So, what are Exclusive Buyer Brokerage Agreements?
The Florida Association of Realtors (FAR) defines an exclusive buyer brokerage agreement (also known simply as an exclusive buyer brokerage) as "an employment contract between a buyer and a real estate licensee." Stephen H. Kader, Far’s vice president of contracts and associations, further explains "Essentially, an exclusive buyer brokerage agreement authorizes a real estate licensee to work as the buyer’s advocate in the purchase of property."
FAR members and brokers can purchase the Sample Exclusive Buyer Brokerage Agreement directly from the Association, and the price comes in at about $35. The FAR Exclusive Buyer Brokerage Agreement MLS Addendum is also available for $11.95.
By authorizing the real estate agent as the buyer’s advocate, the exclusive buyer brokerage agreement replaces "the common practice of allowing a buyer’s broker to represent a buyer without a written employment agreement . " As far as negotiating on your behalf, the exclusive buyer brokerage agreement expressly obligates the buyer’s agent to represent the buyer in all negotiations. On the flip side, the exclusive buyer brokerage agreement allows the listing agent to reject any contract negotiated by the buyer’s agent.
Since it does create a legal obligation to the agent, consumers may be hesitant to immediately sign an exclusive buyer brokerage agreement. Despite the legal implications of signing an exclusive buyer brokerage agreement, they are in the best interest of the client. Exclusivity for the buyers’ agent means a client doesn’t have to worry about whether or not their agent is doing everything they can for them, and if he or she is legally obligated to do so. In the same vein, listing agents have an extra tool to use when negotiating with home buyers—they have the ability to refuse contracts that are proposed by a buyers’ agent without the use of an exclusive buyer brokerage agreement.
The Major Components of Exclusive Buyer Brokerage Agreements in Florida
An exclusive buyer brokerage agreement is a legally binding contract between a homebuyer and their real estate agent or broker. While the specifics of these agreements may vary between states and types of agreements, most exclusive buyer agreements in Florida include similar key features and elements.
Representation
One of the primary functions of an exclusive buyer brokerage agreement is to establish a formal relationship between you and your broker. Your agent becomes your legal representative when you sign this agreement, resulting in a mutually binding contract. In Florida, brokers must provide legally required disclosures and adhere to licensing requirements, which include verbal and written agreements. Exclusive buyer brokerage agreements in Florida most often fall under the agency representation as defined by Section 475.01(12), F.S.
Obligations
Exclusive buyer brokerage agreements define the legal duties of a real estate agent. Under an exclusive buyer brokerage agreement in Florida, agents have a duty to: Furthermore, exclusive buyer agreements require agents to use skill, care, and diligence while assisting their clients to find a property.
Compensation
In an exclusive buyer brokerage agreement, you must agree to compensate the agent for services. Buyers should negotiate the commission rate and which services will be provided before signing the contract. Compensation is generally calculated as a percentage of the purchase price. Listing agents sometimes offer a commission to buyer’s agents for bringing qualified buyers. As part of the contract, the buyer agrees to pay the difference if their purchase does not exceed the buyer’s agency commission.
Duration
Florida’s exclusive buyer brokerage agreements typically have a specified termination date, although they may be extended for additional periods with each party’s consent. Most contracts last from three to six months. Exclusive buyer agreements distinguish themselves from general buyer representation agreements in this regard, as general agreements do not have specified terms.
The Legal Perks of an Exclusive Buyer Brokerage Agreement
No agreement is to be entered into lightly. An exclusive buyer broker and their clients agree that their arrangement will be exclusive by signing a written agreement. This "marriage contract" can protect both parties when it comes to the real estate buying process in Florida. Buyers should understand that an exclusive buyer brokerage agreement will give them a lot of protection. This agreement will provide you the right to have commitment from the broker in representing your best interests exclusively. The broker cannot represent that buyer is working with another agent at the same time. The law makes it so that the broker must put in a commitment to represent the buyer. Another benefit is that the buyer is given guidance throughout their buying process. It spares the time and hassle of trying to "date" multiple agents at once, with the fear that one hardworking agent will be "dropped" in favor of another.
Exclusive Buyer Brokerage vs. Non-Exclusive Buyer Brokerage Agreements
The major factor that distinguishes one form of buyer’s agreement from another is whether the agreement provides the broker with an exclusive right to represent the buyer (also known as an exclusive contract) or whether the contract allows the buyer to work with multiple brokers at the same time and not prevent them from purchasing a property from a seller with whom no broker represented the buyer (also known as non-exclusive contracts).
Exclusive Buyer Brokerage Agreements: Florida law does not require a buyer to enter into a contract with a buyer’s broker. However, you must be aware that in Florida, a buyer entering into an Exclusive Buyer’s Brokerage Agreement, is entering into a binding contract with the broker. The Exclusive Buyer Brokerage Agreement requires the buyer to make a serious commitment to work with that broker who will, in turn, make a serious commitment to search for the right property for the buyer.
Generally, in an exclusive buyer’s brokerage agreement, the compensation arrangements between the buyer and the broker are set forth in the contract. Compensation can be determined by a percentage of the sales price or an hourly basis. In an exclusive buyer’s brokerage agreement, if the buyer finds a property for which they want to submit an offer, they must submit it through their agent. The buyer broker must be compensated by the seller, the property owner or anyone else in order for the buyer to break the one to three year contract. Many buyers choose an exclusive contract with their buyer broker because it allows them to receive full representation of their interests.
Unilateral Agreement: Unlike the exclusive buyer’s brokerage agreement, the non-exclusive agreement is also referred to as a "unilateral buyer’s agreement" meaning that the buyer’s broker, once hired, still has to distribute "commissioned" properties to the buyer whether he or she is under contract with the seller or not. In a unilateral agreement, there is no guarantee or expectation that the buyer’s broker will be compensated. The buyer, thus, may not be fully represented in the purchase. The non-exclusive buyer’s agreement does not lock buyers into one real estate agent. He or she can work with any number of agents but without the representation of a fiduciary.
The unilateral "non-exclusive" agreements are generally short-term and less strict than exclusive contracts. They are commonly used if additional time is needed when searching for properties. However, the drawback is that buyers do not have an obligation from their agent to work only with them and seek out a commission from a seller. The buyer must also find out if a listing agreement has been entered into with the owner of the property of interest and be prepared to pay the commission based on the contracted terms.
How to Enter into an Exclusive Buyer Brokerage Agreement
To enter into an exclusive buyer brokerage agreement, a prospective buyer must first select a broker with whom to work exclusively. This can be done through referrals from friends, family, or colleagues or by searching for brokers online. When interviewing potential brokers, the buyer should consider the experience and reputation of the broker, as well as the types of properties that the broker typically handles. Once the buyer has selected a broker, the next step is to negotiate the terms of the agreement. This includes the duration of the agreement, the commission rate , and any other provisions that the buyer and broker would like to include in the agreement.
The buyer should then review the proposed agreement carefully to ensure that all of the provisions are to their satisfaction. It is important for the buyer to understand all of their rights and obligations before signing the agreement. If there are any provisions that the buyer is not comfortable with, they should negotiate with the broker to modify those provisions. Once the buyer and broker have agreed on all of the terms, the buyer should sign the agreement and pay any initial fees that may be required. The broker will then begin searching for a property that meets the buyer’s criteria.
Exclusive Buyer Brokerage Agreement Pitfalls & How to Avoid Them
One of the most common complaints I see from buyers early in their home searching process, is feeling stuck or limited in their options because they have worked with more than one agent, and have not entered into any exclusive buyer brokerage agreements. As noted above, without an exclusive buyer brokerage agreement in writing, a buyer is not entitled to any compensation for the services performed by any broker. This is the case even if you are paying your agent a non-refundable retainer up front. Unless you are entering into an exclusive buyer brokerage agreement, your agent does not have to give you a dime back should you choose to sever ties.
Buyers and brokers should be careful not to mistake the universal buyer representation agreements with the one-off, property-specific purchase contracts that are virtually ubiquitous in this industry. The property-specific purchase contract is just that, specific to each property. Your buyer representation agreement is not tied to any one property, but rather it covers your relationship with the buyer and all of the properties they may or may not choose during this search.
Agents should also be aware that using these types of standard, pre-printed acceptances and rejections are not appropriate when rejecting all offers simultaneously. This is a common misunderstanding in the industry. A rejection of all offers must be clear and unequivocal to cut off your agent’s right to a commission and/or duty to perform. Other agents doing the same thing, does not absolve your agent’s duty and lenders usually do not want to take that risk. That being said, in this fragile market, buyers and sellers alike should consider the pros and cons to rejecting all offers. Sometimes it may be better a counter-offer and give buyers one more chance.
Another common pitfall for buyers when signing these agreements are when their agent misrepresents themselves in offering to represent them for free. Not all industries allow such behavior anymore. It is unethical. All the research indicates that the antiquated practice of splitting commissions is becoming rarer and rarer. Agent commission rates continue to fall as well. While there are sound business reasons to reduce and/or eliminate client costs for certain services, consumers have been misled that they will be represented for free. More transparent and ethical industries will have to consider how they equip their best agents to offer their services at reasonable prices without undercutting the core values of their brand.
Many buyers think that they are signing a purchase contract when they are really signing an exclusive buyer representation agreement. It is a key distinction in the law that buyers should be aware of because they are entitled to have an attorney review the agreement prior to signing. A buyer representation agreement is not a purchase contract. It does not obligate the buyer to enter into a purchase contract at all. Agents and buyers should not conflate the two agreements and mistakenly think that they are part of the same transaction. A breach of the exclusive buyer representation agreement will not necessarily cause a breach of the purchase contract purchase contract and vice versa.
Exclusive Buyer Brokerage Agreement FAQs in Florida
How long is an exclusive buyer brokerage agreement in Florida valid for? An exclusive buyer brokerage agreement does not have to be open-ended. Many times they are for a period of six months, but they can definitely be longer or even shorter in duration.
Can my buyer sign more than one exclusive buyer brokerage agreement at the same time? Yes. However, at the time the buyer goes to actually write an offer on a home, only one agreement usually is enforceable. The premise behind an exclusive buyer brokerage agreement is that it will protect the buyer’s agent from getting cut out of the commission, if he or she finds a property where the buyer decides to transact.
My buyer told me my commissions were too high, so he signed another exclusive buyer brokerage agreement with another agent. Is that legal? Usually, yes. Just because a buyer signs a second exclusive buyer brokerage agreement with a new agent does not mean that a court would agree that the first agreement is invalid. The rule of thumb is that a buyer has the right to contract with whomever he or she pleases, and the brokerage firm that first signed the exclusive buyer brokerage agreement gets the commission.
I took my buyer to a couple of homes, then she decided to purchase a home without involving me. Can I get compensated by the seller’s agent or seller? Under most circumstances, unlikely . When you have an exclusive buyer brokerage agreement with a buyer, you should include specific conditions for when you would be compensated. For example, what happens if your buyer goes to an open house, and the listing agent speaks with her. Will you still be compensated under those circumstances? What if your buyer sees a for sale by owner sign, and negotiates the purchase of the home without your knowledge? Will you still be compensated for that transaction?
The form that I use says I get automated emails each time my buyer goes to see a property. Does that really protect me from not getting my commission for showing the property? No. It’s a deterrent. If the seller’s agent or listing agent or seller obtains a direct family member (such as a child) to purchase the property, then your broker may not get the commission.
Does the exclusive buyer brokerage agreement have to be signed using electronic means or may it be signed by hand? Under Florida Real Estate Commission rules, the documents must be signed using an electronic means that has the ability to verify the identity of the persons who signed the documents. This would exclude typed signatures on the documents. In addition, electronic signatures may not be applied anytime unless the person to whom they belong has given consent for them to be used.