What is a Non-Exclusive Buyer Representation Agreement?
What is a Non-Exclusive Buyer Representation Agreement?
If you’re reading this, you’re likely familiar with the traditional Exclusive Buyer Representation Agreement (sometimes referred to as an EBRA). It is a written agreement that is exclusively between you and a Realtor you want to work with that you will only use that Realtor when you are purchasing real estate. In exchange, the Realtor agrees to work for you, be available to show you properties, help you find the right one, and then negotiate a deal for you. Some buyers only like to do a deal if a property is a "deal" but that’s a different conversation. An EBRA is a contract just like any other contract. It has begin and end dates. You can terminate the contract as long as you are not in default and have not suppressed the Realtor from working for you, etc. The Realtor can terminate the contract as well. When the Contract expires, you can choose to enter into a contract with your Realtor again or even another Realtor. Usually, this type of relationship works well for everyone. We all know that a good realtor can be a valuable resource especially for first time home buyers.
So what’s a non-exclusive buyer representation agreement? Basically , it’s an agreement you have with one or more realtors that says you can work with any number of realtors and they can work with any number of their clients. They aren’t exclusive to you unless you choose to work exclusively with them. It is just an arrangement to ensure everyone knows who is representing whom. Therefore, it’s just as legal and valid as an EBRA but with a few exceptions.
The good news… If you aren’t interested in working exclusively with a realtor, have no problem working with multiple realtors on multiple property purchases simultaneously and don’t want to be tied down to an EBRA, then the non-exclusive buyer representation agreement is a great fit for you. This is especially true if you are out looking at homes for sale but your Realtor isn’t available. You can go out and look at homes with a different Realtor and then schedule time with your realtor at a more convenient time when they are available. This way, you have the flexibility to fulfill your needs without having to get rid of your realtor. Not every Realtor would be willing to work like this, however, it’s worth asking.
As with any contract, please ensure you understand the terms of your agreement before signing. Finally, represent yourself fairly and respectfully to your Realtor as you would in any professional relationship.
Key Features of Non-Exclusive Buyer Agreements
There are several key features of a non-exclusive buyer representation agreement. First, an agreement to be non-exclusive must be mutually agreed to between the buyer and real estate agent. This means that a buyer could enter into multiple non-exclusive agreements with various agents. Under such an arrangement, a buyer can work with agents from various brokerages without requiring them to be associated with the same broker in order to have active buyers under agreement.
Further, under a non-exclusive buyer representative agreement, there is no obligation for exclusivity in representing the buyer. This means that an agent must show properties selected by the buyer and not properties they think might be a better fit for the buyer or is more desirable to the agent. A non-exclusive agreement simply states that the broker will represent the interests of the buyer in a property exchange for any compensation received for such work. Such arrangements do not require a buyer to give the same level of commitment that an exclusive agreement may. This is particularly important for those individuals who simply want an experienced professional to help with a residential property purchase without locking them into a long-term relationship.
Advantages for Buyers
A non-exclusive buyer representation agreement allows the agent to broaden the options for a buyer. Since the agent doesn’t have to find houses matched with his listings, the agent can spend time finding different types of houses for the buyer to see. This broadening of the options and the competitive environment adds pressure on the seller to bring the price closer to the amount that the buyer is willing to pay.
A non-exclusive arrangement also reduces the pressure on buyers from their agents. Many buyers enter the market at least partially out of fear that prices are going up faster than they can afford. In that type of market, a lot of agents will pressure their buyers to make offers quickly or will say things like "Well, there’s already 10 offers on that house and it hasn’t even been on the market a week."
If your buyer agrees to a non-exclusive buyer representation agreement, then he/she can shop around with the widest range of options available and try to find the best deal.
Limitations of Non-Exclusive Agreements
One of the biggest potential drawbacks of non-exclusive agreements is that the agent who signs them has no obligation to provide you with through service. Because these agreements are not exclusive, an agent could easily spend their time and resources on a different buyer who might be more likely to buy a house sooner and for commission sooner. Again, this is not to say that buyers need to take precedence over sellers or renters, but if an agent has a few clients they can invest time with, they are going to prioritize those clients who give them the best chances of making money sooner rather than later.
This type of agreement can also lead to confusion for both parties. Buyers may think that they are the only client the agent is currently working with, only to discover that they are one of many. Similarly, the agent may make investments or decisions that based on the false assumption that you are either a serious buyer or a casual browser, depending on their fitting proposal.
Finally, even if an agent is juggling multiple clients, you may be the one who ends up suffering due to their lack of prioritization. Busy agents often have a hard time providing the best service to every client. This can mean that non-exclusive buyers end up receiving the least amount of attention from their realtor. This may mean receiving fewer and less promising homes or undesirable prices on homes you like than a client who has a preferred realtor.
How to Choose Between Exclusive and Non-Exclusive Agreements
Both exclusive and non-exclusive buyer representation agreements can be beneficial, but whether a non-exclusive agreement is the better option for a buyer depends on the buyer’s needs and preferences, as well as the current market conditions. Here are some factors to consider when deciding between an exclusive and a non-exclusive agreement: Buyer Preferences: Buyers should take into account their preferences and expectations when deciding which type of buyer representation to pursue. For instance, some buyers may be fairly confident in their own ability to evaluate properties and negotiate a fair price, in which case they may prefer the freedom of working with multiple agents. On the other hand, a buyer may be less confident and more dependent upon an agent’s expertise, in which case a non-exclusive agreement may not be the best fit. Property Type: The type of property being sought can also play a role in deciding between an exclusive and non-exclusive agreement. For instance, a buyer searching for investment properties or rentals may benefit from a non-exclusive agreement, as they may be looking at a large number of properties over a longer period of time . On the other hand, a buyer who is purchasing a home for the first time may benefit from the additional guidance and advice that comes with an exclusive agreement. Market Conditions: Current market conditions can have a big impact on whether a buyer will benefit from a non-exclusive agreement. In a seller’s market, for example, many buyers are confused by having numerous offers on a property and can find it hard to make an offer when they aren’t sure who they’ll be competing against. Such buyers may benefit from the additional guidance and stability that comes from an exclusive agreement. In a buyer’s market, however, buyers tend to have more time to review properties and think through any decisions, making the flexibility of a non-exclusive agreement more appealing. A non-exclusive buyer representation agreement can benefit both buyers and agents. By allowing for the possibility of creating partnerships and synergies between agents and buyers when needed, a non-exclusive agreement gives agents a way to build a steady stream of clients while continuing to focus on areas in which they excel.
Tips for Maximizing a Non-Exclusive Buyer Agreement
If you’re a prospective home buyer considering a non-exclusive buyer agreement, there are a few things you can do to help ensure a successful experience.
Keep the Lines of Communication Open
The great benefit of a non-exclusive buyer agreement is that it gives you tremendous negotiating power. The flip side of this is that you have to shoulder the responsibility of knowing what your obligations are under the agreement and when you should delegate the responsibilities to your buyer’s broker.
It’s important to keep the lines of communication open between yourself and your buyer’s agent so that all parties are on the same page regarding the terms of your agreement with the seller’s agent. Be sure to regularly discuss the nature of your relationship with each agent and don’t be afraid to ask questions if you are unsure about something.
Be Certain That the Terms Are Clearly Specified
Like any other legally binding contract, it’s important that all parties are in agreement about what the relationship is. Oftentimes, a home buying agreement will start to resemble a prenup: when negotiating the terms, no one wants to think about all the bad things that could happen so it might be easy to leave out some important detail that might come back to haunt you later. Make sure that all parties clearly lay out the terms of the agreement and agree upon them. For example, if you and your buyer’s agent agree that you will provide a bonus to him if you purchase a property that he shows you, make sure that this agreement is clearly spelled out in the agreement.
Keep Everything Well Organized
You’ll want to keep very good records of all correspondence with both buyer’s agents. It’s easy to blame the buyer’s agent when something goes wrong, but chances are that you could face some liability as well for not following the terms of the agreement. Keeping organized records of everything will enable you to prove your due diligence if something goes wrong.
Legal Considerations
Buyers should be aware of the following legal considerations when signing a non-exclusive buyer representation agreement:
- Non-exclusivity – Buyers should confirm in writing that the relationship is non-exclusive upon signing an exclusive agreement. There is no law that requires real estate agents to enter into exclusive agreements.
- Rights of other agents – The non-exclusive agreement must fully explain the rights and duties owed to the buyer by the agent and how those rights may or may not extend to other real estate agents. Generally, the rights owed to a client by a real estate agent are not owed by other agents. A general non-exclusive buy agreement will usually allow for other agents to represent the buyer for specific properties; however, buyers should fully understand how their rights and duties may be altered by signing other agent’s agreement before signing. In other words, clarifying that the agreement is truly non-exclusive, as understood by the buyer.
- Fiduciary relationships with clients – Although a non-exclusive buyer representation agreement does not establish rights or duties due to a buyer that are not fully explained in the agreement, there may be certain other legal rights or duties between the agent and their client that are created by law such as a fiduciary duty . Buyers should review with their lawyer their rights and duties with their agent and the extent of a fiduciary relationship.
- Default – Buyers should consult a lawyer to review their buyer’s agreement as this may involve a dispute regarding which parties may compete or share fees and commissions. Moreover, a default by an agent may be complicated by a competing agent. Many cases require an experienced litigator and fact-finder to rectify and avoid more expensive disputes.
- Fiduciary relationship disputes – If the relationship with the buyers and their agent is fiduciary (agent is also the buyer’s client), the buyers may be exposed to a conflict of interest dispute. For example, there are duties and rights owed by an agent to their client specifically involving competing rights between client and agent. Such rights may extend to various third parties as well. It is always better not enter into such relationships and contact a lawyer before doing so.
- Buyers still have a choice – Buyers should note that these types of agreements are not suitable for every buyer. It is important to respect those buyers who do not seek non-exclusive representation and allow for them to be represented by their sales agent of choice to see the property of their choice.
