Understanding the CT Exclusive Right to Represent Buyer Agreement

The Exclusive Right to Represent Buyer Agreement Explained

Understanding the Exclusive Right to Represent Buyer Agreement in CT
An Exclusive Right to Represent Buyer Agreement is a legally binding contract that a buyer uses to specifically authorize a realtor to represent them in a transaction, such as buying a new home. Once the realtor (or agent) is hired, it is their responsibly to negotiate the best deal for the buyer and take the lead in the transaction process (such as scheduling home viewings, arranging inspections, etc.).
The designated realtor could directly work for the real estate company, or be a contractor, but either way they are required to be duly licensed and understand the local laws, rules and regulations. The buyer does not have to work with whoever is assigned to them by the real estate company if they feel uncomfortable, however the agreement will still remain in effect until either the property is purchased or abandoned, or until the buyer cancels it .
Exclusive agreements are counter-intuitive to popular conceptions of what a Buyer’s Agent actually does. Many buyers think that the fact their agent has negotiated their purchase means that the buyer should not have to pay them – but that is fundamentally incorrect. The fact that your real estate agent negotiated for you to get a fantastic house at a price you were happy with (to be a little dramatic, a steal compared to its listing) is the very reason they deserve to be paid for their services. Additionally, the agreement between a real estate agent and a buyer is that the agent will be paid for his or her services at the end of the real estate purchase, provided they carry through with their obligations as specified within the agreement contract.

Essential Terms of the Agreement

An exclusive right to represent buyer agreement works similar to an exclusive right to sell agreement (listing contract); an agreement whereby a person under the supervision of a real estate broker (associated licensee) agrees to perform services designed to find a property for the buyer client, the buyer agrees to not work with anyone else in connection with finding real estate, and the buyer further agrees to compensate the broker entity, through the associated licensee. In that regard, the agreement is an exclusive agreement, because the buyer agrees not to solicit other agents for the purpose of satisfying the provisions of the agreement. There are a number of components of the agreement which this article will focus upon. The agreement clearly states that the buyer and agent understand the agent will work with the buyer to find a property and that while the parties have signed the agreement, the buyer is not obligated to purchase real estate, unless the buyer chooses to do so. The agreement then provides that the buyer when finding a property that he/she feels meets the buyer’s requirements, will then present said offer to the agent to present to the seller. Even though under state law the buyer is not obligated to purchase property, the parties still agree to compensate the broker entity if said property is purchased. If the property is purchased by the buyer and the seller is represented by a real estate agent, the buyer shall pay the compensation as set forth within the agreement to the broker entity. If the property is purchased by the buyer without a cooperating real estate broker, then the seller or seller’s agent could provide the buyer with a fee for the buyer’s broker entity or it would be the responsibility of the buyer to compensate his/her broker entity. If the property is purchased by the buyer and the seller is represented by a real estate agent, who is also working with a buyer, the party/agreed upon in the agreement shall compensate the buyer’s broker entity. In addition, if the property is purchased by the buyer and the seller is a FSBO (for sale by owner), then the buyer and agent agree therein to assist with negotiating compensation to the buyer’s broker entity. In Connecticut, if a FSBO property is purchased, what is the typical practice from our experience is that the day of closing, the buyer’s agent requests that the seller pays the buyer agent’s compensation by subtracting that compensation from settlement proceeds.

Advantages for Connecticut Buyers

While some Connecticut real estate agents don’t use Exclusive Right to Represent Buyer agreements, the benefits for buyers outweigh not having one.
A buyer should look at it this way: if you are the only buyer working with a particular agent, you will get better service from that agent. That agent will be more likely to get you access to a new property first, and give you the most up-to-date information on what is happening with the real estate market in your area. A buyer who is first will usually get the pick of the litter when it comes to real estate purchases. And they will not have to pay a buyer’s agent commission either, which can save them thousands of dollars. It’s win, win.
Buyers and buyers agents will agree that finding the right fit is key. Therefore, the buyer will usually end up getting what they want if they are patient and don’t settle on the home of their dreams. A good buyer’s agent will tell a buyer not to settle for less than 100 percent satisfaction. There are plenty of choices and houses on the market, and real estate agents should provide as many options as possible. Buyers should never feel rushed or forced into making a decision. An Exclusive Right to Represent Buyer agreement will likely make the home search a much smoother process for a buyer, ultimately leading to them finding the house of their dreams for a reasonable price.

Obligations of the Licensed Real Estate Agent

As per section 2.2 of the Exclusive Right to Represent Buyer Agreement which is taken from the form provided by the Connecticut Association of Realtors, "the responsibilities of the Real Estate Agent under this agreement in general terms include:
(a) promoting buyer’s interests in the purchase of real property as if it were his or her own interest, with undivided loyalty and full disclosure;
(b) disclosing to buyer all material defects regarding the property that are actually known to the Real Estate Agent and are readily observable;
(c) informing the buyer of the benefits and risks of the transaction any time the Real Estate Agent becomes aware of it;
(d) making every reasonable effort on buyers behalf to ascertain the availability of any property, assist the buyer in making an informed decision and in negotiating the best possible result;
(e) advising the buyer to seek expert advice outside of the Real Estate Agent’s expertise, where appropriate;
(f) advising the buyer to seek expert advice where the Real Estate Agent is licensed to practice in a particular field or subject of expertise;
(g) adhering to all lawful requirements concerning the Real Estate agent’s performance, including but not limited to, a duty to avoid fraud, negligent misrepresentation and specific disclosures required by law;
(h) complying with all laws relating to the performance of a real estate licensee’s duties under a brokerage agreement and the regulations, policies, rules, codes, standards and vectors adopted thereunder; and
(i) giving the buyer the level of confidentiality as agreed upon by the parties in the section of the agreement entitled "Confidentiality".
The Exclusive Right to Represent Buyer Agreement basically entrusts the real estate agent in Connecticut to be on the buyers side when involved in a residential real estate transaction. Even though the real estate agent does not have a fiduciary duty to the buyer per se, the exclusivity of the right to represent the buyer to purchase a piece of real estate basically establishes a type of fiduciary duty if that makes sense. The exclusive nature of the agreement also prevents duplicative efforts by the buyer’s agent and a seller’s agent if you will notice down the road while looking at properties for sale on the Multiple Listing Service.

Legal Protection and Implications

In Connecticut, the legal implications of an exclusive right to represent buyer agreement are twofold. Firstly, it prevents competition from other agents; if a homebuyer is accompanied by an agent to a real estate showing, the showing agent cannot pay any commission to another agent should the buyer purchase that property. This is a significant protection for buyers and their agents because the seller may not even know that the buyer has entered into the agreement with the agent. With the state being relatively small, a homebuyer may enter into an agreement with more than one agent unaware that they have already signed the agreement with another agent. "In that situation, it becomes a race to the buyer," as Gregory E. Galant says in an article on the CT Realtors blog. However, omnibuses and good communication between agents can often prevent this problem.
The second legal implication of the agreement regards information sharing between the buyer and the agent. In signing the exclusive right to represent buyer agreement, the homebuyer has given up vital personal information to the agent and is now legally entitled to the protection of that information . If the agent breaches their fiduciary duty and passes along confidential information to a third party without the permission of the buyer, they are breaking the law.
Legal liability is at play in two ways in the situation above. The agent would be legally liable to their client for the leak of confidential information, therefore breaching the fiduciary duty poising the question of whether the breach invalidates the representation agreement with the client. On the flip side of that situation, the third party who receives the information is also liable under the law. In Connecticut, the Connecticut Unfair Trade Practices Act (C.G.S. § 42-110a et seq) prohibits unfair trade practices such as disclosure of confidential information to a third party without express consent of the client. If the buyer does not give permission to share their information with a third party and the agent does so anyway, the buyer can sue both the agent and the third party for violating the Connecticut Unfair Trade Practices Act if loss due to the breach is incurred.

Ending the Agreement

Termination of an Exclusive Right to Represent Buyer Agreement in CT
The exclusive right to represent buyer agreement is by its nature conditional. The condition in an exclusive right to represent buyer agreement is the commission of the wrongful act. No wrongful act? No condition. Right to receive a commission because of the wrong. And the true test of whether or not the wrongful act occurred lies in whether or not agent submitted accurate and complete information to the multiple listing service.
If the broker failed to submit accurate and complete information to the multiple listing service (i.e., the listing was incomplete, not accurate or both); then the broker should be required to return the commission. Note the word ‘should’. If the agent really is a total scam artist, he’s not about to send the commission back to you. And in a defensive way, if you have a contract out there; he will probably need your help with closings and the sale of your house.
But despite the hand-wringing of realtors everywhere, you may terminate the right to represent buyer agreement. Almost all real estate contracts have provisions regarding dissolution or termination of the contract. You should be acutely aware of this type of language in the exclusive right to represent buyer agreement:
THIS AGREEMENT MAY BE TERMINATED AT ANY TIME BY EITHER PARTY (i.e., the buyer or the agent) BY GIVING WRITTEN NOTICE TO THE OTHER. UPON TERMINATION, NEITHER PARTY SHALL HAVE ANY OBLIGATION TO THE OTHER EXCEPT FOR THE PAYMENT OF ANY FEES DUE AS PROVIDES HEREIN PRIOR TO TERMINATION NOR SHALL THE AGENT OR THE BUYER BE REQUIRED TO MAKE, ACCEPT, OFFER TO MAKE OR ACCEPT, ANY OFFERS OR CONTRACTS FOR THE PURCHASE AND SALE OF THE ABOVE PROPERTY.
The above language terminates the exclusive right to represent buyer agreement upon written notice from either party.

Questions & Answers

The following are some frequently asked questions I have received about this document over the years.
What is it?
An Exclusive Right To Represent Buyer Agreement is a legally binding contract that clarifies the relationship between a real estate agent and a buyer. The buyer agrees to use that particular Realtor as their agent in their home search.
What are the benefits of signing one?
Having it documented helps you ensure other buyers have to use the same Realtor. This encourages your Realtor to work hard to find you the right home.
Why wouldn’t someone want to sign one?
They may have had bad experiences in the past with real estate agents and feel that it isn’t worth the hassle. Or they may be using someone who hasn’t presented it to them, or the agent does not want to present it . This is an unfortunate situation for the customer.
How long does the agreement last?
It varies from Realtor to Realtor, but typically one year is the default.
What happens if I find a home on the internet after I’ve signed the agreement?
That depends on how the agreement is written.
Are there any other potential pitfalls?
When you are working with a great agent, they will guide you through the process and look out for your best interests. Retailers, on the other hand, are less savvy and can do things opposite their obligation to you. Be careful that you are working with someone that you trust to look out for you. It can also become difficult if you aren’t completely open and honest about the scope and seriousness of the situation.