Are You Being Asked To Sign An Agreement Before Seeing A Home?

So, you may have heard from your local real estate agent that you need to sign an agreement prior to them showing you a house or working with you. Well, I can assure you that they aren’t a stick in the mud – they are just following the rules. Agents need to have a signed agreement in order to show you properties or write offers. If you’ve bought a home before and weren’t asked to sign anything in the past, please understand that it’t a thing of the past and you will from here on out be asked to sign a buyer representation agreement before an agent can open a door for you. Just think about it for a moment: do you really want to work with someone who’s okay bending the rules right from the start?

The correct terminology in this case is called “Agency.” By law, agents must disclose who they represent in any transaction or service offering. Per TREC rules “license holders are required to provide certain consumer notices to you. The first time you communicate about a specific property with a license holder, the broker or agent is required to provide you with a form called the “Information About Brokerage Services”. This form describes the different ways a professional can represent you, the minimum services they must provide to you and key business names, licenses and contact information for the sales agent, their sponsoring broker, and any delegated supervisor”.

Will You Have To Pay Your Buyers Agent?

A series of lawsuits have led to a huge change in the real estate industry. The suits originated from agents allegedly were not being transparent enough in their compensation and that it was unfair to that of the seller having to compensate both their listing agent as well as the buyers agent. In most cases, agents have always been clear about these issues, but the National Association of REALTORS settled to make sure all real estate agents in the multiple listing service (MLS) negotiate directly with the buyer for their compensation. What does this mean exactly? Well, sellers are no longer required to offer compensation to a buyer’s agent. This DOES NOT MEAN that a seller can’t offer compensation to the buy side. A seller may offer some concessions to cover part or all of the buyer agent’s compensation as a condition of the buyer purchasing the seller’s property. From here on out, agents who are members of the MLS, must negotiate and document their compensation agreement before entering a property or making offers on behalf of their client. The Department of Justice has also entered the chat to ensure transparency in who pays whom in real estate transactions. By August 16, 2024, these new practices will be in full effect, and will requirea signed compensation agreement between the buyer and the buyer agent’s firm before any property showings.

What Are The Pros of Signing A Buyer Representation Agreement?

A buyer agency agreement will need be signed in order for you and your agent can begin working together. This buyer rep agreement is going to cover compensation and also allows the buyer’s agent to negotiate their fees with the seller whenever you want to submit an offer to the seller.

Other disclosures will include Fair Housing laws, Texas property disclosures, and more. It is crucial that you understand these disclosures prior to viewing properties or submitting offers. The NAR settlement and DOJ requirements mean a buyer representation agreement is necessary BEFORE an agent can show you a property or write an offer.

I want to make it clear that when signing these agreements, they don’t have to cover long periods or broad services. An agreement can be limited to one home or just a weekend of house hunting. So if you’re on the fence about an agent, negotiate a shorter agreement period. Commissions between you and the agent representing you are negotiable. When you and your agent agree upon a commission in the buyer agency agreement, that will be the cap of what an agent can collect (unless an amendment to the agreement is agreed upon and signed by you - the buyer). This agreement is also the buyer agents key to attempt to negotiate with the seller to contribute to some or all of the compensation you and the agent have agreed upon.

These agreements give you as a buyer a better idea of what your agent can and can’t do, it details their responsibilities and the extent of their negotiation powers on your behalf. Buyer agency agreements provide several benefits and is now a required part of the home-buying process with every agent. So if you’re not being asked to sign an agreement prior to an agent showing you a home, run.

What Am I Signing & How Do I Negotiate?

I know that change is scary and a change specific to nearly a century-old practice is going to take some getting used to for everyone involved, but the requirement to have agreements fully explained to you are in your best interest especially when making one of the biggest purchases of your life. I encourage you to ask lots of questions and get clarity on how your agent will be guiding you and where they anticipate their compensation to come from. Just like it was made crystal clear to you on what you were getting paid before you accepted your last job, agents want to know how they will be compensated for the work that they do as well.

Seek clarification on each paragraph, not just on compensation. You want to know the exact role of your agent for there are a lot of moving parts in a real estate transaction and your agent will be your trusted guide in the process.

If you are looking to buy or sell a home in Texas, please don’t hesitate to reach out to me and allow me to explain the process and how I can be your partner to assist you in one of the largest investments you’ll make in your life.