The real estate industry has been buzzing with a recent federal class action lawsuit settlement. One of the settlement’s most significant outcomes is the requirement of Buyer’s Representation Agreements. Starting in August 2024, all real estate professionals who are members of the National Association of REALTORS will be required to have a signed Buyer’s Representation Agreement before showing a buyer property.
These agreements, which allow a real estate broker to represent a buyer’s interest in a transaction, are already a requirement of Missouri under Chapter 339 of the state statutes. However, some buyers are hesitant to sign an agreement before viewing a home, but it’s to their benefit to do so.
In Missouri, every potential buyer of a property is a customer. A real estate licensee can give out general information about a listed property for sale, such as price, address, and characteristics. However, no advice about a property or guidance on a potential transaction can be provided until a Buyer’s Representation Agreement is signed by a buyer and the broker of a real estate firm. The agreement converts a customer into a client. Prior to an effective Buyer’s Representation Agreement, the Realtor is working for the best interest of only the seller.
A Buyer’s Representation Agreement is like a letter of engagement a client would sign with an attorney representing them legally. It establishes the type of property the buyer is looking for, the area, duties, and responsibilities of the agent, the amount of compensation, and when it will be paid, and the length of the agreement. Also included can be client-specific disclosures and authorizations.
Buyers gain significant advantages from the professional guidance and support a buyer’s agent provides during the home purchase process. Real estate transactions are more complex than ever, with required laws and disclosures, as well as the threat of scams and fraud. A buyer’s agent does more than just help find a property and submit an offer. They are a trusted guide, leading a buyer through initial offer negotiations, inspections, resolving inspection issues, appraisal, contingencies like loan and title commitment, and facilitating the final closing with a title company.
There are still some situations where an agreement will not be required, such as when a seller’s agent is holding an “open house” for the public, or a potential buyer calls a listing agent directly for a private showing. However, a buyer should remember the real estate professional showing the property is working in the best interest of the seller at that point, not their own.
Buyer’s Representation Agreements are in the best interest of a homebuyer, and they should seek fiduciary representation. Entering a contractual agreement with a buyer’s agent can be intimidating, but it provides the buyer protection. If a buyer has questions about the agreement, they need to ask their Realtor questions such as how long the agreement lasts, what fees will be incurred, and how they can terminate the agreement if they decide to.
If a buyer isn’t getting the answers they need from their agent, they can always contact an agent’s broker directly or their own attorney for clarification. If a buyer is reluctant to enter into a Buyer’s Representation Agreement, consider options like a shorter agreement time frame or an agreement for specific properties until a relationship is built with a Realtor they are comfortable with.
Brian Toohey is the chief executive officer for the Columbia Board of REALTORS.
