The Buyer’s Listing Agreement – Form 103 and 103-1

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

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, get the buyer’s written commitment retaining you to work with them as their exclusive agent. In exchange, you agree to diligently engage yourself to meet your client’s objectives.

Exclusive right-to-buy listing agreement

An exclusive right-to-buy listing agreement creates parallel activity to a right-to-sell listing for marketing property for sale. 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]

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

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. Further, the exclusive aspect imposes a duty to work diligently and continuously to meet their buyer’s objectives. [See RPI Form 103 §2.1]

The buyer, entering 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. The safeguard under a written employment is the screening of property by the broker and their agent since they:

  • 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.

Additionally, 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’s 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 you are paid a fee, signed by your 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 you work for a buyer.

Each section in Form 103 has a separate purpose and need to enforce collection of the fee earned. 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;
  • Brokerage fee: The buyer’s obligation 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 are set forth in Section 4;
  • Property sought: A general description of the type of property to be located for the buyer is entered; and
  • Signatures and identification of the parties: On completion of entries on the listing form and any attached addenda, the buyer and the broker (or agent) sign the document consenting to the employment.

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

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 (which is a precarious arrangement); or
  • the seller intentionally interferes with the performance of the buyer’s oral (or written) promise to pay a fee.

Related Video:
The Exclusive Right to Buy Listing Agreement

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 writing, the agent needs to enter into a written single property acquisition agreement.

The Buyer’s Listing Agreement – Specific Property Acquisition published by RPI is used by a buyer’s agent when employed by a buyer as their sole agent retained for a fixed period of time, to negotiate the acquisition of a specific property that has already been located. The agreement safeguards the agent’s time spent on behalf of the buyer by assuring collection of a fee if the buyer acquires the identified property. [See RPI Form 103-1]

When the agent’s duties do not include locating a suitable property, the specific property agreement lists the particular tasks the agent is to do pertaining to the described property to receive their fee, such as:

  • evaluating the economic suitability of the price and terms of payment proposed;
  • 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;
  • checking the property’s proximity to schools, markets, financial institutions, etc.; and
  • developing an opinion of the property’s fair market value (FMV).

With the signed writing in hand, the agent holds an enforceable fee arrangement with the buyer.

Auction representation

Use of the single property fee agreement is partially 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(a), (b)]

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