If you are working with a buyer’s agent in Colorado, you will probably be asked to sign a buyer’s agent agreement. This form has been approved by the Colorado Real Estate Commission, in other words, most of it was not written by your agent.
Singing the buyer’s agent agreement is the real estate equivalent of “going steady.” Your agent agrees to do the best job for you and give you what you need. In return, you agree to work only with your agent so that in the end, when you finally buy a house, your agent gets paid.
What is included in the buyer’s agent agreement?
This agreement has several sections.
The first three sections set the date, the type of representation (buyer agency), and what kind of firm you will be working with.
Next, it defines the terms included in the agreement including who is the broker, what is the property, who is the buyer.
The services and duties of a buyers’ agent are defined.
This section I think is particularly interesting. Unofficially, it explains that the broker must “look out for” the buyer. Officially, it says the buyer’s agent job is “Promoting the interests of Buyer with the utmost good faith, loyalty and fidelity.”
For example, if the broker knows something bad (or, officially “adverse material facts”) the buyer’s agent has to tell the buyer. The broker must submit work on time. Also, the broker is not allowed to reveal your secrets to the seller, like if the buyer is willing to pay more than they offered.
How does a buyer’s agent get paid?
There are several options outlined in the agreement: success fee, hourly fee, or retainer fee. The most common is the success fee. This mean, if you successfully buy a home, the agent gets paid. This is generally a percent of the purchase price of the home, and is only paid if you actually buy the house. For example, 2.8% of the purchase price.
Who pays the buyer’s agent?
Again, there are several options: buyer pays, listing broker or seller pays, or buyer pays whatever the seller doesn’t cover. The most common option is that the seller or listing brokerage pays. This was the option checked in my contract.
The rest of the agreement is pretty typical legal jargon.
No discrimination. What to do in case of a conflict. You can’t modify the contract.
Ask your agent how the contract can be terminated.
It also has a section that allows for additional provisions, meaning they are not standard and your agent probably added them. Our agent added a provision that says that we can terminate the agreement at any time with no penalties. I thought that was pretty unusual, and because of it, I didn’t have the usual twinge of “I sure hope I didn’t just miss the fine print where I signed away my first born.”
Remember, this is a legal document, and I am not an attorney. I am a first time home buyer sharing my experience. If you have questions about the agreement, or would like to meet a buyer’s agent, click here.