Getting ready to buy a home? Before diving into property tours or submitting offers, it is important to establish a professional relationship with a RealtorⓇ who will advocate for your goals. From guiding your property search to negotiating on your behalf, your RealtorⓇ is your key partner throughout the buying process. The contract used to formally establish an agency relationship is the Exclusive Right-to-Buy Listing Contract.
Selecting a RealtorⓇ
Choosing a RealtorⓇ to help you buy a home or investment property can begin with a previous broker relationship, a referral from a trusted friend or family member, conducting your own research, or contacting the listing agent. With many local Durango RealtorsⓇ to choose from, it’s helpful to focus on market knowledge, experience, and specialties that fit your needs - whether that’s farm & ranch, commercial, horse property, first-time home buyers, etc. No matter the real estate broker you choose, you can expect the same Uniform Duties and Code of Ethics, which take effect once you sign the Exclusive Right-to-Buy Listing Contract.
What is an Exclusive Right-to-Buy Listing Contract?
Commonly referred to as a Buyer’s Agreement or Buyer Broker Contract, the Exclusive Right-to-Buy Listing Contract outlines the terms and conditions between you and your RealtorⓇ. Once signed by both parties, the broker becomes responsible for showing properties, conducting market research, preparing offers, guiding you through the entire transaction - including dates and deadlines - always with your best interests in mind. While the Buyer’s Agreement covers many details, the key components include the listing period, brokerage relationship, brokerage duties, and compensation.
Listing Period
The Buyer's Agreement remains in effect until a successful closing or the termination deadline of the agreement. Many brokers use a three-to-size month term to allow time to build a working relationship and find the right property If more time is needed, the contract can be extended. Also important is the holdover period, which extends the contract for a short time after it ends. If you purchase a property the broker previously showed you or negotiated on during the contract period, they may still be entitled to a commission IF they submit a list of those properties to you in writing prior to the contract expiration date.
Brokerage Relationship
In Colorado, there are three main types of brokerage relationships when working with a buyer: Agency, Transaction Broker, and Customer.
- In a Buyer’s Agent relationship, the broker solely works for the buyer and owes them fiduciary duties, including loyalty, confidentiality, full disclosure, and advocacy. This relationship is established via the Buyer’s Agreement.
- If the broker is acting as a Transaction Broker, they are not representing either party. Instead, they help facilitate the contract by assisting both buyer and seller with fairness and honesty, but without advocacy or fiduciary duties.
- If a buyer is treated as a Customer, they are not represented. This may occur if a buyer contacts a listing broker directly and works with them to prepare an offer, however that broker is the agent of the seller, so the buyer proceeds without representation.
Brokerage Duties
Regardless of relationship type, the broker must adhere to the Uniform Duties. These include exercising reasonable skill, performing per the buyer’s terms, presenting all offers from the buyers in a timely manner, maintaining confidentiality, and being a source of information and additional resources. Fiduciary duties include not disclosing the buyer’s motivation unless the buyer permits, how much more the buyer is willing to pay, or other terms without prior consent. If the agent is a true Buyer’s Agent (as checked on Exclusive Right to Buy) they are also required to promote the interests of the buyer, seek price and terms acceptable to the buyer, and counsel the buyer on risks and benefits.
Compensation
The broker’s success fee - also called compensation - is typically a set percentage of the purchase price or a fixed dollar amount. Hourly fees are an option in the contract, however they are not commonly used. The second part of the compensation section outlines who pays the fee: the seller or buyer. Compensation has always been negotiable and it’s been customary in our market for the seller to cover the buyer’s broker compensation. However, following the 2024 National Association of REALTORSⓇ lawsuit, some sellers have opted to not offer compensation. Although not common, in these cases, the buyer may need to cover the fee, so it is critical to discuss this with your broker upfront and consider it when budgeting for your purchase.
There are many other elements in the Exclusive Right to Buy Listing Contract including disclosures, fraud prevention, nondiscrimination notices, legal and tax disclaimers, and Meghan’s Law; we are here to break it all down and guide you through the process. Please don’t hesitate to contact The Durango Team at The Wells Group for more information on Buyer’s Agreements and to begin your property search with us.
View a sample Buyer’s Contract here.
Learn about the Seller’s Agreement here.
