Working with buyers is essential if you want a successful real estate career in today’s dynamic market. However, when your buyers are working with other agents or touring open houses solo, your efforts are at risk.

Real estate services have great value to members of the public. This is evident by the fact that nearly all buyers and sellers use an agent to assist them to meet their real estate objective. Often, members of the public are allowed to exploit the time and talent of agents without payment. Prospective buyers learn what they need to know about MLS properties, and fail to return when they decide to buy.

Most brokers realize a signed buyer’s listing agreement (also known as a buyer’s agency agreement or a buyer’s representation agreement) is necessary to produce the maximum financial return for the time, effort, talent and money agents invest when representing buyers in negotiations. [See RPI Form 103]

Before you counsel a potential buyer by giving advice or searching for qualifying properties, ask them to enter into a written agreement retaining you to work for them as them as their sole and exclusive agent.

What is a buyer’s listing agreement?

The exclusive right-to-buy listing agreement is used by brokers and their agents to prepare and submit to prospective buyers their offer to render services on their behalf as the buyer’s real estate agent. [See RPI Form 103]

Under it, you are employed to locate property sought by the buyer in exchange for the buyer’s assurance you will be paid a fee when the buyer acquires the type of property they seek.

Each section in the buyer’s listing agreement has a separate purpose and need for enforcement. The sections include:

  • Brokerage services: The employment period for rendering brokerage services and the broker’s due diligence obligations are set forth in Sections 1 and 2. General provisions for enforcement of the employment agreement and broker fee-splitting arrangements are included in Section 3.
  • Broker fee: The buyer’s obligation to either pay a broker fee or assure payment of the broker fee by the seller or a seller’s broker, the amount of the fee and when the fee is due are set forth in Section 4.
  • Property sought: A general description of the type of property to be located for the buyer is then entered.
  • Signatures and identification of the parties: On completion of entries on the listing agreement and any attached addenda, the buyer and the broker (or agent) sign the document consenting to the employment.

When a buyer refuses to enter into a written agreement for your services, this shows the buyer does not want a representative. What this unlisted buyer likely wants is an agent to act as a locator or finder of properties, providing valuable information without any obligation to compensate them for the assistance.

Without the buyer’s written promise to pay a fee, you are entitled to nothing when your buyer “goes around” you and acquires property based on information you provided.

Without the buyer’s written promise, no fee is earned or collectible from anyone, unless you arranged a fee-sharing agreement with the seller’s broker documenting the buyer as your client. [See RPI Form 105]

Additionally, it is unreasonable for a buyer’s broker to expect to receive a fee, no matter who is expected to pay it, for working with a buyer who acquires property located and presented by the broker, unless:

  • the buyer has signed some writing which contains a fee provision relating to the property; or
  • the seller’s broker has agreed in writing (or orally) to share their fee with the buyer’s broker regarding the identified buyer.

Agency duties owed to buyers

Special agency duties are owed to a buyer when a broker and their agents undertake to locate property on the buyer’s behalf. The duty to the buyer first arises when the broker:

  • enters into an exclusive right-to-buy agreement with the buyer; or
  • presents property information to an unlisted buyer who they have agreed to assist by locating qualifying properties suitable to the buyer.

When representing a buyer under a written exclusive right-to-buy employment agreement, the broker (and their agents) has entered into a bilateral employment agreement. Such an employment obligates the broker, through their agents, to exercise due diligence by way of a constant and continuing search to locate qualifying properties, while keeping the buyer informed of their progress.

Without an exclusive right-to-buy listing, the brokerage duties to locate properties for a buyer are best-effort obligations created by an oral (or written) open listing, called a unilateral employment agreement. A best-effort obligation requires no affirmative action (diligence) on the part of the broker’s office to locate property.

However, under a buyer’s listing, be it a written exclusive or oral open, the act of delivering property information to the buyer they are assisting obligates the broker and agents to use due diligence in their efforts to:

  • gather readily available data on the property under review;
  • assist in the analysis and consequences of the property data gathered; and
  • advise the buyer regarding the property and any proposed transaction in a conscientious effort to act honestly, and to care for and protect the buyer’s best interests.

When acting as the buyer’s agent regarding the acquisition of a particular property, due diligence includes:

  • disclosing facts about the integrity of the property; and
  • recommending investigative activity which the agent knows might influence the buyer’s conduct in negotiations.

Without an exclusive employment with a buyer on whose behalf the agent is locating properties, the agent is reduced to a mere “locator” or “finder.” Worse, the buyer’s agent is burdened with affirmative agency duties of utmost care and protection owed their buyer when reviewing properties listed with other brokers even if they are not acting under a written exclusive right-to-buy listing agreement with that buyer. [See RPI Form 103]

Be professional, be courteous, but be smart: protect your fee with a signed buyer’s listing agreement— or all your hard effort may be for naught.

This article has been updated and was first published in October 2012.