What is a Buyer Broker Agreement?

(Jeff Sorg – OnlineEd)The buyer broker agreement, also known as buyer broker service agreement, exclusive buyer service agreement, etc.  is a contract for services between a buyer of real property and real estate broker. In the agreement, the buyer agrees to work with the broker for a specified period while locating and negotiating the purchase of a specified type of property. The agreement also provides that the buyer will pay a commission to the broker if the buyer purchases a property during the term of the agreement. The agreement can also require the buyer to reimburse the broker for expenses incurred during fulfillment of the contract. The commission the buyer agrees to pay in the buyer broker agreement is to be reduced by any fee paid to the buyer broker by the seller or other third party. The buyer broker contract can also, but seldom does, require the buyer to reimburse the broker for certain expenses incurred during the term of the contract.

The buyer broker agreement, also known as buyer broker service agreement, exclusive buyer service agreement, etc. is a contract for services between a buyer of real property and real estate broker.

In the usual case, under a typical Multiple Listing Service (“MLS”) cooperation arrangement, the listing  broker offers to pay the selling broker a specified percentage of sales price of the listed property when the sold property closes in escrow. This amount paid by the listing broker to the buyer broker is then subtracted from the amount the buyer agreed to pay, and the buyer pays only the difference. The amount offered through the MLS is a percentage of the total amount the listing broker was able to negotiate with the seller when entering into the listing contract.  There is no rule or law requiring the listing broker to disclose to the buyer broker the fee arrangement with the seller or that requires the listing broker to disclose to the seller the amount offered to the buyer broker. However, when the listing broker is a REALTOR®, the National Association of REALTORS® Code of Ethics requires the REALTOR® to discuss with and disclose to the seller the amount the listing broker is offering to the buyer broker. For example, if the listing REALTOR® accepts a listing at 7% and then only offers 2.5% to the selling broker, this needs to be disclosed to and agreed to with the seller. Under this type of MLS cooperation arrangement, although the money for the buyer broker’s fee is offered by the listing broker, it is really paid by the seller from the sale proceeds. It is important to note that the source of the fee does not determine the fiduciary responsibilities of the buyer broker. In other words, even when the seller pays the fee to the buyer broker, and absent an agreement allowing the broker to be a dual agent (one who represents both the buyer and seller), the buyer broker’s  fiduciary responsibility remains with the buyer.

A real estate broker can represent a buyer without a written agreement, but if the buyer is expected to pay the broker for services, then the broker must put the agreement in writing for if it is to be enforceable.



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About Jeff Sorg

Jeff Sorg is a co-founder of OnlineEd®, an online real estate, mortgage broker, and vocational school founded in 1997, where he also serves as Chief Executive Officer, and School Director. Sorg holds vocational and post-secondary school instructor licenses in several states and has authored numerous real estate continuing education and pre-licensing courses and has been awarded the International Distance Education Certification Center's CDEi Designation for distance education. Memberships include ARELLO (Association of Real Estate License Law Officials), the National Association of REALTORS®, Oregon Association of REALTORS®, and Portland Metro Association of REALTORS®. Awards and service include REALTOR® Emeritus in the National Association, Life Member award in Portland Metro Association and Chairperson of the Oregon Real Estate Forms Committee. OnlineEd® provides real estate, mortgage broker, insurance, and contractor pre-license, post-license, continuing education, career enhancement, and professional development and designation courses over the Internet.