Types of Buyer-Broker Agreements and Their Benefits

Embarking on the journey of buying a home involves careful navigation through the intricate realms of real estate transactions. Central to this process is the relationship between a homebuyer and their real estate agent, governed by various agreements that define the scope, responsibilities, and financial considerations. In the real estate landscape, there are three distinct Buyer-Broker Agreements: Exclusive Right to Represent Agreements (ERAs), Non-Exclusive Right-to-Represent Agreements, and Non-Exclusive Not-for-Compensation Agreements. Each agreement brings a unique set of advantages and considerations, catering to different needs and preferences of homebuyers. Let’s delve further into these different agreements!

  1. Exclusive Right to Represent Agreements (ERAs):
    • This is the most common form of Buyer-Broker Agreement. In an Exclusive Right to Represent Agreement, the buyer agrees to work exclusively with the designated real estate broker or agent. This means that the buyer cannot use another broker to find a property during the term of the agreement, and the broker’s commission is guaranteed. However, if another party compensates the broker (i.e., from the Seller’s broker via commission split), then this obligation is waived to the extent of the payment received from the other party. Further, if the buyer purchases a property during the term of the agreement, regardless of whether the agent found the property, the agent/broker is entitled to the agreed-upon commission. 
    • Beneficial Scenario: A buyer who is looking for a specific property in a competitive market may benefit from an Exclusive Right to Represent Agreement. In a hot real estate market where desirable properties are scarce and time is of the essence, having a dedicated agent working exclusively on the buyer’s behalf can be advantageous. If the buyer is looking for a property in a high-demand neighborhood, having an agent committed to finding the best options quickly can increase the chances of securing a desirable home.
  2. Non-Exclusive Right-to-Represent Agreements:
    • This agreement between the buyer and broker outlines the broker’s duties to the buyer, the dynamics between the broker and agent, and the buyer’s responsibilities. The buyer generally retains the flexibility to engage another broker, as long as the home in question wasn’t suggested by the original broker. Typically, these agreements are irrevocable, except for specific reasons.
    • Beneficial Scenario: This type of agreement might be beneficial for a buyer who is in the early stages of the home-buying process and wants the flexibility to explore multiple options with different agents. For instance, a buyer might be considering homes in various neighborhoods and want to work with different agents who specialize in those areas. The Non-Exclusive Right-to-Represent Agreement allows the buyer to engage multiple agents.
  3. Nonexclusive Not-for-Compensation Agreements:
    • In this type of buyer-broker agreement, the broker’s responsibilities to the home buyer, often delegated to the broker’s agent, are detailed. The document also clarifies the relationship between the agent, broker, and the buyer’s obligations. Notably, this contract explicitly states that no compensation will be paid to the broker. It allows the buyer the option to engage multiple brokerages simultaneously, and either party retains the right to terminate the agreement at any time.
    • Beneficial Scenario: Imagine a situation where a buyer is in the initial stages of exploring the real estate market and hasn’t committed to working exclusively with a single agent. In this case, the Nonexclusive Not-for-Compensation Agreement provides flexibility without a financial commitment. The buyer may be uncertain about their preferences, and the agreement allows them to engage with multiple brokers without the obligation of compensating any one of them.

Have questions about Buyer-Broker Agreements? Listen to our recent podcast episode that delves further into the litigation affecting buyer-broker agreements and how you can use them in the real estate industry!