Understanding Buyer Representation Agreements in the State of California

Buyer Representation Agreement Explained

What is a Buyer Representation Agreement?
If you are thinking of buying a home the first thing you should usually do is consult a real estate agent, and pen what is known as a buyer representation agreement. When you sign this agreement, you will be asking them to represent you in a real estate transaction.
The purpose of the agreement is to provide you with a trusted advisor that has your best interest in mind and is willing to help you find the right property for you. It is extremely important to have a good buyer’s agent, and this is one of the most important keys to successfully buying a home .
In California, it is standard practice for real estate agents/brokers to ask homebuyers to sign a buyer representation agreement before they start showing properties. The agreement is often misunderstood and sometimes scares potential buyers off because they think it commits them to a long-term contract with their buyer agent. But that is not true.
Essentially, the buyer representation agreement is just a written contract that gives an agent the exclusivity of representing you. This means that if you do not end up buying a home with the agent, you do not owe him/her any money.

The Basic Elements of Buyer Representation Agreements in California

There are several key elements that are essential to real estate buyer representation agreements in California. The following is a brief overview of the main components of these forms:
The Agent’s Duties

  • To assist the buyer in locating a property and to provide extensive information about the property and surrounding area.
  • To place the interests of the buyer ahead of all others by performing in the best financial and personal interests of the buyer. This is done by disclosing all information and giving full information to the seller about the buyer (if the buyer consents to this)
  • To use reasonable effort to locate a property for the buyer.
  • To take care that the buyer is not subject to illegal financing, buddy bidding, advancing fees, or a large commission.

Compensation/Commission
One of the most common disputes between real estate agents and their clients involve the amount of compensation/commission which will be paid to the real estate agent if the property is sold. In fact, the National Association of Real Estate Lawyers has stated that 60% of all disputes between real estate agents and their clients concern disputed commissions and fees. The compensation/commission amounts are usually dependent upon the price of the property and the amount of time it takes to sell the property. The costs of commission are negotiable with the agent and the seller to determine the correct price, but the general rule is that the seller pays the commission of both the seller’s and the buyer’s agents.
Disclosure under California law
An important element of the buyer representation contract is full disclosure between the agents and the buyer regarding the condition of the property. Both the buyer and seller are required by law to provide full disclosure of the defects of the property. This becomes even more important for a buyer when purchasing property in "as is" condition.

Advantages of Signing a Buyer Representation Agreement

By signing a representation agreement with a real estate agent, you are guaranteeing dedicated service and support throughout the entire homebuying process. The advantages of a dedicated agent with a buyer representation agreement include:
Personalized Services
When you work with one of our dedicated buyer’s agents, you will receive personalized services tailored to your specific needs. From the first meeting through the closing of your new home, your agent will provide you information on the housing market, advise you on offers, and help you find the best home for your needs.
Negotiation Benefits
Some negotiations that occur prior to the signing of a final sales contract can be tedious and time consuming. By having an agent with a buyer representation agreement, these negotiations can lead to significant savings, such as price cuts and closing cost assistance.
Protection in Transactions
If needed, your buyer’s agent can file complaints with the Department of Real Estate or the Association of Realtors. When buyer representation agreements are signed, you have additional protection and your agent will proceed in a manner that protects your best interests.

How to Select the Right Real Estate Agent

In the complex California real estate market, finding the right agent is crucial for homebuyers. Your real estate agent will be your guide and advisor during one of the most significant financial transactions of your life. Here are some essential criteria to consider when choosing an agent to represent you in the homebuying process:
Experience: Look for a real estate agent with a solid track record of successful transactions. An experienced agent will have a deep understanding of the market and will be better equipped to handle any challenges that may arise during the buying process.
Local Market Knowledge: A good real estate agent will have extensive knowledge of the local market. This includes information on neighborhoods , schools, amenities, and pricing trends, all of which can be crucial when determining the best home for you and your family.
Client Reviews: As you begin your search for the right agent, don’t forget to check client testimonials and reviews. Reading feedback from past clients can give you insight into the agent’s communication style and level of professionalism.
Personable Chemistry: Buying a house is an intricate process that can take months to complete, so it’s important to choose an agent with whom you feel comfortable. Your agent will be your main point of contact throughout the process, and they should be someone who you can easily work with and trust.

Agent’s Legal Responsibilities in California

Upon signing a Buyer Representation Agreement in California, the Agent (now the "Buyer’s Agent") has a legal and binding fiduciary duty to the Buyer, unlike those agents operating without a Signed Buyer Representation Agreement. California Business and Professions Code Section 10176 includes as a cause for disciplinary action by the Real Estate Commissioner that an agent has "failed to disclose a secret of his principal, where the buyer or seller has instructed him not to do so." While it is true that practically this type of discipline is rare, it is an enforceable duty of the real estate agent. And it is certainly enforceable by the buyer or seller, and shall be a breach of fiduciary duty if the agent fails to do so. In addition to not disclosing secrets, the Agent must "account for all assets" in their possession and in the Buyer’s best interests, has a duty to be loyal to the Buyer, and a duty to report to the buyer anything different from what the agent knows the buyer may assume exists. For example, if the agent knows of "rotten wood" under the carpet, the Agent must tell the Buyer so the Buyer can inspect it.

Ending a Buyer Representation Agreement

After a contract is made it can be cancelled, terminated or breached. A buyer representation agreement can be cancelled or terminated at any time by agreement of the parties. For example, if a buyer has signed a buyer representation agreement with ABC Realty and wants to work with a different agent or company, the agreement can be cancelled with little more than the agreement of the parties. The cancellation should be in writing and signed by the buyer and the agent whose firm represent the buyer.
Buyer representation agreements can also be terminated for cause. Typical reasons for terminating the relationship include: not being able to agree upon terms of purchase, buyer chooses to purchase a property through another source, the buyer finds an agent more acceptable to him/her, the buyer wants to move to a new city or, the buyer fails to abide by the terms of the buyer representation agreement .
You can also find a provision in a buyer representation agreement that conditions its termination on the failure of the agent to perform with the period. Because what constitutes "performance" is often subjective – that standard may be subject to discussion between the buyer and the real estate firm.
A buyer representation agreement (whether oral or in writing) is a contract. As a result all rules pertaining to contract law apply. If there is a dispute under a contract, it is best to resolve the dispute without going to court. Involve your broker (if applicable) or contact legal counsel if necessary.