When buyers and sellers work with real estate agents, they typically sign legal contracts that outline the terms of their relationships. These contracts ensure clarity, establish obligations, and protect all parties involved. Here's a breakdown of the most common legal contracts between buyers, sellers, and their respective agents:

1. Buyer Representation Agreement (Buyer's Agent Agreement)

  • What It Is: A legal contract between a buyer and a real estate agent that formalizes the agent’s role in helping the buyer find and purchase a property.
  • Key Elements:
    • Exclusive vs. Non-Exclusive Agreement:
      • Exclusive: The buyer works solely with the agent during the agreement period.
      • Non-Exclusive: The buyer can work with multiple agents.
    • Duration: Specifies the timeframe for the agent’s representation.
    • Agent’s Responsibilities:
      • Searching for properties that meet the buyer's needs.
      • Advising on pricing, offers, and negotiations.
      • Assisting with contracts and closing.
    • Buyer’s Responsibilities:
      • Working exclusively with the agent (if agreed upon).
      • Being financially qualified to purchase a property.
    • Compensation:
      • Commission, typically paid by the seller but detailed in the agreement.
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2. Listing Agreement (Seller’s Agent Agreement)

  • What It Is: A contract between a seller and a real estate agent that authorizes the agent to market and sell the property.
  • Key Elements:
    • Type of Listing Agreement:
      • Exclusive Right-to-Sell: The agent receives a commission regardless of who finds the buyer.
      • Exclusive Agency: The agent earns a commission only if they or another agent finds the buyer.
      • Open Listing: Non-exclusive, allowing the seller to work with multiple agents.
    • Duration: Sets the listing period during which the agent has the right to sell the property.
    • Listing Price: The agreed-upon price at which the property will be marketed.
    • Agent’s Responsibilities:
      • Marketing the property (e.g., advertising, open houses).
      • Advising on pricing strategies.
      • Handling offers and negotiations.
    • Seller’s Responsibilities:
      • Making the property available for showings.
      • Providing accurate information about the property.
    • Commission:
      • Typically a percentage of the final sale price, paid at closing.

3. Dual Agency Agreement (If Applicable)

  • What It Is: A contract where one agent or brokerage represents both the buyer and the seller in the same transaction.
  • Key Elements:
    • Disclosure: Both parties must be informed and consent to the dual agency arrangement.
    • Limitations: The agent cannot advocate for one party over the other.
    • Compensation: Typically the same as a standard agreement but split between both roles.
  • Legalities: Not allowed in some states due to potential conflicts of interest.

4. Commission Agreement

  • What It Is: A document specifying the agent’s commission and how it will be paid.
  • Key Elements:
    • The agreed-upon commission percentage (typically 5-6%, split between the buyer’s and seller’s agents).
    • How the commission is distributed at closing.
    • Conditions under which the commission is earned (e.g., successful sale or purchase).

5. Agency Disclosure Agreement

  • What It Is: A document explaining the types of agency relationships available and disclosing the agent's role in the transaction.
  • Key Elements:
    • Single Agency: Represents only the buyer or seller.
    • Dual Agency: Represents both parties with consent.
    • Transaction Broker: Facilitates the transaction without representing either party.

6. Exclusive Marketing Agreements (Optional)

  • For Sellers: Agreements for staging, photography, or premium marketing services.
  • For Buyers: Agreements for off-market property searches or additional services.

7. Offer to Purchase Agreement (Collaboration)

  • While not directly an agent-specific contract, agents often assist in drafting or negotiating:
    • Purchase Offers for buyers.
    • Counteroffers for sellers.
    • Addendums or contingencies that benefit their clients.

Contract Type

Parties

Purpose

Buyer Representation Agreement

Buyer, Buyer’s Agent

Defines the agent’s role in assisting the buyer.

Listing Agreement

Seller, Seller’s Agent

Authorizes the agent to market and sell the property.

Dual Agency Agreement

Buyer, Seller, Agent

Allows the agent to represent both parties (if legal).

Commission Agreement

Buyer/Seller, Agent

Outlines how and when commissions are paid.

Agency Disclosure Agreement

Buyer/Seller, Agent

Discloses the agent's role and type of representation.

Note that there are some recent changes on how these parties agree. Consult a real estate professional or agent to understand these contracts or any recent changes.

What type of legal contracts does a buyer or a seller agree with the seller and buyer agent?

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