Buyer's Representation

Follow this order of signing documents so you have written agreements for payment of your fee before the parties sign a contract:

1. Have your buyer sign a buyer’s representation agreement. If the buyer signs the Residential Buyer/Tenant Representation Agreement (TAR 1501), you may want to point out that under Paragraph 11B, the buyer may be obligated to pay you if the seller refuses or fails to pay your fee.

2. Provide the seller with the Information About Brokerage Services form (TAR 2501, TREC OP-K) and discuss the agency relationships involved in this purchase. You may want to use the Representation Disclosure (TXR 1417) to memorialize in writing that the required representation disclosure has been made to the seller.

3. Complete the Registration Agreement Between Broker and Owner (TAR 2401) and check the box (Section 4) in the broker’s representation section that indicates you are representing the prospect only. Have the seller sign this document.

4. Give the seller the Seller’s Disclosure Notice (TAR 1406) to complete and sign.

5. Present your buyer’s offer for the seller’s consideration and signature.

Remember, even though your client is the buyer, you have an obligation to treat the seller fairly and honestly. Avoid actions that might be construed as pressuring the seller to sell the property to your client.

The TAR Buyer/Tenant Representation Agreement does contain language that states that the broker will seek to obtain payment of the broker's fees from the seller, landlord, or their agents, but provides that if the buyer agent does not receive all or any of the specified commission from those sources, then the buyer/tenant is obligated to pay that commission (or the difference in the amount specified in the agreement and the amount paid by the seller, landlord, or their agent). This provision can also establish a legal claim to a fee from a buyer who has purchased a home during the term of the agreement using some other agent to complete the purchase contrary to the buyer's agreement to use the broker named in the buyer representation agreement. Brokers should clearly explain the buyer's potential fee obligations under this paragraph of the agreement when they first present the representation agreement to the buyer for signing. Clarity of the parties' rights and obligations in the broker/client relationship is one of the main reasons for having a written brokerage agreement.

No. A buyer-representation agreement is a contract between a buyer and a broker, not a salesperson. As such, your buyers would still be represented by your previous broker. However, your buyers can ask to be released from the buyer-representation agreements with your previous broker.

No. A relationship between a broker and a client can legally exist without a written document. However, there are four good reasons why a broker-client relationship should be in writing, whether it’s with a buyer, seller, landlord, or tenant:

1. A broker cannot sue for a commission unless there is a written agreement signed by the party agreeing to pay that commission.

2. If office policy permits a broker to act as an intermediary (the broker has a broker-client relationship with both the seller and the buyer in the same transaction), then the broker must obtain the written consent of each party and it must state who will pay the broker. The Texas REALTORS® buyer's representation agreements and listing agreements include the necessary written consents and other statutory requirements for a broker to act as an intermediary.

3. Written agreements between a broker and his client help ensure that all parties have mutually agreed on the terms of representation.

4. Article 9 of the Code of Ethics requires that REALTORS®, for the protection of all parties, assure whenever possible that all agreements related to real estate transactions are in writing.

While it is proactive for you to provide the form on your Web site, Section 1101.558(c) of the Real Estate License Act requires that a licensee furnish the written statement contained in the form to a party to a real estate transaction at the time of the first substantive dialogue with the party. The Real Estate License Act defines "substantive dialogue" to mean a meeting or written communication that involves a substantive discussion relating to specific real property. The term does not include a meeting at an open house or a meeting or written communication that occurs after the parties to a transaction have signed a contract or lease. In the situation you describe, the Real Estate License Act would require you to provide the form to the prospective buyer when you first meet him at the listed home. Note: A licensee is not required to provide the written statement (the form) if the proposed transaction is for a residential lease for not more than one year and no sale is being considered, or the licensee meets a party who is represented by another licensee.

Assuming an agreement with the listing broker as regards cooperation and compensation, you may represent the buyer as an exclusive agent. You cannot be appointed by the intermediary because you are not an associate of the listing broker, and from the facts as you describe them, no intermediary status is going to arise. Confidential information obtained from the seller when you were acting as the seller's agent, of course, could not be disclosed to your new client, the buyer.

At the time a property is listed, the licensee is obligated to advise the owner as to the licensee's opinion of the market value of the property. Once appointments have been made, the appointed associates are permitted, but not required, to provide the party to whom they have been appointed with opinions and advice during negotiations.

It depends. If you have created an agency relationship in which you’re representing the buyer—even if you haven’t signed a representation agreement—then you have a fiduciary duty to the buyer and you are not a subagent of the seller. 

A subagency relationship is not as common as it used to be, but it usually arises when a buyer who is not represented uses the services of a broker to view a property. That broker then owes a fiduciary duty to the listing broker and the seller—not the buyer—and the buyer is treated as customer of the broker. It is important that a broker in this situation obtain permission from the listing broker, and explain his or her role to the buyer to avoid any confusion.