the buyer may choose to work with any number of agents, as they wish, on the same transaction.
If the buyer has agreed to sign a buyer representation agreement with the subject brokerage or agent, this must be disclosed on the legally required "Working with Real Estate Agents" document.
While there is an obligation to fully disclose whether a buyer is already working with another agent, in practice many agents never ask buyers if the buyer already has a current buyer representation agreement with another agent or brokerage before they sign their own agreement. Therefore , rarely do any brokers or agents ever review whether the signing buyer has a current non-exclusive buyer representation agreement with another agent. The absence of such inquiry makes it simpler for the buyer(s) to claim they have no obligations under their non-exclusive buyer representation agreement with you.
Wording on the "Working with Real Estate Agents" form concerning non-exclusive buyer representation agreements: b) A buyer or a seller that has previously entered into a non-exclusive buyer or seller representation agreement with another registered brokerage, without having previously notified the other registered brokerage in writing of the cancellation of the agreement, will be in breach of the agreement. Note – if more than one buyer or seller is party to the contract, it is assumed that all buyers or sellers are represented by the same brokerage unless specified otherwise.
Advantages of Non-Exclusive Buyer Agreements
A non-exclusive buyer representation agreement will guarantee a professional and streamlined experience in the search for real estate. A non-exclusive agreement will afford you the ability to employ multiple real estate agents to aid in your search, therefore widening your net and allowing you to see more prospective properties in a shorter amount of time.
A non-exclusive buyer representation agreement, in addition to maximizing your property search, will also allow you to play the field and meet with multiple real estate agents. This is a huge benefit when searching for a real estate agent that you feel comfortable with, have click with, and feel will be able to best meet the needs that you have while looking for a property. There are many different types of real estate agents available in the market, and some of them may not be the right fit for you. Meeting with a number of real estate agents will allow you to figure out which real estate agent has the expertise and experiences that you are looking for.
With a non-exclusive buyer representation agreement, there is no obligation to continue on and work with a real estate agent who is not working out or not meeting your needs. In the event a particular agent does not work out, the non-exclusive buyer representation agreement allows you to walk away and move onto another agent, without obligation. Buying a house is an intimate act, and one that you want to ensure is done properly, and you want to ensure you have chosen the right real estate agent for that journey.
With an agreement in place, you are guaranteed that a professional and dedicated real estate agent will be working for you to help you find your new home. While it is important to recognize the potential pitfalls of certain buyer representation agreements, with the non-exclusive agreement you can rest assured that you will have an advocate working with and for you to give you regular information and feedback about the property that you are purchasing.
The Crucial Components of the Agreement
As a prospective buyer enters into a non-exclusive buyer representation agreement, there are key elements that will be included in the agreement. These elements provide clarity on the relationship, and are important components to understand to help buyers navigate the home buying process.
Fiduciary Duties. The duties of the agent are typically broken down into seven categories, including obedience, confidentiality, reasonable care, loyalty, full disclosure, accounting, and to use skill and care. Each of these components is essential to ensuring that the agent is using their skill set to their advantage, and acting in the buyer’s best interest.
Definition of Real Estate. To avoid confusion, the agreement will define what constitutes the subject property. The agreement will also typically outline the general parameters of what the buyer is looking for, whether it be a single family home, farm, vacation property or raw land. For realtors, this is a great opportunity to get more specific in what they are looking for in a potential client. While it can be exciting to receive a call about a new listing, if it is the complete opposite of what you typically represent, don’t be afraid to turn it down.
Purchase Price and Commission. Generally, the purchase price is based on fair market value of the property, and the agent’s commission is based on the terms of the agreement. This is where the agent has to do their job to ensure that the purchase price is as low as possible. The buyer should understand that by signing the agreement, they are agreeing to pay the real estate commission to the agent.
Expiration of the Agreement. This is one of the final provisions in the agreement. When does the buyer representation agreement expire? This can be a hotly contested issue between the agent and the buyer. For a buyer, the expiration should be as short as possible, but should give the agent enough time to find a potential buyer. For an agent, a firm expiration date allows them to feel secure that the buyer is committed. A typical agreement might have a term of a few months.
Disclosures. If the seller of the property is represented by another agent, or if the buyer has to perform additional inspections, the agreement must disclose the potential problem. By disclosing the issue, the buyer is giving the seller the opportunity to remedy the issue, and allowing the buyer to make it part of their decision-making process.
By understanding what is likely to be in the buyer representation agreement, the buyer can be aware of what they need to look for, and have realistic expectations about their working relationship with the agent.
How Non-Exclusive Agreements Contrast With Exclusive Ones
The primary difference between a buyer representation agreement that is non-exclusive versus one that is exclusive is that when an agreement is non-exclusive, the buyer is only hired by and has no obligation to work with any particular REALTOR until he or she decides to sign a buyer representation agreement. Once the buyer signs with the REALTOR, however, the agent will then be considered the buyer’s exclusive representative.
For buyers, the benefit of having a non-exclusive representation agreement is that they are never obligated to sign that agreement, which means that they are not obliged to work with that REALTOR. It is important to keep in mind, though, that the obligation of the buyer to pay that agent commission is, by implication, limited to the amount the competition pays. If that is not what the buyer wants, there is no reason for the buyer to sign a non-exclusive agreement.
For the REALTOR, the difference is that all information given to them by the buyer during the time before a non-exclusive agreement is signed must be disclosed to the seller. The seller would not necessarily be required to disclose this aspect of the arrangement to the buyer unless the buyer asks. But the REALTOR should fully inform the buyer if he or she intends to reveal information about the buyer to the seller and give the buyer an opportunity to sign an exclusive agreement at that time.
Both exclusive and non-exclusive buyer representation agreements are legal contracts. If the buyer changes his or her mind after signing a non-exclusive agreement or an exclusive agreement with a REALTOR, whether that buyer has to pay a commission will depend on the terms of that contract. A fully-executed written agreement takes precedence over a verbal agreement, and a written agreement always takes precedence over an implied agreement.
When to Opt for a Non-Exclusive Agreement
A buyer would want to enter into a non-exclusive buyer representation agreement when he or she is not ready to commit to an agent. Non-exclusive buyer representation agreements also are preferable in situations where the buyer has a lot of faith in his or her negotiating skills. Buyers may choose to forego a written agreement if they either expect to make an offer on a property during their first day ("wholesale" agreement) in the area or plan to be represented by a different broker after the initial offer. In these situations, buyers expect to find that the first broker will understand that his or her representation has been replaced.
Such buyers should keep in mind, though, that without a written buyer representation agreement between the buyer and his or her original agent, they may end up working with multiple agents prioritizing obtaining a commission over achieving a successful property purchase . Negotiating a contract with a property seller can be like playing poker. If it is clear who holds the best hand, the other side can consolidate the offer and avoid putting anything on the table that might lead to a concession. For instance, you probably will not see the owner of a high-end condominium in a bad neighborhood sell for a price below what the best unit in an upscale condominium community is going for in a well-regarded neighborhood.
A non-exclusive buyer representation agreement should not be used as a long-term strategy for buying property. Buyers must protect themselves from unscrupulous agents who will basically act "as needed." If a buyer is not ready or able to formally document the agent-buyer relationship, he or she should consider the advantages of paying only a single commission fee, and possibly lower overall costs.
Legal Implications and Selling Strategies
To ensure clarity and mitigate potential legal issues in a non-exclusive buyer representation agreement, both buyers and real estate professionals should pay close attention to a few key considerations. First, the agreement should be in writing and signed by all parties to establish the terms of the relationship and to provide a clear record of the agreement. This document must outline each party’s rights and responsibilities to avoid any ambiguity that could lead to legal disputes in the future.
Additionally, it is essential for real estate professionals to clearly discuss and explain the terms of the representation agreement with the buyer before signing. It is important to ensure that the buyer fully understands the scope of the agreement and the rights of each party, as well as the cancellation process and any potential liability for fees or commissions that may arise during the term of the agreement. Ensuring your buyer has full understanding and providing them an opportunity to ask questions about what is expected to the buyer for terms and compensation is a best practice.
It is also advisable to include provisions regarding confidentiality and dispute resolution. These provisions can help establish a clear framework for handling confidential information and resolving any potential disputes that may arise during the term of the agreement.
For real estate professionals, understanding local laws and regulations surrounding seller representation agreements is crucial to ensure compliance and avoid any potential legal pitfalls. Compliance with these requirements not only helps protect the best interests of the buyer but also the real estate professional and their brokerage.
Ending a Non-Exclusive Buyer Representation Agreement
One of the most convenient characteristics of a non-exclusive buyer representation agreement is that either party may terminate it without any specific conditions. All that may be required is providing the other party with notice of at least 60 days. However, if notice is not provided , the agreement will expire after 6 months. The opportunity to terminate the agreement naturally protects both parties in case they decide the arrangement is or is not working out. One stakeholder may decide it has become more of an inconvenience than what it is worth, for example.
Notice of termination must be provided in writing and can be handwritten, emailed, or printed from a computer, with all parties receiving a copy.