Buyers Contract: Everything You Need to Know
Buyers contract is a legal agreement between a home buyer and a real estate broker, who will then be compensated for acting as a representative of the buyer.3 min read
A buyers contract is a legal agreement between a real estate broker and a person interested in buying a home. With this contract in place, the real estate broker will represent the home buyer and will receive compensation for their services.
Types of Buyers Contracts
Buying a home requires considering a variety of important factors:
- The community in which you want to live.
- The size of the house that you need.
- Your desired price.
Because finding and purchasing a home can be so time-consuming, many people choose to work with a real estate broker. The agreement between you and your real estate broker is known as a buyers contract or a buyer-broker agreement. Almost every buying agent will want a legal contract with the home buyer that they represent.
Buyers contracts are usually bilateral agreements, which means the responsibilities of each party will be laid out in the contract. These contracts, essentially, represent an exchange of promises between the buyer and their agent. If the agent does not uphold their end of the deal, the buyer may be able to fire them based on the terms of the contract.
Finding a Buyers Agent
A home buyer can be referred to a buyer's agent in several ways:
- By family.
- By co-workers.
- By friends.
Getting a referral is usually the simplest solution for finding a real estate broker or buyer's agent. If you are new to an area, however, and have not yet had a chance to build a social network, there are several other methods for finding a buyer's agent.
First, you could perform an internet search. You can look for online home listings, and with these listings, you should be able to determine which agents work in which neighborhoods. The drawback is that most of the agents you find using this method will be seller's agents instead of buyer's agents.
Another way to find a buyer's agent is to attend open houses in your area. In some cases, the listing agent and the agent who hosts these events will be the same person. Talk with the agent at the open house and see how knowledgeable they are about the real estate market in your city. If you feel like they can provide the services you need, ask them for a business card.
The main reason for a real estate broker and a home buyer to enter into a buyers agreement is to help prevent future problems. In the contract, the responsibilities of the broker and the buyer will be described, and the services provided by the broker will also be listed.
Types of Buyers Contract
Multiple types of buyers contracts can be used to formalize the relationship between a buyer and their agent. One type of buyers contract is a non-exclusive, not-for-compensation agreement. With this form of contract, the broker's responsibilities will be outlined, and there will usually be a requirement that the broker completes these duties himself. Using this type of buyers contract means the broker will not receive compensation. This contract may also allow the buyer to hire more than one broker or give either party the right to end the contract whenever they wish.
A non-exclusive right-to-represent contract is another type of buyers contract. If this type of contract is in place, the broker will be compensated if they propose a house that the buyer decides to purchase. If the broker is paid a commission by anyone else, however, there is no obligation for the buyer to compensate the broker. Because this contract is non-exclusive, the buyer is allowed to purchase a home proposed by another broker, as long as the original broker did not propose the property first. Also, for one of the parties to end this type of contract, there usually needs to be a specific reason.
The most common type of buyers contract is an exclusive right-to-represent contract. This contract creates an exclusive relationship between the buyer and the broker, meaning the buyer cannot work with another broker as long as the contract is in place. This contract also outlines the commission that the broker will be paid. The broker will receive this commission regardless of whether they find the house that is purchased or the buyer does.
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