Key Points in This Article:
Exclusive Representation and Fiduciary Duty: The Buyer’s Agency Representation Agreement ensures that your Realtor’s Brokerage is committed to representing you exclusively, granting you fiduciary duty. This means my Brokerage and I will act solely in your best interest, providing services such as property searches, offer negotiations, and paperwork assistance.
Clear Outline of Services and Compensation: The agreement details the scope of services the Brokerage will provide and specifies how they will be compensated, typically through a commission paid by the seller. This clarity helps avoid any misunderstandings about the roles and payment structure.
Client vs. Customer Benefits: As a client, you are afforded a range of fiduciary duties including loyalty, confidentiality, disclosure, obedience, reasonable care, and accounting. These protections ensure that your interests are prioritized and safeguarded throughout the home-buying process.
Table of Contents
What Is a Buyer's Agency Representation Agreement?
The Buyer’s Agency Representation Agreement is a formal contract between you (the homebuyer) and my brokerage which I represent as an Executive Broker. This document outlines the responsibilities and duties of the Brokerage and its representatives (vis-a-vis, me) and ensures we are legally bound to act in your best interests throughout the home-buying process.
The agreement that I send to my clients was drafted by attorneys for the Arkansas Realtors Association and is the official document for all Realtors in Arkansas. It includes a number of sections which formally outline the fiduciary relationship between me and my clients, such as:
- Exclusive Representation: The brokerage commits to representing you exclusively, which means they will not work against your interests and grants you fiduciary duty.
- Scope of Services: It details the services the brokerage will provide, such as finding properties, negotiating offers, and assisting with paperwork.
- Compensation: The agreement specifies how the brokerage will be compensated, usually through a commission that is typically paid by the seller.
- Duration: The agreement sets a time frame during which the brokerage will represent you, providing a clear timeline for your home search.
Upon completion, this document establishes you as a CLIENT, not a customer…
What's the Difference Between a Client and a Customer?
In short, a Client is afforded Fiduciary Duty which includes Loyalty, Confidentiality, Disclosure, Obedience, Reasonable care and diligence, and Accounting; A customer is only afforded honesty and fair dealing.
The National Association of Realtors does an excellent job of describing these benefits ascribed to Clients, so I will shameless steal their content to share with you here. Note “Principal” in this context refers to you as a Client:
- Loyalty
A duty of loyalty is one of the most fundamental fiduciary duties owed by an agent to his principal. This duty obligates a real estate broker to act at all times solely in the best interests of his principal to the exclusion of all other interests, including the broker’s own self-interest. A corollary of this duty of loyalty is a duty to avoid steadfastly any conflicts of interest that might compromise or dilute the broker’s undivided loyalty to his principal’s interests. Thus, a real estate broker’s duty of loyalty prohibits him from accepting employment from any person whose interests compete with, or are adverse to, his principal’s interests.
A classic example of breach of this duty of loyalty by a real estate broker is a broker who purchases property listed with his firm and then immediately resells it at a profit. Such conduct ordinarily is perfectly appropriate and lawful by persons acting “at arm’s length.” But a fiduciary will be deemed to have “stolen” a profit opportunity rightfully belonging to his principal and thus to have breached his duty of loyalty.
- Confidentiality
An agent is obligated to safeguard his principal’s confidence and secrets. A real estate broker, therefore, must keep confidential any information that might weaken his principal’s bargaining position if it were revealed. This duty of confidentiality precludes a broker representing a seller from disclosing to a buyer that the seller can, or must, sell his property below the listed price. Conversely, a broker representing a buyer is prohibited from disclosing to a seller that the buyer can, or will, pay more for a property than has been offered.
Caveat: This duty of confidentiality plainly does not include any obligation on a broker representing a seller to withhold from a buyer known material facts concerning the condition of the seller’s property or to misrepresent the condition of the property. To do so would constitute misrepresentation and would impose liability on both the broker and the seller.
- Disclosure
An agent is obligated to disclose to his principal all relevant and material information that the agent knows and that pertains to the scope of the agency.
The duty of disclosure obligates a real estate broker representing a seller to reveal to the seller:
- All offers to purchase the seller’s property.
- The identity of all potential purchasers.
- Any facts affecting the value of the property.
- Information concerning the ability or willingness of the buyer to complete the sale or to offer a higher price.
- The broker’s relationship to, or interest in, a prospective buyer.
- A buyer’s intention to subdivide or resell the property for a profit.
- Any other information that might affect the seller’s ability to obtain the highest price and best terms in the sale of his property.
A real estate broker representing a buyer is obligated to reveal to the buyer:
- The willingness of the seller to accept a lower price.
- Any facts relating to the urgency of the seller’s need to dispose of the property.
- The broker’s relationship to, or interest in, the seller of the property for sale.
- Any facts affecting the value of the property.
- The length of time the property has been on the market and any other offers or counteroffers that have been made relating to the property.
- Any other information that would affect the buyer’s ability to obtain the property at the lowest price and on the most favorable terms.
Caveat: An agent’s duty of disclosure to his principal must not be confused with a real estate broker’s duty to disclose to non-principals any known material facts concerning the value of the property. This duty to disclose known material facts is based upon a real estate broker’s duty to treat all persons honestly and fairly. This duty of honesty and fairness does not depend on the existence of an agency relationship.
- Obedience
An agent is obligated to obey promptly and efficiently all lawful instructions of his principal. However, this duty plainly does not include an obligation to obey any unlawful instructions; for example, an instruction not to market the property to minorities or to misrepresent the condition of the property. Compliance with instructions the agent knows to be unlawful could constitute a breach of an agent’s duty of loyalty.
- Reasonable care and diligence
An agent is obligated to use reasonable care and diligence in pursuing the principal’s affairs. The standard of care expected of a real estate broker representing a seller or buyer is that of a competent real estate professional. By reason of his license, a real estate broker is deemed to have skill and expertise in real estate matters superior to that of the average person. As an agent representing others in their real estate dealings, a broker or salesperson is under a duty to use his superior skill and knowledge while pursuing his principal’s affairs. This duty includes an obligation to affirmatively discover facts relating to his principal’s affairs that a reasonable and prudent real estate broker would be expected to investigate. Simply put, this is the same duty any professional, such as a doctor or lawyer, owes to his patient or client.
- Accounting
An agent is obligated to account for all money or property belonging to his principal that is entrusted to him. This duty compels a real estate broker to safeguard any money, deeds, or other documents entrusted to him that relate to his client’s transactions or affairs.
If you desire representation that has all of these qualities, the Buyer’s Agency Representation Agreement grants them to you and legally binds your representation (me) to provide them.
Why Does This Document Exist?
This document has been a standard of doing business with integrity for a very long time – I’ve used it or over a decade now. That being said, the last year or so has brought about several news stories about court cases fought around disclosure, representation, and fair dealing, and I’ve been getting questions not only from my clients, but also from my agents and students.
These news stories highlight the push to ensure buyers really understand the ins and outs of these agreements as consumer advocates called for better protection and education for those navigating the tricky world of real estate.
Several states have or are currently rolling out new rules to boost transparency and protect homebuyers. Arkansas, fortunately, has been ahead of the curve on most all of the changes happening across the country and there has been very little practical change for Agents and Brokerages who have been following the rules and doing business with integrity all this time.
Putting It All Together
Ultimately, the Buyer’s Agency Representation Agreement is your ticket to a seamless and protected home-buying process. This agreement not only outlines the responsibilities and duties of your real estate agent but also ensures you receive the highest standard of service and protection throughout your home-buying journey. By formalizing this relationship, you gain a dedicated advocate who prioritizes your interests above all else, providing you with loyalty, confidentiality, and expert guidance every step of the way.
So, If you want a professional who is committed to acting solely in your best interest, look no further. Let’s make your home-buying experience smooth, informed, and successful—starting with a solid foundation of trust and representation!