Buyer agency or the buyer brokerage is a practice of brokers in real estate and the agents that represent the buyer while dealing with real estate transactions instead of by simply representing the seller either as a sub agent or directly.
In many states within the united states and provinces in Canada, until 1990, the buyers who worked with a real estate broker agent for finding a house were customers of the brokerage and since by most common law, most of the states the broker only represented the seller. It is since the 1990s that many states passed a law to create the buyer’s agency.
The buyer agency is able to exist exclusively or in a full serviced company by being able to offer the buyer agency to those buyers who end up becoming a client. The buyer would need to agree to forms of dual agency if they would like to buy a home from a company that represents the seller.
Today, if the buyer is working with brokers other than the brokerage that has listed the property, they may decide to enter into an agreement that is a buyer-brokerage agreement in order to be represented. There are some times where it is permitted by law that dual agency can come into play where the broker is able to represent a buyer. Whenever a buyer doesn’t want to enter into this type of agreement, then they will remain a customer of the broker who is a sub agent of the seller’s broker.
With there being an increase in the buyer agency practice in the United States, since the 1990s, in many areas, agents who were acting under their broker were actually able to represent the buyer in the transaction with a written agreement which is quite similar to a listing agreement that is between the seller and the broker. The real estate licensee when entering into an agreement with the buyer, will agree to work just for them and in return the buyer is agreeing to exclusive representation.
It is at this point that the real estate brokerage will owe the buyer the duties on:
- Disclosure to other parties in the transaction that has been engaged upon as a buyer’s agent.
- Loyalty to the buyer by acting in the buyer’s best interest.
- Confidentiality by opting to not disclose facts that may influence the ability to be able to negotiate all the best terms.
The broker will negotiate the price and terms on the buyer’s behalf and will prepare the standard real estate purchase contract by filling in the needed information on the contract form. The buyer’s agent will then act as the fiduciary for the buyer.
Just like the listing agreement with a seller, the agreement with the buyer must have a start and end date as well as how the broker will be paid. In addition, it also needs to spell out the obligations and duties of all parties. This agreement will need to specify how conflict of interest will also be handled as it may occur when the buyer is represented by a conventional firm and becomes interested by a seller who is represented by that firm.