Buyer Broker Agreements / Buyer Agency

To understand the current state of buyer broker agreements, we need to take a step back and examine their history.

History
For a long time, two realtors were typically involved in a property sale. One was the Listing Agent, the person hired by the property owner to sell the home. When the owner contracted with the Listing Agent, the seller agreed to pay the brokerage a commission upon the property’s sale.  

The other person was the agent who found the buyer. This agent could work for the same brokerage as the Listing Agent or a different one. However, only the Listing Agent had a contractual obligation to perform specific duties. The listing brokerage agreed to shar the commission with the brokerage of the agent who found the buyer. Despite this arrangement, the buyer’s agent was actually a sub-agent to the Listing Agent. In reality, the buyer was not directly represented by anyone.

When buyers realized the agent they trusted to secure the best deal had no responsibility to act solely in their interest, they sought a new solution. A New York Times article from September 19, 1993, noted:

“TIME was, if you went looking for a house, you went to a broker, who consulted listings and showed you what he or she thought you’d be most likely to buy. You probably didn’t know, and almost certainly would never be told, that that broker didn’t represent you in any way — that he or she was legally and contractually obligated to represent solely the interest of the seller in any transaction that might occur. Times change. After several lawsuits, laws and regulations were changed and buyer agency began. These days, more and more home seekers are also seeking representation of their own, brokers or agents who will represent the buyer in the deal…”

Development of Buyer Agency
As a result of a lawsuit, regulatory agencies and the NAR created buyer agency.  Because the sub-agent was taken away, the seller through the listing agreement, agreed to pay the buyer’s brokerage’s commission just as they had been paying the subagent. To ensure buyer agents acted in their clients’ best interests, a contract was created outlining the brokerage’s obligations to the buyer.

Let’s pause to review the eight elements required to form an enforceable contract (not legal advice, but a principle covered in business courses):

1. Offer

2. Acceptance

3. Awareness

4. Consideration

5. Capacity

6. Beginning date

7. Ending date

8. Legality

Initially, buyer broker agreements often lacked critical details or simply referenced “per MLS” wen it came to fees. Some agents even told clients their services were “FREE.” Over time, efforts were made to align buyer broker agreements with legal standards. In some jurisdictions, buyers were required to sign documents coTo bring clarity, contracts were tightened. Agents could no longer claim services were free since their payment came from the seller. This led to questions about fairness.

Modern Buyer Agency
Sellers began asking why they should pay for someone not obligated to act in their best interest. Some sellers were unaware that fees were negotiable and filed lawsuits claiming deception. These lawsuits later consolidated into a class action, which resulted in a settlement.

Under the settlement, buyers must sign a contract with the brokerage for representation. Sellers are not required to offer compensation to the buyer’s agent, and buyers must be informed they can negotiate the buyer agency fee. Buyers may request the seller cover part or all of the fee, but they must understand that, if the seller declines, they are responsible for the payment.

Additionally, MLS entries must indicate what the seller is willing to pay. This measure prevents agents from showing clients only listings offering higher commissions.

If you choose to use an agent or Realtor, you must sign a buyer broker agreement. Don’t worry—it’s fully negotiable. You can structure it for one day, one house, or any other terms you prefer, as long as it includes all the elements of an enforceable contract.