Working with an agent

What the agreement must contain

For agents who use a multiple listing service and work with buyers, the agreement must include a specific and conspicuous statement of the compensation or how it will be determined. Compensation must be objective, such as a flat fee, a percentage or an hourly rate, and not open-ended. The agent cannot receive more than the agreed amount from any source. And the agreement must state clearly that fees and commissions are fully negotiable and not set by law.

Beyond those required items, agreements vary. Look for the length of the term, the area or properties covered, the services promised, how to end the agreement, and what happens if you buy a home you found yourself.

Who pays

Your agreement sets what your agent will be paid. A seller may agree to pay some or all of it, but offers of compensation can no longer be posted on the multiple listing service. Sellers can still offer concessions such as help with closing costs. In practice, buyers now negotiate two things: what they agree to pay their agent, and what they ask the seller to contribute in the offer. Some loan programs limit seller contributions, so check with your lender before you write that request into an offer.

Choosing an agent

Interview at least two or three agents. Ask how many buyers they represented recently in your price range and area, how they communicate, how they handle multiple-offer situations, who covers for them when they are away, and which inspectors, lenders and attorneys they have worked with and why. Ask to see a blank copy of their buyer agreement before you meet so you can read it without pressure.

Other ways to buy

Some buyers work with a real estate attorney, especially in states where attorneys handle closings. Others buy new construction directly from a builder's sales office, where the person you talk to represents the builder. Buying without your own representative is possible, but you then handle pricing research, contract terms and deadlines yourself.

Dual agency

Dual agency means one agent or brokerage represents both buyer and seller. State laws differ on whether and how it is allowed, and it usually requires written consent from both sides. Ask what the agent can and cannot do for you in that situation, especially on price.

Before you sign anything

Interview at least two agents. Ask how they would help you find homes, price offers and manage deadlines, and how they handle compensation if the seller does not pay it. Read the written agreement before the first tour: the compensation term, the length of the agreement, the area or property types it covers, and how either side can end it. Remember that the amount is negotiable and not set by law. If you plan to buy without an agent, list the jobs you will take on and the professionals, such as a real estate attorney, you will hire instead.

Lawyers and leaving an agreement

Your agent negotiates and coordinates, but no one at a typical closing represents only you unless you hire your own attorney. In states where an attorney must attend closing, that attorney's main duty is usually to the lender. A buyer's own attorney can review the contract before you sign, clear title problems and check the closing documents, which is most valuable for estate sales, seller financing, co-buying or a title issue. Buyer agreements are contracts too, usually with the brokerage rather than the individual agent. If the relationship is not working, read the end date, whether the agreement is exclusive, how it can be ended and any protection period that could still require payment for homes you were shown. Ask the broker for a written release before signing with someone else. The guides on real estate attorneys and ending a buyer agreement cover the details.

How to use this file

Read the buyer agreement guide first; it includes a calculator to convert any fee into dollars at your price range. Then use the guides on interviewing agents, commission negotiation, dual agency and ending an agreement.