Buyer-agent agreement: what it must say

If you look for a home with an agent, they may ask you to sign an agreement before you tour homes. This guide is for anyone about to sign one or who already did: it explains what it is, what it must say about pay, who pays your agent, what else to read and what you can negotiate. It is a contract: read every part before you sign.

You sign the agreement, if your agent is with NAR and uses the MLS

Before the first tour¹

About pay, which the agreement must include according to NAR

4 components²

Commissions are not set by law

Negotiable¹

What the buyer-agent agreement is

The buyer-agent agreementbuyer-broker agreementA buyer-broker agreement is a legal document you sign with the real estate agent who helps you buy, and it formalizes your working relationship. According to the VA, after a court settlement with the National Association of Realtors (NAR), its agents must sign one with you before you tour a home. The agreement must state clearly how much the agent will be paid or how that is determined, without leaving it open-ended; bar the agent from receiving more than the agreed amount from any source; and say that commissions are fully negotiable and not set by law. You can negotiate before signing and ask the seller to pay your agent.See the full definitionClose (also called a buyer representation agreement) is a written contract between you and the real estate agentreal estate agentA real estate agent (often called a realtor) is the professional who helps you buy or sell a home. There are buyer's agents and seller's agents (listing agents). A buyer's agent helps you find homes that fit your needs and budget, gives you information about neighborhoods and property taxes, prepares and presents your offer, negotiates with the seller and guides you to closing. Their commission is negotiable and not set by law; it is written into the agreement you sign with your agent. On the Closing Disclosure, the agent appears in the contact table, usually with a state license number.See the full definitionClose helping you buy. It says what services they will provide and how they will be paid.³

Why are you being asked to sign one? In its settlement in the Burnett case, the National Association of REALTORS (NAR) agreed to require that its agents who participate in an MLS and work with a buyer sign a written agreement with that buyer before the buyer tours any home, unless that conflicts with a state or federal law or regulation.¹ According to NAR, this applies to both in-person and live virtual tours, and these changes are already in effect. You do not need an agreement just to talk with an agent at an open house or ask about their services.²

Your state may have rules too. According to the CFPB, state laws can require your agent to tell you who they represent and on what terms.⁵

What the agreement must say about pay

The NAR settlement sets what the written agreement must say about your agent’s pay.¹ NAR sums it up in four components:²

What it must say	What is not allowed
The amount or rate of pay, or how it will be determined, clearly and conspicuously	Leaving the pay unstated
Pay that can be determined objectively	Open-ended pay, such as “whatever the seller offers the buyer”
That the agent will not collect more than agreed from any source	Collecting more because the seller offered more
That commissions are not set by law and are fully negotiable	Presenting the commission as a fee set by law

According to NAR, objective pay can be, for example, $0, a flat fee, a percent or an hourly rate.² The same settlement prohibits NAR agents from saying their services are free unless they will receive no compensation from any source for them.¹

Example with real numbers

Four ways to write the pay, in words

Examples of how pay could appear in your agreement, under the rules of the NAR settlement.

A flat fee in dollars

Allowed: it is objective²

A percent

Allowed: it is objective²

An hourly rate

Allowed: it is objective²

Whatever the seller offers the buyer

Not allowed: it is open-ended¹

Whatever the form, your agent cannot collect more from any source than the agreement says.¹ To see how much cash you will need at closing, use the calculator.

Run it with your numbersClosing costs

Who pays your agent

The agreement says how much your agent charges; who pays depends on what is negotiated. According to NAR, the seller may agree to offer compensation to your agent, and that practice is permitted. What is not allowed is posting the offer on an MLS, the local marketplace where buyer and listing brokers share information about homes for sale. You can also accept seller concessions, such as paying your closing costsclosing costsClosing costs are all of the costs you pay on closing day on top of the down payment: lender fees, the appraisal, the credit report, title insurance, the closing agent's fees, any transfer taxes your state or county charges and the first deposits into the escrow account. The lender must itemize them on the Loan Estimate within days of your application and confirm them on the Closing Disclosure before you sign. Some can be paid by the seller, and several state programs help cover them.See the full definitionClose.²

The Department of Justice describes it the same way: the settlement allows offers of compensation to buyer brokers to continue and to be posted publicly, but prohibits making them on the MLS.⁴ And there is a cap: whoever pays, your agent cannot receive more from any source than what you agreed.¹

Before you sign, ask your agent what happens if the seller does not offer to pay them or pays less than agreed, and what part you would pay. The CFPB suggests always asking how an agent is paid.⁵ The closing costs guide explains how to estimate your cash to close.

Where to see it at closing. Under Regulation Z, the Closing DisclosureClosing DisclosureThe Closing Disclosure is a required five-page form with the final details of the mortgage you selected: the loan terms, your monthly payment, every closing cost and how much cash you must bring on signing day. The lender must give it to you at least three business days before closing, so you can compare it with your Loan Estimate and ask about any change. If an important number changes, the three-day period starts again. Keep it: you will need it for your taxes.See the full definitionClose itemizes under “Other” each charge in the transaction for services obtained by the buyer, the seller or another party, with the name of who receives the payment and in the column of who pays it. Its contact table lists the buyer’s and the seller’s brokers, with their license number or other identifier.⁶ On the CFPB’s sample, broker commissions appear in Section H, “Other.”⁷ Compare them with your agreement; the Closing Disclosure guide helps you read it.

Other points to read before you sign

Pay is not the only thing. NAR’s guide to these agreements says they should be written in terms everyone understands and clearly spell out the agent’s services, your obligations, their duties of confidentiality to you and the Equal Housing Opportunity statement.³ It also mentions several points that may appear:

• The term. You and the agent can negotiate how long the agreement lasts, and whether it is extended until closing once you sign a purchase contract.³
• How it ends. The agreement may say how either side can end it, with or without cause.³
• The carryover period. It may say you would owe the agent if you end the agreement and then sign a purchase contract within an agreed time.³
• A retainer. You may agree to a retainer fee and whether it is added to the pay, credited against it or refunded.³
• Conflicts of interest. For example, what happens if the agent represents other buyers making offers on the same home, or if there is dual agency.³
• Disputes. It may include mandatory or optional mediation or arbitration, and a waiver of jury trial and class actions.³

NAR does not dictate the type of relationship, the term (it can be one day, one month, one house or one zip code), the services or the type or amount of pay: all of that is agreed between you and the agent.³

Before you sign, point by point

1. 1. Ask for the agreement before the first tour

   Before touring homes

   If your agent is with NAR and uses the MLS, you sign it before touring any home.¹

2. 2. Check the pay

   While reading it

   Amount or rate, or how it is determined; nothing open-ended; and no more than agreed.¹

3. 3. Check the term and how to end it

   While reading it

   Look for a carryover period or a retainer.³

4. 4. Check how disputes are resolved

   While reading it

   See whether there is mandatory arbitration or a jury trial waiver.³

5. 5. Negotiate what does not work for you

   Before signing

   Commissions are not set by law and are fully negotiable.¹

6. 6. Keep your copy

   When you sign

   You will need it to compare with the Closing Disclosure.⁶

How to negotiate the agreement

The commission can be negotiated. According to NAR, your agent’s pay remains fully negotiable,² and the settlement requires the written agreement to say, in conspicuous language, that commissions are not set by law.¹ Before signing, NAR recommends making sure the agreement reflects what you negotiated and that you understand what services you will get and for how much.²

Some questions for the conversation:

1. Who do you represent in this purchase, and do you keep my conversations confidential?⁵
2. Which services exactly does your pay cover?³
3. How much do you charge and how is it calculated? Who pays if the seller offers nothing?¹
4. How long does the agreement last and how can I end it?³
5. Is there a carryover period, a retainer or mandatory arbitration?³

If this is you

You are buying for the first time

A HUD-approved housing counselor can walk you through the buying process, often for free or at low cost.⁸

You would rather read it in Spanish

According to NAR, the agreement should be written in terms everyone understands.³ Ask for each part to be explained before you sign.

You are worried about paying the agent

You can accept seller concessions, such as paying your closing costs, and the seller can offer to pay your agent.²

What the agreement does not change

NAR’s guide says the agreement should include the Equal Housing Opportunity statement.³ Your rights under the Fair Housing ActFair Housing ActThe Fair Housing Act is the federal law that makes it illegal to refuse to sell or rent a dwelling, or to discriminate in its terms, because of race, color, religion, sex, familial status (having children), national origin or disability. It applies to landlords, real estate agents and managers, and also to banks and lenders when their practices make housing or credit unavailable for those reasons. National origin covers your language and the country you come from, regardless of immigration status. If you believe you were discriminated against, you can file a complaint with HUD at no cost; many states add protections.See the full definitionClose are covered in the guide on how to choose a real estate agent.

NAR also suggests these agreements include warnings about wire fraudwire fraud at closingThis is a scam aimed at people about to close on a home. Days before closing, the scammer sends an email that looks like it comes from your real estate agent or settlement agent with "new" instructions to wire or electronically transfer your down payment or closing costs to a different account. If it works, getting the money back can be very hard. The CFPB recommends writing down two trusted contacts ahead of time, confirming any instructions with them using only those numbers, and not using phone numbers or links in the email. If it happens to you, call your bank right away to stop or reverse the transfer.See the full definitionClose.³ The closing costs guide explains how to confirm wiring instructions before sending closing money.

If anything in the agreement is unclear, ask your agent in writing before you sign. For questions about the contract in your own case, free legal aidlegal aidLegal aid is the free civil legal help that nonprofit organizations and their lawyers provide to low-income people in civil, not criminal, matters. In housing, that includes representing families facing eviction or foreclosure, alongside matters such as custody, child support, protection from domestic violence and access to benefits. In the United States, the Legal Services Corporation, created by Congress, funds a nationwide network of these organizations; its finder points you to the one in your area. Each sets its own income limits.See the full definitionClose is an option, and a HUD-approved housing counselorHUD-approved housing counselorA HUD-approved housing counselor works at an agency HUD has approved to provide housing counseling: independent, expert advice customized to your situation about buying a home, renting, a missed mortgage payment, a foreclosure or credit problems. The agencies usually charge little or nothing; many serve in Spanish and offer the homebuyer education course several assistance programs require. They are not lenders or real estate agents and sell you nothing. Your county page lists the official agencies with phone numbers.See the full definitionClose can guide you through the rest of the purchase.⁸

• Mistake: Signing the agreement at the door of the first home, without reading it.

  Instead: Ask for it ahead of time and read it calmly: it should reflect what you negotiated.²

• Mistake: Accepting pay written as 'whatever the seller offers.'

  Instead: Pay must be objective: an amount, a rate or how it is calculated.¹

• Mistake: Believing the commission is set by law.

  Instead: It is not set by law and is fully negotiable.¹

• Mistake: Skipping the term and the carryover period.

  Instead: Check how it ends and whether you could owe the agent after ending it.³

• Mistake: Not checking agent payments on the Closing Disclosure.

  Instead: Find them in Section H, 'Other,' and compare them with your agreement.⁷

What to do this week

1. Ask your agent for the written agreement before touring homes.¹
2. Check the four components about pay: amount or rate, that it is objective, the cap and that it is negotiable.²
3. Read the term, how it ends, the carryover period, any retainer and how disputes are handled.³
4. Ask what happens if the seller does not offer to pay your agent, and estimate your cash to close with the closing costs tool.²
5. Keep your signed copy to compare with the Closing Disclosure.⁶
6. If you want guidance on the whole purchase, find a counselor through the housing counselors guide.⁸