Defining an Exclusive Buyer Agency Agreement
Exclusive buyer agency agreements in North Carolina are an agreement between a buyer and real estate agent where the agent is legally required to represent the buyer’s interests. This is an exclusive contract signed between the buyer and the real estate agent stating the agent has the buyer’s exclusive right to represent them in the purchase or sale of property. The exclusive agent must find and negotiate the best possible terms and conditions for the property sale to best benefit the buyer. When the contract is signed the buyer is agreeing to work solely with that agent.
In North Carolina, an exclusive buyer agency agreement is typically signed between the buyer, or "principal," and their real estate agent. The contract states that the agent has the duty to find the best property for the buyer and then negotiate the very best deal for the buyer. Once the buyer has decided on a property , they the agent will then draw up the offer and submit it to the seller’s agent.
The primary purpose of an exclusive buyer agency agreement is to protect the buyers from the seller’s agent trying to negotiate the sale of the property and increase the price. The seller’s agent has only the seller’s interests in mind and tries to sell the property for the highest price. The exclusive buyer agent has the interests of the buyer in mind and can help negotiate the sale of the property for a lower price since they are not represented by the seller’s agent.
A buyer is not obligated to sign an exclusive buyer’s agreement, but it can have great benefits. The buyer’s agent is then contractually bound to look out for all of the buyer’s interests, including things like price, closing costs, and amenities. When buying a house, many factors come into play, and having the representation with a real estate agent that has your best interests in mind can be extremely beneficial when purchasing a property.
Requirements in North Carolina
We often get questions from lawyers in other states about how North Carolina differs in the specifics of Exclusive Buyer Agency Contracts. In North Carolina, there are a number of legal requirements for a contract to be binding and compliant with the North Carolina Real Estate Commission, the entity that issue real estate licenses.
First, the contract must be in writing. While it is true that in North Carolina real estate agents may act on an oral buyer-buyer agency contract in some circumstances, there can be unintended consequences if the agency agreement is not created before the client starts asking to view properties. In addition, the real estate commission has mandated that any contract for which a commission will be paid must be in writing. The writing must be signed by the party to be charged, generally the buyer.
Next, the North Carolina Real Estate Commission uses the term "client" to denote a relationship established by the express written consent of the parties. The "consent" must be in a Property Management Agreement or Sales and Purchase Contract in order for the real estate agent to offer services to a buyer. The writing must contain the following:
The restrictions are designed to protect the buyer client from agreements that eliminate the possibility of seeking redress for misrepresentation or breach of duty by the broker. It also prohibits a broker from being unduly compensated from multiple parties for the same service. The restrictions do not limit the remedies available to courts to remedy wrongs o be done to a buyer client.
There is no North Carolina Attorney General opinion on this topic.
Terms of the Agreement
The content of an exclusive buyer agency agreement can vary, but most typically include a number of duty-based and general provisions. As in any contractual relationship, the exclusive buyer agency agreement fixtures the obligations and duties of both the buyer and broker or agent. Buyers should pay special attention to the following:
Agent Duties: What specific obligations will the broker or agent owe to the buyer? The agent’s fiduciary obligations to the buyer may be expanded by the written agreement. For example, the agent may have a fiduciary duty to (1) assist the buyer in identifying and viewing available properties, (2) provide property comparables to assist the buyer with reasonable expectations of residence values, (3) work toward the best pricing strategy for the acquisition, (4) protect and promote the buyer’s interests in negotiations with the seller, and (5) maintain transparency with the buyer.
Buyer Duties and Obligations: As a principal to the agency agreement, the buyer is required to disclose all pertinent information to the agent and will be expected to fulfill his or her obligations under the contract, such as accepting or declining a contract offer.
Duration of Contract: Most contracts are for a specific time period, and the duration of the contract will usually dictate whether the agreement will renew for another term, terminate, or remain in effect until cancelled by either party.
Compensation: This may be the most critical provision for most buyers. The terms of compensation, including how and when commission will be paid between the buyer and agent, may depend on whether the purchase of the residence is completed, the work performed by the agent throughout the contractual period, delays in transactions, and if the sale price is different from the original list price.
Benefits of an Exclusive Buyer Agency Agreement
Exclusive Buyer Agency-The Advantage to Buyers
You can be assured that someone representing you and your interests is working on your side. NCREC has determined that in the real estate process, there is a huge difference between the way an Agent (real estate broker) and an Affiliated (sales person or licensed salesperson) acts on behalf of a Buyer in North Carolina. The only people that will protect you fully are Agents and the designated agents they appoint to represent you. However, that doesn’t mean the Affiliated is not competent and does not have your best interest at heart. An Affiliated can be an excellent resource for you, but they must work under the supervision of an Agent who is your appointed representative. In order to maximize your level of asset protection I highly recommend that you sign an Exclusive Buyer Agency Agreement only with Agents. Believe me when I tell you that these Agents do know what they are doing and can be an invaluable resource. Thus, get an Agent to represent you. They are working for you, on a direct course toward getting you from preventable mistakes. Having someone knowledgeable in the industry, will definitely give you an advantage in negotiating a home purchase you love. They know the market and can quickly spot sellers who over value their home and are just testing the waters. They have the negotiating experience that you don’t have and know how to interact/communicate with sellers and their agents without offending them. Without experience, you’re likely to offend someone doing things that normal people do in other areas of life, but just don’t translate to negotiations.
Tips for Selecting a Realtor
If you decide that an Exclusive Buyer Agency Agreement is right for you, we can help. With thousands of agents in Wake County, it can be difficult to sort through the options.
Licensure
First, look for someone who is licensed and familiar with the area where you want to live. In North Carolina, all residential real estate agents are licensed by the state. If someone can’t show you their license, most likely they are not legally authorized to help you.
Experience
A qualified agent should have experience working with first-time home buyers as well as selling properties. Their work should be familiar and comfortable for them. Ask how many times they have assisted agents with clients in your price range. Is this their full-time job? This is what we do for a living.
Credentials
How long have they been in business and what organizations do they belong to? Ask if they have access to the Multiple Listing Services (MLS) and if they are a member of the National Association of Realtors (an MLS affiliate). A pre-licensing class covers basic information to obtain a real estate license. To keep their license current , a broker must pursue additional education.
Interviewing Candidates
Talk to two or three agents to discuss their qualifications. Prepare questions in advance so you feel comfortable assessing their character and professionalism. Don’t be shy; ask what you want to know. People are usually happy to talk about themselves and their experiences. Once you find someone you like, sign the Exclusive Buyer Agency Agreement.
Drawbacks and Terms to Consider
Buyers should consider several potential downsides to signing an exclusive buyer agency agreement. With an exclusive buyer agency, a buyer is limited to the real estate broker or firm with whom he/she/they signs an agreement. A buyer does not have the right to work with another broker or firm on the same transaction except as authorized in their exclusive buyer agency agreement. As a result, if you are not happy with the service being provided by your buyer’s agent, you cannot fire that person without also terminating your exclusive buyer agency agreement (which may involve a penalty). If the penalty is significant, you might not be able to begin working with another agent who you believe will provide the level of service you want until the penalty period has lapsed. In some cases, the penalty can be up to 3 months’ commission, depending on what the parties agreed to at the time of signing the agreement.
Another potential drawback is that your agent may have a conflict. Your buyer’s agent may also have a relationship with the seller’s agent that presents a conflict. An owner or buyer agency agreement should address this type of conflict to avoid potential liability for a dual agency situation that neither party would have approved of had they been aware of the circumstances at the time of entering into the agreement.
Many consumer protection groups caution buyers to never sign an exclusive buyer agency agreement without first being fully informed of how this exclusivity may work to complicate an already complicated process. They suggest that it is often easier to go forward with a nonexclusive buyer agency agreement with a broker, allowing you to "test drive" the services of an agent while you identify the type of service and support you want in your home search. An exclusive buyer agency agreement is, after all, a legal contract with potentially significant consequences. It would be a shame if you signed a contract that made it more difficult to buy your dream home.
How to End an Exclusive Agreement
As discussed earlier in the post in the context of buyer agency agreements, exclusive buyer agency agreements must be terminable by either party in writing. The Commission rules don’t specify how many days’ notice is necessary but the notice of termination must provide a date of termination at least 30 days from the receipt of the notice of termination.
However, this requirement does not apply where the agreement has been terminated by the death of the broker or the death or bankruptcy of the firm, as is the case if a corporate buyer agency firm is dissolving or if the individual broker is going out of business and closing the broker’s trust account. This termination by the death of the broker or firm does not preclude a lawsuit for damages for breach of contract.
In the case of a broker who is a salesperson working for a broker-in-charge the notice of termination shall only be given by the stated expiration date of the agreement or the termination of the individual’s real estate license. However, the broker who is the broker-in-charge (and responsible for supervising all of the brokers licensed with that firm) can terminate the individual’s authority to act in the capacity as the firm’s exclusive agent with that buyer or seller prior to the expiration of the time period provided in the contract.
To summarize it’s quite simple. To be valid, a termination by the salesperson must be done in writing. To be valid, any termination by the firm’s Broker-in-Charge must also be done in writing.
Frequently Asked Questions on Buyer Agency Agreements
- What does "exclusive" mean in an exclusive buyer agency agreement? Exclusive in the context of real estate means something that is one of a kind or unique to you. You are the only client the company has. You will be receiving full service representation and fiduciary duty during the entire term of the contract. This includes full disclosure of all known material facts and the duty to keep confidential information confidential. You can be assured that you are the only party a company is representing.
- What if your agent will not let you hire your friend who’s a "part-time agent?" Beware of agents who do not wish for you to hire your friend because your agent will receive less commission because of the referral fee your friend might receive. You are hiring the agent for a certain percentage of the commission on the sale of your house. The exclusive buyer agency agreement covers the entire commission not just the portion you owe your agent. When your agent asks that you do not use your friend , they are asking to their own detriment, not yours.
- Am I required to use your company for everything? No. You are not required to use our company for anything. You are not even required to buy or sell real estate. You may terminate your relationship with an agent at any time, with or without cause. You have the right to hire the moving company of your choice, or also a completely different mortgate company. You can even be referred to the agent of your choice for a company to perform services for you.
- Is it hard to cancel a buyer agency agreement? No. It is not hard to cancel a buyer agency agreement. Simply send a written notice to your agent via e-mail, fax, or regular, US Postal Service mail. Your agent would be happy to send you a cancellation or release of your buyer agency agreement.