What Home Buyers Can Expect When Signing a Buyer Representation Agreement

Real Estate Today Contributor

By: Suzy Minken of COMPASS

If you are considering a home purchase in 2025, there are “new rules” in real estate that you need to know before you begin your house-hunting journey. As a result of the National Association of Realtors (NAR) lawsuit settlement, home buyers nationwide are required to sign a Buyer Representation Agreement when working with a realtor.

You might be wondering, “What is a buyer representation agreement?” Before the NAR lawsuit settlement, buyers often worked with realtors who showed them homes, provided market analysis, negotiated offers, and assisted with every step through the closing. For many realtors, they would provide these realtor services in the absence of a signed buyer agreement for exclusive representation.

Before the “new rules,” a major pitfall existed in the home-buying process. Buyers could submit an offer with a realtor who showed them the house, even if they had seen dozens of homes with another realtor. There was no guarantee that the realtor, who a buyer worked with for months, would be the one to submit an offer.

The New Buyer Client Relationship

Under the nationwide “new rules,” the buyer-realtor relationship is no longer undefined. Buyers who want to work with a realtor now need to formally engage a realtor to represent them and sign a Buyer Representation Agreement. This changes the relationship from “open” to “exclusive,” turning the buyer from a “customer” into a “client.”

To understand the Buyer Representation Agreement, consider the relationship between a listing agent and a home seller. The seller chooses a realtor and signs a Listing Agreement, working exclusively with one realtor. Similarly, buyers now need to enter a client relationship with a buyer agent.

The Key Component – Realtor Compensation

A key component of the Buyer Representation Agreement is how the buyer agent is compensated. Previously, the seller negotiated the total fee with the listing agent, covering both the listing and buyer agents. The buyer agent fee was essentially “baked into” the purchase price, indirectly paid by the buyer at closing. Today, it’s a whole new ball game!

The buyer agent’s brokerage compensation is now “uncoupled” from the seller’s total realtor fee, which has always been negotiable. Under the “new rules,” the buyer agent’s compensation is negotiated separately. Sellers can choose whether or not to offer compensation to the buyer agent and, if so, how much.

Significantly, the Buyer Representation Agreement specifies the compensation fee (percentage or flat dollar amount) the buyer will pay directly to the buyer agent’s brokerage at closing. For the first time, many buyers will now negotiate realtor compensation directly with their agent. This is a significant shift in how buyer agent compensation is determined.

Negotiating Buyer Agent Compensation

Among the various terms of the Buyer Representation Agreement, you will negotiate the duration of the agreement, the areas (or properties) covered by the agreement, and the compensation fee for your buyer agent due upon closing. Many sellers may continue to pay the buyer agent compensation, but the amount is no longer disclosed on the Multiple Listing Service (MLS). Here’s an example.

Since the “new rules” were implemented in August, I’ve found that sellers often pay a buyer agent fee for homes my clients are interested in here in Northern New Jersey. During the initial buyer consultation with my clients, we will discuss the home buying process and the Buyer Representation Agreement, including the buyer agent fee and other terms. I advise my clients about the seller’s offered compensation before touring homes in person, as this influences their offer strategy, especially in competitive situations. And for some homes where my clients are interested, my agreed-to buyer agent compensation may exceed what the seller offers.

Recently, one of my buyer clients made an offer on a home with multiple offers. On this particular home, the compensation fee negotiated in the signed Buyer Representation Agreement was greater than what the seller provided. There were 15 offers on the property, and my buyers were thrilled when the seller accepted their offer! At closing, the compensation paid to my brokerage was, therefore, a “hybrid,” with a portion paid by the seller and another portion paid by the buyers.

The Right Agent: Your Key to Securing Your Dream Home

In today’s complex real estate landscape, selecting a good agent is crucial. The choice of your buyer agent matters more than ever, as you may be responsible for all or part of their compensation. Having a “rockstar” realtor by your side is paramount to providing the expert guidance you need at every step of your home-buying journey. Engaging the right realtor can help you successfully navigate one of life’s significant financial decisions with confidence. Who you choose to represent you can be the key to securing your dream home and ensuring a smooth and enjoyable journey!

With expertise and dedication, Suzy Minken of COMPASS can guide you through the complexities of today’s real estate landscape. For more information or to begin your home-buying journey, visit her website at www.bestinshowing.com, email her at suzy.minken@compass.com, or call her at 908-239-9261. Her Compass office is conveniently located at 1200 Morris Turnpike, Suite 3005, Short Hills, New Jersey 07078.