A buyer brokerage or buyer agency is the practice of real estate brokers and their agents representing a buyer in a real estate transaction rather than, by default, representing the seller either directly or as a sub-agent. In the United Kingdom and Australia, the most common term is buying agent.
In most U.S. states and Canadian provinces, until the 1990s, buyers who worked with an agent of a real estate broker in finding a house were customers of the brokerage, since, by most common law of most states at the time, the broker represented only sellers. It is only since the early 1990s that states passed statute law to create buyers' agency.
Buyer agency can exist exclusively (where a brokerage firm chooses to only represent buyers and never sellers, as an exclusive buyer agent) or, in a full-service company, by offering buyer agency to buyers who become clients. Buyers would have to agree to some form of dual agency in the event that they wished to buy a home which that company has listed for sale and for which it represents the seller.
Today, if the buyer is working with a broker other than the brokerage listing the property, he or she may choose to enter into a buyer-brokerage agreement to be represented. (In some cases where dual agency is permitted by law, even the listing broker may represent the buyer). If the buyer does not enter into this agreement, he/she remains a customer of the broker who is then the sub-agent of seller's broker.
Buyers as clients
With the increase in the practice of buyer agency in North America, especially since the late 1990s in most areas, agents (acting under their brokers) have been able to represent buyers in the transaction with a written "buyer agency agreement" not unlike the "listing agreement" between brokers and sellers (often referred to as a sellers agency). The real estate licensee, upon entering into a written agreement with a buyer, agrees to work solely for the buyer and in return, the buyer agrees to exclusive representation.
At this point, a real estate brokerage owes the buyer the duties of:
- Loyalty to the buyer by acting in the buyer's best interest.
- Confidentiality by not disclosing facts that could influence the buyers ability to negotiate the best terms.
- Disclosure to other parties in the transaction that the licensee has been engaged as a buyer's agent.
The broker negotiates price and terms on behalf of the buyers and prepares standard real estate purchase contract by filling in the blanks in the contract form. The buyer's agent acts as a fiduciary for the buyer
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Buyer agency agreements
Like the listing agreement with sellers, the agreements with buyers must have a starting and ending date as well as specifying how the buyer's broker is to be paid (by the seller or by the buyer himself). In addition, it should spell out the duties and obligations of all parties.
The agreement should also specify how a conflict of interest will be handled. A conflict of interest can occur when a buyer represented by a conventional firm becomes interested by a seller who is also represented by that firm.
Another potential conflict of interest can occur when the same firm finds itself representing two buyers who are competing for the same property.
A real estate agency should have a written, objective policy for how it will handle conflicts of interest and this policy should be disclosed to any potential client in advance.
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