Help Agents Explain the Importance of Written Buyer Agreements

Being a Broker, Managing Your Agents, Compensation Plans for Real Estate Agents, Working With Buyers, Legal

By: Lee Nelson

The Sitzer-Burnett verdict spotlights the need for more transparency when it comes to compensation. Help agents understand the importance of the written buyer agreement and how to communicate its value to their clients.

The October 2023 Sitzer-Burnett verdict has reinvigorated the conversation around compensation and transparency among real estate professionals. The topic of written buyer agreements is top of mind in the real estate industry, and for good reason: due to the proposed settlement reached in the litigation brought on behalf of home sellers relating to broker compensation, all MLS participants providing services to a buyer will soon be required to enter into a written agreement before the buyer tours a property on the MLS.

The legally binding contract provides protection and transparency for the agent and consumer alike.

“It solidifies and quantifies the responsibilities of the broker to the buyer and the responsibilities of the buyer working with the broker,” states Lynn Madison, a REALTOR® in Schaumburg, Il. and CEO of Madison Seminars.

Rather than relying on a verbal conversation or assuming an understanding, a written agreement during a transaction spells out expectations, including the services provided to the buyer, the agency
relationship, how the brokerage is compensated, and how that system serves the buyer’s best interest.

In recent months, more brokerages have been working to relay the importance of written buyer agreements to help ensure clarity and transparency between the broker and the consumer. Consumers deserve transparency and need to understand the full breadth of the services provided by buyer brokers, which means agents need to be able to communicate their value effectively. Given the coming practice changes, Madison feels that brokers should train their agents now on the use and significance of written agreements and how to present them to consumers. close up image of two people shaking hands. There is a note pad with a black pen on it and a calculator

Make Sure Agents Understand the Buyer Representation Agreement

“They help the buyers, the sellers, the agents and the broker,” says Gretchen Pearson, president and owner of Berkshire Hathaway HomeServices Drysdale Properties in Danville, Calif. Written buyer agreements have been mandatory for her 900 agents since the start of the pandemic.

She started training agents on written buyer agreements before the pandemic hit, but when it did, real estate professionals in California were required to have buyers sign statements regarding exposure to the virus. Certain public health requirements had to be followed, like airing out the home for two hours before a property could be shown, and the statements acted as a binding contract stating the agents would adhere to those requirements.

Pearson said the written agreements formalized the relationship and the responsibilities of each party. When regulations around the pandemic lessened, Pearson says it was a natural fit to continue using written buyer agreements even after the COVID protocols were no longer required.

To help agents understand the importance of using these agreements, they need to understand them. Explain to agents that written buyer agreements are legally binding documents that are designed to protect both the consumer and the broker, and that they clearly outline the duties and responsibilities of both parties. With everything outlined clearly, the consumer will understand what they can expect the broker to do for them.

When thinking through the use of written agreements, consider these points:

  • Written agreements will soon be required before a buyer tours properties listed for sale in the MLS.
  • Expectations and duties are on paper for all to see and understand.
  •  Written agreements explain how consumers can work alongside agents to ensure ideal outcomes are reached.
  • Through transparency and clear expectations, the written agreement fosters trust and understanding for the consumer.
  • Consumers will better understand that many agents are self-employed, make a living helping people buy and sell their properties, and how they are compensated for these services.

Buyers will understand how the broker will be compensated for their work.

Explaining the Buyer Representation Agreement to the Consumer

Ensuring agents understand what’s in the agreement is the first step in helping agents realize the importance of using them. The next step is to quell any fears they have in presenting the written agreement to consumers by making sure they’re comfortable explaining the terms of the agreement.

To start, the agent should be able to explain to the consumer how the agreement protects both parties. The agent should also explain how a written agreement makes the homebuying process more transparent.

Madison is a frequent instructor of the Accredited Buyer’s Representative (ABR®) designation course for the National Association of REALTORS®, and she speaks to brokerages across the country about the topic. “The Accredited Buyer’s Representative (ABR®) course, which NAR is currently offering to members at no cost, includes many ideas and resources to help the agent articulate their value proposition in order to get the buyer representation agreement signed,” she adds.


What to Include in a Written Buyer Agreement

If your brokerage does not have a standardized written buyer agreement, reach out to the state or local REALTOR® association.

“There is no (national) standard buyer representation agreement just like there’s no national standard listing agreement for sellers either,” states Madison.

If neither your brokerage nor your local or state REALTOR® association has a written buyer agreement, consult legal counsel to draft an agreement to ensure it complies with your state laws and MLS policies.

Madison says a written buyer agreement should include the amount of compensation for the broker’s services, how the broker is compensated, as well as statements describing the agent and the consumer responsibilities. For example:

Agent duties may include:

  • Use diligence in its search to locate a property which is acceptable to the buyer.
  • Arrange showings of properties of interest to the buyer.
  • Disclose to buyer any known information that would materially affect the buyer’s decision ot acquire a property.
  •  Use professional knowledge and skills to assist a buyer in negotiating for the purchase of such property.
  • Assist the buyer throughout the transaction and to represent buyer’s best interests.
  • Protect any confidential information that a buyer discloses to the buyer’s agent.

Buyer duties may include:

  • Provide accurate and relevant personal information to buyer’s agent regarding buyer’s financial ability to purchase real estate.
  • Advise the buyer’s agent of any home offered for sale to the buyer where the buyer may have an interest in purchasing such property.
  • Submit through buyer’s agent any offer to purchase or contract on a property which was shown to buyer by buyer’s agent.

“A buyer representation agreement memorializes everything you have said to your buyer, and they can’t come back and say, ‘You didn’t say that,’” Madison comments. “Now, everyone knows what their responsibilities and duties are.”