Oct. 4, 2019
Buying a home is much more complicated than it seems, and buyers are highly advised to have representation when they begin their home search.
Having a real estate agent represent you when making the largest purchase of your life is certainly beneficial for many reasons, but the details of this professional relationship should ideally be outlined in a contract. In Tennessee, that contract is known as an Exclusive Buyer’s Representation Agreement.
What is an Exclusive Buyer’s Representation Agreement?
An Exclusive Buyer’s Representation Agreement is a contract that both the buyer and his agent sign formalizing the business relationship between the two. Since it’s a contract, it is legally binding, which means both you and your agent have a legal obligation to fulfill the duties that are stipulated in the agreement. By signing an Exclusive Buyer’s Representation Agreement, you agree to work exclusively with that particular agent and brokerage for an agreed-upon time period.
This might sound like you’re making a major commitment, but signing this agreement means that your agent and the brokerage promise to be fully committed to helping you find a home at a price you can afford, all while keeping your best interests in mind. Their loyalty lies with you, and not the seller, which means your agent will work diligently to ensure that you are top priority over any other party involved in the transaction.
Why Sign a Buyer’s Representation Agreement?
The idea of signing a contract and entering into a legally-binding agreement can sound daunting. But in the case of a buyer’s representation agreement, you’re actually being afforded with certain benefits that protect you throughout the home purchasing process.
By signing this agreement, you become a bonafide client. As a client, you are owed a fiduciary duty from your real estate agent and brokerage. A fiduciary duty is an obligation to act in the best interest of another party. For instance, a corporation's board member has a fiduciary duty to its shareholders, a trustee has a fiduciary duty to its trust's beneficiaries and a real estate agent has a fiduciary duty to his clients.
Without this signed agreement, your agent has no fiduciary duty to you, which means they don’t necessarily have the obligation to keep your best interests in mind when showing you homes or negotiating with a seller.
On the other hand, an Exclusive Buyer’s Representation Agreement means that your agent must disclose all pertinent information regarding any properties to you and negotiate on your behalf. Of course, agents are still obligated to treat all customers who do not have a signed buyer’s representation agreement in place with honesty and fairness.
Without a signed agreement, you are essentially a customer rather than a client, which means your agent doesn’t exclusively represent you. Instead, any pertinent information does not have to be kept confidential and can actually be shared with the seller. This obviously doesn’t allow your best interest to be upheld, which is why it’s very important for you to sign this type of agreement. This ensures that your agent works exclusively with you, and you agree to do the same.
In addition to benefiting from your agent’s fiduciary duty to protect your best interests in a real estate transaction, an Exclusive Buyer’s Representation Agreement will help you better understand the role your real estate agent plays in the home buying process. All services that are owed to you will be clearly outlined in the agreement and discussed in detail before you sign it.
This contract will also outline important details, such as the type of home that the agent will help you find, the geographical location of the home search, and the real estate agent’s commission that will be paid (typically by the seller) if and when a real estate deal is reached. Since your agent and brokerage are fully accountable to you and are obligated to disclose all relevant information, you can be sure that your best interests will be the number one priority throughout the home search, at the negotiating table, and at closing.
Do You Have to Sign an Exclusive Buyer’s Representation Agreement?
You don’t necessarily have to sign this contract to have an agent show you a few homes if the agent has agreed to do so without a signed agreement. Some agents are willing to show homes without an agreement in place, while others request to have an agreement signed before the first showing.
The agents at Franklin Homes Realty LLC require a signed agreement prior to showing you any properties. We feel this is the best way to protect both your interests and ours. However, no matter which agent you choose, you will be obligated to sign this agreement prior to putting in an offer on a home.
Generally speaking, it’s in your best interests to sign an Exclusive Buyer’s Representation Agreement right from the get-go so that both you and your agent are on the same page about what is expected of the relationship.
It should be noted that you are under no obligation to actually make a purchase. Nowhere in a buyer’s representation agreement does it say that you must make a purchase as part of the contract details.
Can You Break the Exclusive Buyer's Representation Agreement?
Many buyers might be hesitant to sign a buyer’s representation agreement because they don’t want to be bound to one particular agent and brokerage for a certain amount of time. The good news is that these agreements can be severed before the expiration date if both parties consent.
As a buyer, you don’t really have to worry about an agent refusing to agree to end the relationship if you no longer want any part of it. The majority of buyer agents are fine with ending a buyer’s representation agreement early in the process if the buyer wants out.
The Bottom Line
While exclusive buyer’s representation agreements sound very formal and contain a ton of legal jargon, they are really drafted to protect you and allow for a more positive and effective home buying experience.
While they will have to be signed eventually if you plan to put an offer on a home, you would be better off having a signed agreement in place right from the start to ensure that your best interests are upheld from start to finish. To learn more about Buyer's Representation, contact Tammie White, the Broker/Owner of Franklin Homes Realty LLC at (615) 495-0752.
Call Franklin Homes Realty LLC today at (615) 495-0752!
About Tammie White, Franklin TN REALTOR®
Hi There! I am the founder and owner of Franklin Homes Realty LLC and the creator of all of the content on this website. Thanks for taking the time to read this article. Please feel free to leave a comment in the message box below, or share this article on social media with someone who might benefit from it. I appreciate your time on this site and am always open to suggestions and ideas from our readers. Feel free to contact me anytime at Tammie@FranklinHomesRealty.com.