Form-of-the-Week: The Buyer’s Listing Agreement — Form 103 and 103-1

Buyer’s listing agreement

Experienced brokers realize a signed buyer’s listing agreement produces the maximum financial return for the effort, money and talent an agent invests when representing a potential buyer interested in purchasing property. [See RPI Form 103 and 103-1]

Brokers and agents have great value to members of the public, especially when they assist buyers and sellers in meeting real estate objectives. However, some members of the public exploit agents. They learn what they need to know about properties and fail to return when they decide to buy.

Thus, when counseling a potential buyer and before commencing efforts to locate qualifying properties, skilled brokers and agents get the buyer’s written commitment retaining them to work with the buyer as their exclusive agent. In exchange, the agent agrees to diligently engage themselves to meet their client’s objectives. [See RPI e-book Real Estate Principles, Chapter 25]

Exclusive right-to-buy listing agreement

An exclusive right-to-buy listing agreement creates parallel activity to an exclusive right-to-sell listing for marketing property for sale. [See RPI Form 102 and 103]

Under a buyer’s listing, a prospective buyer employs a broker to locate suitable properties of the type the buyer wishes to purchase. [See RPI Form 103]

Use of the exclusive right-to-buy listing provides greater incentive for brokers and their agents to perform since the buyer’s commitment to pay a fee is in writing, as required under the statute of frauds. Further, the exclusive aspect imposes on the broker a duty to work diligently and continuously to meet their buyer’s objectives. [See RPI Form 103 §2.1]

The buyer who enters into an exclusive right-to-buy listing also benefits from a greater likelihood the broker and their agent will find the particular type of property sought.

A written employment authorizes the broker and their agent to screen a wide variety of properties, another benefit to the buyer, since brokers and agents:

• have extensive access to available properties;
• investigate and qualify available properties as suitable before they are presented to the buyer; and
• advise the buyer on both the short and long-term advantage and disadvantages of each property presented.

A buyer’s broker locating properties listed by other brokers does not become a dual agent or lose their status as the buyer’s exclusive agent when the buyer’s broker coordinates with a seller’s broker to obtain information on their listings. Also, the seller typically pays the buyer’s broker fee — either directly (which is the best practice) or through the seller’s broker. This fee activity does not create a dual agency.

Written documentation of an obligation to ensure the broker is paid a fee, signed by the buyer, is the legislatively enacted and judicially mandated requisite to collection of a brokerage fee. Written documentation required under the statute of frauds is critical when working for a buyer.

Without the buyer’s written promise contained in a buyer’s listing agreement, no fee earned is collectible from anyone, unless:

• the broker enters into an oral or written fee-sharing agreement with the seller’s broker documenting the buyer as their client (a precarious arrangement); or
• the seller intentionally interferes with the performance of the buyer’s oral (or written) promise to pay a fee.

The exclusive right-to-buy agreement published by RPI (Realty Publications, Inc.) contains provisions stating the buyer is to pay a broker fee (unless the seller agrees to pay) when the buyer acquires property of the type described in the buyer’s listing during the term of the listing or safety period. [See RPI Form 103]

Without the buyer’s written promise to pay a fee, the broker is entitled to nothing when their buyer “goes around” them and acquires property on which the broker or agent provided them with information.

Specific property acquisitions

Most real estate transactions involving a buyer’s agent include a commitment of the agent’s time locating qualifying properties for the buyer.

However, the buyer’s agent bypasses the initial step of locating a property when:

• they register a buyer they represent at a real estate auction;
• the buyer has already located a specific property to purchase without the assistance of the agent; or
• the buyer and agent have already located a property of interest and no prior written employment agreement exists which assures payment of a fee to the broker. [See RPI Form 103]

When the buyer has selected a specific property and no prior fee agreement has been agreed to in a written employment agreement, the agent enters into a written specific property acquisition agreement. [See RPI Form 103-1]

The agreement allows the agent to negotiate the acquisition of a specific property that has already been located. Further, it safeguards the agent’s time spent on behalf of the buyer by assuring collection of a fee when the buyer acquires the identified property. [See RPI Form 103-1]

Auction representation

The specific property fee agreement is critical in a real estate auction situation. At an auction, a buyer’s agent has absolutely no assurance their buyer will be the highest bidder who acquires the property. Thus, a buyer’s agent under a regular buyer’s listing agreement calling for a fee to be paid on the buyer’s acquisition of the property runs the risk of receiving no compensation for their time, effort and talent performing due diligence investigations and assisting in the bidding.

When the buyer does successfully acquire the property as the highest bidder, the single property fee arrangement is structured as a percentage of the price paid, such as 3%, or a fixed dollar amount, to be paid by the buyer (unless the terms of the sale include the amount of fee the broker expects to earn). [See RPI Form 103-1 §5.1]

However, when the buyer is not the successful bidder, the buyer’s agent is still paid a fee. The fee under the single property agreement calls for compensation based on an hourly wage for the agent’s time spent investigating and assisting the buyer prior to the auction event. Alternatively, the agent can state a flat fee to be paid for their services rendered when the buyer fails to acquire the property at auction. [See RPI Form 103-1 §5.3]

Related article:

Brokerage Reminder: Going once, going twice, but not gone

Analyzing the buyer’s listing agreement

A buyer’s agent uses the Buyer’s Listing Agreement published by RPI when employed by a buyer as their sole agent. The form allows the agent to prepare an offer to render services on behalf of the buyer to locate and acquire property for a fixed period of time. [See RPI Form 103]

Each section in the Buyer’s Listing Agreement has a separate purpose and need to enforce collection of the fee earned. The sections include:

• Brokerage services: The broker sets forth the employment period, the due diligence obligations owed during the employment and general provisions for enforcement of the employment agreement [See RPI Form 103 §§1, 2 and 3];
• Brokerage fee: The broker sets forth the buyer’s agreement to either pay a brokerage fee or assure payment of the brokerage fee by the seller or seller’s broker, the amount of the fee and when the fee is due [See RPI Form 103 §4];
• Property sought: The broker enters a general description of the type of property to be located for the buyer, including the location, size, rental amount and rental term [See RPI Form 103]; and
• Signatures and identification of the parties: On completion of entries on the listing form and any attached addenda, the buyer, the broker and their agent sign the document consenting to the employment. [See RPI Form 103]

Related article:

Form-of-the-Week: Exclusive Right-to-Sell and Right-to-Buy Listings — Forms 102 and 103

Analyzing the specific property acquisition agreement

A buyer’s agent uses the Buyer’s Listing Agreement — Specific Property Acquisition published by RPI when employed by a buyer as their sole agent to acquire a specific property for a fixed period of time. [See RPI Form 103-1]

The Specific Property Acquisition agreement lists the particular tasks the agent is to do pertaining to the described property to receive their fee, such as:

• consulting the buyer;
• evaluating the economic suitability of the transaction;
• inspecting the property;
• attending an open house with the buyer prior to an auction or submitting a written offer;
• obtaining and analyzing a title profile on the property;
• assisting the buyer in arranging financing;
• checking the property’s proximity to schools, markets, financial institutions, etc.; and
• developing an opinion of the property’s fair market value (FMV). [See RPI Form 103-1 §3.1]

With the signed writing in hand, the agent holds an enforceable fee arrangement with the buyer — a necessity as a matter of best practices.

This article was originally published in April 2013 and has been updated.

Related article:

Brokerage Reminder: The buyer’s listing – the listed buyer benefits

Want to learn more about operating under a buyer’s listing? Click the image below to download the RPI book cited in this article.