Establishing a Buyer Representation Agreement

Please view a section-by-section explanation below on the sample Exclusive Buyer Representation Agreement.

After requesting and reviewing input from brokers across the State, Louisiana REALTORS® is providing members with a sample Exclusive Buyer Representation Agreement (the “Agreement”) to assist you in serving consumers seeking to purchase property in Louisiana.

Whether a member utilizes this sample Agreement or another, an agreement between a broker and buyer establishing their relationship up front can build trust, define the parameters of mutually beneficial relationships, provide clarity regarding services to be provided to the buyer, and detail the real estate professional’s compensation for their services. In short, signing a buyer representation agreement at the outset is beneficial for both a broker and a buyer because it minimizes future misunderstandings.

Exclusive Nature of the Sample Agreement

The sample form provided is an exclusive agreement which would require the buyer to only work with the named broker and no other licensee during the time period specified in the Agreement. For brokers, an exclusive buyer representation agreement safeguards their client relationship, which is reinforced by Article 16 of the REALTOR® Code of Ethics. Non-exclusive agreements are also acceptable and the difference between exclusive and non-exclusive agreements should always be discussed during negotiations of a buyer representation agreement.

Highly Encouraged, but Not Mandatory

The use of a buyer representation agreement is not mandated by Louisiana law but is highly encouraged by industry experts. Additionally, the Louisiana Real Estate Commission does not require the use of buyer representation agreements. If a member elects to use the sample Agreement form in their practice, then the form should be revised to reflect the member’s practices and always be revised to reflect negotiated and agreed upon terms between a broker and a buyer client.

Compensation is Always Negotiable

Compensation of licensees for real estate services is always negotiable. While some compensation methods and conditions are included in the sample Agreement, the parties are free to contract for any compensation or compensation conditions that they deem appropriate and agree upon.

Summary of the Agreement Sections

     I. Section 1 lays out the purpose of the Agreement, largely discussed immediately above. It also would allow the parties to limit the scope of the exclusive relationship to the purchase of a specific type of property in parishes they designate in the Agreement, but it also provides the Agreement would cover residential property located in Louisiana if the type of property was not specified or parishes were not designated. However, it is highly recommended that the geographic limitation and the designation of the type of property involved always be provided so that you and buyer establish a clear understanding of what properties the buyer is interested in and suit the buyer’s needs.

     II. Section 2 is a representation on the part of the buyer that he or she was not in a contractual relationship for the purchase of property with any other broker. This supports the exclusive nature of the relationship set forth in the Agreement.

     III. Section 3 creates an agency relationship between the Broker and the buyer, and by virtue of that agency relationship, the Broker would owe the buyer certain duties, such as the duty of good faith and fair dealing.

     IV. Section 4 lays out the definitions of certain terms used in the Agreement.

     V. Under Section 5, a specific licensee in the Broker’s office would be appointed as their “Designated Agent”. The Designated Agent is the real estate licensee in the Broker’s office who is the agent of the Buyer that will primarily work with the Buyer. Section 5 also makes it clear that certain people associated with the Broker could perform ministerial acts in connection with the exclusive relationship.

Note, this Agreement does not directly address what happens between the Broker and the Designated Agent if the Designated Agent ceases to be affiliated with the Broker but would allow for a substitute agent in that instance. The relationship between the Designated Agent and Broker, and what happens upon termination of that relationship, should be set forth in a separate written agreement between the Broker and Designated Agent.

     VI. Section 6 lays out the specific duties the Broker would owe a buyer under the Agreement, including the following:

            a. Locating a property acceptable to buyer.

            b. Negotiating the purchase.

            c. Drafting and negotiating the purchase agreement.

            d. Acting as buyer’s exclusive representative under the Agreement; and

            e. Promoting buyer’s best interests.

This section of the sample Agreement includes the duties set forth in Louisiana agency law, but clearly does not include the many and various services members provide their clients. The document should be modified to include any additional specific services you provide, and services agreed to during negotiation of the terms of any buyer representation agreement.

The Agreement also references “ministerial acts” that may be performed by the Broker. La. R.S. 9:3891(12) defines “Ministerial acts” as “acts that a licensee may perform for a person that are informative in nature,” and provides examples of these acts, such as responding to phone inquiries, conducting an open house, and setting an appointment to view property.

     VII. Section 7 lays out the duties a buyer would assume under the Agreement, including the following:

            a. An agreement to work exclusively with the Broker.

            b. Informing other brokers that the buyer encounters of his exclusive relationship with the designated Broker.

            c. Work reasonably to assist Broker in Broker’s requests and listings Broker coordinates viewing of properties.

            d. Doing due diligence on matters that would impact the purchase.

            e. Seeking expert advice on property when necessary; and

            f. Becoming familiar with the transaction documents that will be executed in connection with the purchase.

This section sets forth the duties of the buyer so that buyer clearly understands what would be expected of him or her.

     VIII. Section 8 includes specific acknowledgements that would be made by both buyer and Broker, including the following:

            a. Broker’s diligent search for property would only include those that come to Broker’s attention in the ordinary course of Broker’s business.

            b. Broker or any licensee may show property buyer is interested in to any other prospective buyer, meaning that although buyer is in an exclusive relationship with Broker, Broker is not limited to only consummating the sale of property to the particular buyer.

            c. Broker would have no obligation to monitor construction or repairs to property.

            d. No knowledge would be imputed to Broker regarding property that buyer is interested in.

            e. Broker would not provide advice on matters related to construction, insurance, surveys, titles, inspections, appraisals, finance, mold or hazardous substances, termites, insects, law, or other matters; buyer is advised to seek expert opinions on these matters; and

            f. Broker would not owe the buyer any other duties than what is required by law and set forth in the Agreement.

This section is also intended to clarify the Broker and Designated Agent’s roles and responsibilities. Again – clarifying what would and would not be done by the Broker and Designated Agent unless otherwise agreed to by the parties.

     IX. Section 9 addresses compensation. Under the terms of the sample Agreement, the buyer would be presented three possible compensation structures:

            1. a percentage of the sale price of the purchased property,

            2. a flat fee, or

            3. another form of compensation to be negotiated and agreed to by the parties.

Section 9 also provides that any compensation owed by buyer under the Agreement would be offset by compensation received by the Broker from the seller or listing agent. Section 9 also states when compensation would be due to the Broker, including the obligation of a buyer to compensate the Broker if property is purchased within a certain amount of time after the termination of the Agreement and the Broker learned about the purchased property from the Broker. Lastly, Section 9 addresses transactions involving Veterans Affairs loans as it is understood that some of these loan products may prohibit payment of a commission to a Broker by a buyer.

Members are reminded that compensation and compensation terms and conditions are always negotiable, and the Agreement provided is a sample form to be modified as necessary.

     X. Section 10 provides for the term of the Agreement; the term would be agreed upon by the buyer and Broker. This length of the term is always negotiable by the parties, but it is recommended that the term always have reasonable and specific beginning and end dates.

     XI. Section 11 details termination rights. The Buyer would be able to terminate the Agreement at any time upon written notice to the Broker, but termination of the Agreement would not terminate Broker’s right to earned and owed compensation under Section 9.

     XII. Section 12 addresses dual agency, and provides that if a dual agency relationship arose, then applicable laws, rules and regulations would be followed.

     XIII. Section 13 provides that the Broker would not be liable for the following items:

            a. Inaccurate and/or incomplete information provided to buyer by Broker, designated agent and any licensee, independent contractor, or employee of Broker.

            b.  Security deposit funds money handled or held by anyone other than the Broker, designated agent and any licensee, independent contractor, or employee of Broker.

            c. Injury or damage to property viewed or visited pursuant to the Agreement or the loss of tangible or intangible property which occurred or is believed to have occurred in connection with viewing or visiting a property pursuant to the Agreement.

            d. Injury to persons while any property is viewed or visited pursuant to the Agreement or injury of persons attributed to visiting or viewing a property pursuant to the Agreement.

Brokers should be aware that this language does not bar a person from filing suit for the listed items but is included in an effort to limit any potential liability if a claim arose for any of the listed items. 

     XIV.  Section 14 is a fairly “standard” provision in all types of contracts. It states that the Agreement would be the sole agreement between the parties which would confirms the parties have no oral agreements or side agreements related to the subject matter covered by the Agreement. That may be important should the buyer subsequently claim that the Broker or Designated Agent made promises or representations not included in the Agreement.

     XV. Section 15 authorizes electronic communications and is similar to the electronic communications provisions of the mandatory purchase agreement form.

     XVI. Section 16 is a space that allows for the parties to add, modify, or write in any other terms, conditions, agreements, or specifications agreed to in their negotiations. Of course, the parties may also agree to attach an addendum if there are substantial additions or modifications to the Agreement and that addendum can simply be referenced in Section 16.