Buying a home comes with a lot of responsibilities: You need to figure out the right community, the right size of house, the location, and especially the price. You have to negotiate with sellers and real estate agents. To cut down on the time it takes to do this, you might want to hire a real estate broker, otherwise known as a buyer's broker, to represent you and help you find a home. The broker usually has an agent to help him or her with this task.
If you want to get a buyer's broker, you'll want to know about the three most common buyer-broker contracts and what they entail.
To avoid problems, the buyer and broker enter into a contract defining the legal relationship. This contract explains the duties and responsibilities of the parties and sets out exactly what services the broker will provide. There are several types of buyer's broker real estate agreements representing the nature of the relationship between the buyer and the broker. These contracts can generally be provided by the broker in preprinted "fill-in-the-blank" forms adapted to the laws of the particular state.
Nonexclusive not-for-compensation contracts
This type of contract describes the broker's duties and obligations to the home buyer, generally to be performed by the broker's agent. It also outlines the relationship between the agent and the broker and the buyer's responsibilities.
This contract specifies there is no compensation to be paid to the broker. Other common components include that the buyer can retain more than one brokerage and either party can revoke the contract at any time.
Nonexclusive right-to-represent contracts
This arrangement defines the broker's responsibilities to the buyer, the relationship between the broker and the agent, and the buyer's obligations. It provides for compensation to be paid to the broker if the broker proposes the house the buyer decides to buy or otherwise represents the buyer.
If another party pays a commission to the broker, this obligation is removed. Additionally, the buyer is typically able to buy a home through another broker as long as that home was not proposed by the previous broker. Usually these agreements may not be revoked except for specified reasons.
Exclusive right-to-represent contracts
This is the most common contract between home buyers and brokers. This agreement outlines the obligations of the broker, the broker-agent relationship, and the responsibilities of the buyer. What distinguishes this contract is the buyer may not retain more than one broker to assist him or her. It sets forth the commission amount to be paid to the broker, which is owed even if the buyer finds the house herself or another broker does so. But if another party pays the broker the commission, the buyer doesn't have to.
In comparison to nonexclusive contracts, which are usually for one or two months, exclusive agreements might run from several months to a year and generally cannot be revoked except for specified reasons.
Making the choice
The key elements of the agreement are broker exclusivity, contract duration, compensation, and the description of the type of home the buyer is seeking. There is no "correct" answer for every buyer, so you should compare options. Speak with friends, family members, and professionals who are familiar with the process, and consult different brokers to see what they offer and whom you feel most comfortable working with.
Updated from an earlier version by Moshe Pollock