One of the biggest changes in how we do business locally came this August. All Realtor®s representing buyers, must have their buyers sign a compensation agreement prior to seeing properties.
How is this different from before?
In many places across the country, this was already common. Similar to representing a seller and having them sign an exclusive right to sell listing agreement. Locally, however, most brokers did not require an agreement to be in place for buyers. Buyer’s agents would hope that the buyer they had worked with for weeks or months, or years, would buy a house through them when the time came. Thus, allowing that agent to get paid.
Now, your buyer’s agent will ask you to sign a buyer compensation agreement in advance that outlines how they get paid and by whom. This agreement can be either Exclusive or Non-Exclusive.
Exclusive Compensation Agreement
The exclusive agreement says that the buyer broker is owed compensation if you purchase any house in the timeframe of the contract. Therefore, I would recommend this option if you already know, like & trust the agent you’re working with. This does not only apply to houses you see with them. So if you sign this agreement, you should plan on only working with one agent. It also applies to homes for sale by owner. So, if you find a house that you like that isn’t listed with a brokerage, you should involve your agent in the process from the beginning. Keep in mind there is no minimum timeframe for this contract. It can be a day, a few weeks, a year. Whatever is agreed upon between you and your buyer’s agent.
Non-Exclusive Compensation Agreement
This agreement allows buyers to work with multiple agents if they’d like and also to purchase a house for sale by owner without representation. It basically says that if the buyer’s agent that they signed the agreement with shows them the house, and they purchase it, then that agent is owed compensation. Because of that, this one includes a list of houses you’ve seen together so that there isn’t any confusion as to which properties apply. This can be a great option if you and your agent are just getting to know each other and aren’t sure yet if it’s a good fit. This is also a great option for buyers that have no resources to pay their buyer’s broker for representation if the seller can’t or won’t. Because it does allow for them to purchase a house without representation if they choose. Like a for sale by the owner. This is also a great choice to start with. Maybe see a few houses and then if you are ready to commit to your agent you could sign the exclusive agreement next.
There isn’t a right answer for which one you choose. The key is understanding your options and discussing them with any buyer’s agents you are considering hiring. Ask lots of questions to make sure you feel comfortable with your choice. And if you are apprehensive, ask to start with a short contract, maybe just a week, and then see how it goes. You can always decide to extend it.
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