The Buyer Representation Agreement
The Residential Buyer/Tenant Representation Agreement (TAR Form 1501) is used by real estate agents in Texas to form a contractual agent-client relationship. Sounds like a mouthful, huh? In the simplest of terms, this contract binds the buyer and agent together and provides an outline of legal duties for the parties. It prevents a lot of headaches and one should be obtained by your agent when you begin working with them. While they may seem a bit scary at first, they’re actually quite easy to understand and very useful. Let’s take a look shall we?
1. PARTIES This is the easy part – it defines the parties (agent and buyer) and gives basic contact info for both.
2. APPOINTMENT This sentence sets it all up: “Client grants Broker the exclusive right to act as Client’s real estate agent for the purpose of acquiring property in the market area.” In Texas, all buying and selling takes place at the broker-level, which means that you are actually signing a contract with the broker of the company your agent works for. The agent is acting as their representative.
3. DEFINITIONS This paragraph lays out the definitions of the following words used throughout the buyer representation agreement: acquire, closing, market area, and property.
4. TERM Definition of the time frame for which the representation agreement with be in effect. The term must have a start and end date.
5. BROKER’S OBLIGATIONS Defines the three basic broker obligations to the client: to assist their client in acquiring property, assist the client in negotiating the contract to purchase a property, and to comply with other parts of the representation agreement.
6. CLIENT’S OBLIGATIONS Similarly, this paragraph defines the basic obligation of the client: to work exclusively with the broker in acquiring and negotiating the purchase property, inform other brokers, agents, sellers, and landlords that they are represented by the broker and refer them to the broker, and of course, to comply with others parts of the buyer representation agreement. * One of the most often broken obligations of the agreement is that of the client working exclusively with the broker.
7. REPRESENTATIONS This section consists of several statements that both parties (agent and buyer) are in agreement one. A. That each party has the legal capacity and authority to enter into this agreement. B. That the client is not a party to another buyer representation agreement with another broker. C. Client represents that information given to broker is true and correct. D. Defines any employer or relocation company that will provide benefits to the client.
8. INTERMEDIARY Determines (via checkboxes) whether client wish to see broker’s listings. If client wants to see the broker’s listings the agreement then goes into the details of intermediary, which deserves it’s own post.
9. COMPETING CLIENTS Explains that the broker may represent other clients seeking to obtain the same properties as the client.
10. CONFIDENTIAL INFORMATION Probably one of the most important paragraphs in the buyer representation agreement, this section provides for confidentiality of the client’s information. In Texas, without a signed representation agreement, the agent technically represents the agent. Buyer’s agency is a relatively recent development in the real estate world and without it, we all worked for the sellers…often to the buyer’s detriment. This has changed and this confidentiality and agent-client relationship are the most important items set forth by signing a representation agreement. Why wouldn’t you want someone looking out for your best interests? Would you want to work with an agent (in a non-agent-client manner) where the agent was not held to the standard of confidentiality and would therefore be obligated to pass info onto the seller? No way!
11. BROKER’S FEES This section outlines the various aspects of your agent’s commission from working for you to purchase or rent a home. It covers the actual commission, the source of the commission, how it is earned and when it is payable, additional compensation, how agents are paid if you purchase one of the broker’s listings (intermediary again), the protection period, and authorization to open escrow. As money is involved, this section is quite lengthy and verbose, since money disputes are the most common litigation item between buyers and agents.
12. MEDIATION This paragraph sets forth the requirement that in the event of a dispute, the broker and client will choose to submit to mediation before they move to arbitration or litigation. This helps prevent both parties from being sue-happy and requires them to try and work it out before it gets to that point.
13. DEFAULT No one likes to break a contract, but it does happen. This paragraph explains who is at fault and what remedy they may seek.
14. ATTORNEY’S FEES When explaining the buyer representation agreement to clients in a DUI law firm, I often jokingly call this the “loser’s clause” – it basically states that if one party does default and the dispute heads to litigation, the party that loses the case can be liable for court costs and lawyer’s fees of the other party.
15. LIMITATION OF LIABILITY Keeps the broker safe from personal injury and property damage lawsuits brought on my the client. This is a barrier to get compensation for a construction injury. If you break your leg while viewing properties with us, you can’t sue us.
16. ADDENDA A checklist of additional addenda that may be attached and considered part of the agreement. “Information About Brokerage Services” is automatically checked off, as it is required by Texas law.
17. SPECIAL PROVISIONS This blank space allows for factual statements and business details to be added to the agreement. This space should be blank 99.99% of the time. Agents must be careful inserting language in this section to avoid the unlicensed practice of law.
18. ADDITIONAL NOTICES These items are printed on the agreement in bold for a reason…they’re important! A. Commissions (fees) are negotiable and are not set by brokers or the National Association of REALTORS®. B. Broker’s services are provided without regard to race, color, religion, national origin, sex, disability, or familial status. (This is the basis for national Fair Housings laws, but the REALOR® Code of Ethics also applies sexual orientation to this list.) C. Suggests that clients should contact qualified professionals for areas of expertise outside of real estate (ie, inspectors, surveyors, engineers, environmental assesors, and compliance inspectors). D. Recommends that client should have an abstract of title and a title policy issued on the property – this is important as it protects the client from claims to rightful ownership of and/or claims against the property should they arise. E. References residential service contracts (commonly known as home warranties). These are an optional purchase and buyer should review the different service contracts for scope of coverage, exclusions, and limitations. F. Broker can not give legal advice as they are not attorneys. This agreement is a legally binding contract and because of this, if the client has any legal questions, they should consult with an attorney before signing.
That’s the whole buyer representation agreement in a nutshell. While it can seem a bit daunting when you’re first meeting an agent, it is important to consider this agreement as it provides both you and the broker with protections that can help make your home shopping experience better and much smoother. If you have any questions, you can always contact us and we’d be happy to help explain something you don’t understand in further detail.
As with any conversation about legal items and contracts, we must advise you that Kimberly Howell Properties is not a legal firm and can not give legal advice. We would be happy to supply you with a list of real estate attorneys in San Antonio if you seek legal advice. We have done are best to summarize the Residential Buyer/Tenant Representation Agreement here, but this in no way should be considered a full explanation of all the details contained within.
Hello,
My wife & I signed a buyer’s agreement, but are not completely satisfied, & are seeking to terminate the agreement. I noticed as i was looking upon the agreement, that section of “Term” on the agreement was left blank. You specified that this section MUST have a start & end date. Will this allow me to terminate freely the agreement? I also noticed that the broker who is also agent, typed my nickname instead of my full first name & typed my last name incorrectly in all areas where my name was noted. I signed my name in the client signature’s area, but the client printed name was incorrect, as noted she typed my nickname & incorrectly spelled my last name. Can this be eligible for termination of agreement?
Thank you for your important information.
Sorry Benjamin – this comment got caught in the spam filters and we apologize for the delay in getting back to you. The terms of any contract can vary and because they are legally binding documents, this question would be best to take to a lawyer. We always advise clients to call their agent and the broker to see if you can work things out as often, there are solutions that are much better than involving a lawyer that will cost all parties money. Termination is a tricky topic in any contractual situation and you want to be sure you’re getting solid legal advice from someone who practices the law on a regular basis. Good luck with everything, we know it can be difficult when you feel you’re not getting what you wanted out of the relationship.
Is there a time period allowed on a residential buyer/tenant residential agreement that you can opt out of the agreement. This was signed while we were looking at a house. The broker assured us that we would receive a copy by the next day. Some contracts allow three to seven days to withdraw the contract
Mike – there is no specific language in the TAR Residential Buyer/Tenant Representation Agreement allowing a party to withdraw from the agreement and Paragraph 4 sets the term for the agreement. However, some brokers include additional language or use their own agreements, so the conditions of what you have signed may be different from the form as written. Consult with your agent and the broker to get copies of the agreement and speak with them about what obligations you may have. If you have deeper questions, you may want to consult with an attorney to review the agreement and help with a road map of your obligations and duties as well as those of the broker.
Thanks for stopping by and adding your question to the conversation!
The intent of this document appears to offer substantial broker protection to the detriment of the client. Specifically Section 11. Per Section 11.B, if, for whatever reason, the commissions due the broker are not paid, it becomes the responsibility of the buyer…..even if the buyer has acted in good faith and paid all monies due at time of closing. This in essence mean that the buyer could pay the broker’s commission twice; once at closing and then again on demand from the broker if the seller has failed to pay the broker’s commission.
Why would anyone wan to sign a document that does not seem to benefit them yet makes them liable for something they have no control over?
Ken – the intent of the document is to provide protections to both the buyer and the broker. The section on commissions that you mention, does not have a provision that allows a broker to collect a commission twice. The commission is always sought from the selling side first and is the way most commissions are paid. The listing agent charges the seller a negotiated commission, then offers compensation through the MLS to other brokers for bringing the buyer. It is this commission that typically is paid out to the buyer’s broker. The reason that paragraph exists is that sometimes there is no commission offered – best example of this is with a for sale by owner. Many for sale by owners do not offer commission (and don’t fall under MLS rules which require that offer of compensation)…so the agreement has a provision that allows the agent to seek payment of such commission from the buyer, since the seller or their (lack of an) agent will not be paying it.
The single biggest benefit to a buyer for using a buyer representation agreement is that it creates that buyer-agent connection that allows for advice, opinions, and confidentiality. The way brokerage is designed in Texas (from the days before buyer representation existed), we all work for the seller unless buyer representation exists. While an agent must treat all parties honestly and fairly, it is not until the buyer becomes a client of the brokerage through buyer representation that they can be afforded those full benefits. It goes back to the old “don’t tell your agent anything you wouldn’t want a seller to know” way of thinking, which sadly was the way it was done until buyer representation became common place.
I should also mention the most common internet fallacy about buyer representation – the one that works along the lines of “well if I don’t have an agent as a buyer, the seller won’t have to pay a buyer’s agent’s commission, so therefore I can get the house for cheaper.” This always sounds like it makes sense, but the truth of the matter is that the commission is determined at the time of listing the property and is between the seller and their agent. That commission is paid regardless of whether there is a buyer’s agent, so unless the seller is able to renegotiate that commission with their agent, the same amount gets paid to the listing brokerage, in effect paying the listing agent more than they would have received if there had been a buyer’s agent involved.
I am concerned about the clause that says the buyer is liable for the commission to his/her realtor if for any reason the seller’s broker fails to pay. WHy am I on the hook for a failure of the sellers broker?
That section is designed so that buyers don’t use their agent to find them the home and do all the work and then turn around and make an offer direct to the seller/listing agent. It also covers situations where there is no offer of compensation (For Sale By Owner is the best example) – the MLS is a direct offer of compensation between brokers, but if a property is not in the MLS, it is not bound by those rules. In a broker to broker transaction, the MLS is what creates the offer of compensation between the two. If the listing broker failed to pay, the buyer’s broker would have recourse (what we call procuring cause) to collect from the listing broker.
My wife signed a buyers agreement without fully understanding the terms of the contract. The contract lists both my wife and myself but I do not agree with the length of the contract or sec. 11g protection period. I have not signed the contract and have clearly stated to the agent I will not sign. Is the contract valid since as a listed party I have not signed. Thxs
Hello and Happy Holidays,
My girlfriend unintentionally found a home outside the market area as established and agreed in TAR definitions “market area”. Does she have the obligation to amend the agreement to include this potential area with her current realtor or is she free to use any broker outside the market area defined in her agreement if she decides to pursue this potential home?
Thank you, Happy New Year!
This is a question you would want to pose to the agent and their broker.
I signed a buyers agreement with an agent when looking for an investment property. I randomly have decided to sell one of my investments to the renter that is living there. Would that sale be tied to my agent?
As usual, there are a lot of factors to a question like this. Buyer/listing agreements are separate in the state of Texas, so a buyer representation agreement doesn’t also sign you up for selling side (however, there could be language in your particular agreement that does that – always best to ask your agent, broker, or a lawyer). However, since you mention a renter, if you have a property management agreement, that may include agreements for what happens in the event of a sale. Again, always best to refer back to your agreements and when in doubt ask your agent, broker, or lawyer.