In the ever-evolving landscape of real estate, recent headlines have been dominated by news of a lawsuit filed against the National Association of Realtors (NAR) – the largest trade association in the industry. As part of the proposed settlement, Realtors must enter into a Buyer Broker Agreement (BBA) with homebuyers before showing homes listed in the MLS (Multiple Listing Service). This is not common practice in Florida and will require an adjustment for both Buyers and Realtors. So, let’s delve into what a Buyer Broker Agreement entails and what it could mean for your next home purchase.
A Buyer Broker Agreement, also known as a buyer representation agreement, is a legally binding contract between a prospective homebuyer and a real estate agent or brokerage firm. This agreement outlines the terms and conditions of the relationship between the buyer and the agent, establishing their mutual obligations and expectations throughout the home buying process. Here’s a breakdown of what a Buyer Broker Agreement typically entails:
The agreement establishes that the real estate agent or brokerage firm will act as the buyer’s representative in the purchase of a property. This means the agent will work for the buyer’s interests, providing guidance, advice, and assistance throughout the transaction.
There are 3 types of Representation agreements in Florida: Single Agent, Transaction Agent, No Brokerage Relationship. Below our the scope of services for each type of representaion.
Limited representation means that a buyer or seller is not responsible for the acts of the licensee. Additionally, parties are giving up their rights to the undivided loyalty of the licensee. This aspect of limited representation allows a licensee to facilitate a real estate transaction by assisting both the buyer and the seller, but a licensee will not work to represent one party to the detriment of the other party when acting as a transaction broker to both parties.
The agreement specifies the duration of the buyer’s representation, typically ranging from a few months to a year. During this time, the buyer agrees to work exclusively with the designated agent or brokerage firm to purchase a property.
The NAR Lawsuit was initiated due to a rule that required home sellers to offer a commission to the Buyer’s agent when the property was advertised in the MLS. Prior to the lawsuit, the minimum compensation offered in the MLS was $1. The MLS commission field was the only contractual obligation for compensation from the Listing Broker to the Buyer Broker. The proposed agreement removes all mention of compensation from the MLS. Hence the need for a commission agreement between the Buyer and their representative.
Currently, the commission section of the Buyer Broker Agreement reads as follows:
Broker’s compensation is earned when, during the term of this Agreement or any renewal or extension, Buyer or any person acting for or on behalf of Buyer contracts to acquire real property as specified in this Agreement. Buyer will be responsible for paying Broker the amount specified below plus any applicable taxes but will be credited with any amount which Broker receives from a seller or a real estate licensee who is working with a seller.
**IMPORTANT NOTE** Commission paid by the Seller or Buyer is (and has always been) negotiable.
The agreement includes termination provisions, outlining the circumstances under which either party may end the relationship before the expiration date. This allows both the buyer and the agent to part ways amicably if they are not satisfied with the arrangement.
The Protection Period is a specified period that extends past the termination date, typically 90-180 days. This clause states that the Buyer will compensate the Realtor if the Buyer contracts to purchase a property after the termination but within the protection period. However, once the Buyer signs a representation agreement with another Realtor, the protection period is null and void.
If you bought a home in Florida in the past by calling a Realtor to “go and show”, this process will change. Moving forward, you will want to interview Realtors to find one that understands your needs, market conditions, and the sales contract. Ideally, the Realtor will have a consultation appointment with prospective Buyers to discuss their buying needs and the Buyer Broker Agreement. Buyer needs include key points like timeframe, price, payment options, location, and style of home.
Signing a contract might sound a bit intimidating, but it’s really about mutual trust and commitment. It ensures that you have a dedicated advocate working on your behalf, and gives both parties peace of mind. Currently, 18 states require a signed agreement between a Realtor and their Buyer. This new Florida requirement is expected to take effect July 2024.
For more information about the buying a home in Florida or this agreement, contact The Tenpenny Collection today!
© 2024 Tenpenny Collection
600 1st Ave N #304
St. Petersburg, FL 33701
