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Do I have to Sign a Buyer’s Contract to be Represented?

by Jennifer Kirby on December 28, 2008
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Lately I have had some buyers ask whether they have to sign a Buyer’s Representation contract in order to be represented in Minnesota. In some states, like Florida for instance, it is not a state law to sign a representation form, but here in Minnesota, it is.

It seems like everyday I run into a local real estate agent who does not know the basic rules and laws of Buyer Representation. They tell prospective buyers or their clients that there is “no need” to sign an agreement, and then people wonder why I make them sign one. The fact is, here in Minnesota, you are not represented until you enter into a written agreement with a brokerage.

Upon first meeting an agent, he or she should give you what is called an Agency Disclosure form. This form is just a disclosure for the different types of representations available for sellers and buyers, which are:

  • Seller’s Broker
  • Sub-Agent
  • Buyer’s Broker
  • Dual Agency
  • Facilitator

You’ll notice that I said the disclosure is JUST a disclosure. It is NOT a contract for representation. People always get confused over this one. If you want an agent to represent your interests, then you must, by Minnesota law, enter into a written contract.

Yep, that’s correct…a written contract/agreement.

So here’s a scenario: Buyer Bob calls Agent A and tells her he just moved to the area and needs to find a home. Agent A meets with Bob, finds out his needs, and they go house hunting. Buyer Bob really likes a home and wants to put in an offer. Agent A doesn’t return his phone calls. After two days, Buyer Bob finally hears from the agent and is told the agent is working with another client on the same home. Bob is really upset and wants to know why “his agent” is not putting his best interests first. Agent A reminds Buyer Bob that he refused to sign a Buyer’s Representation contract, and so the Agent owes no fiduciary duties to Bob.

Hmmm…what’s going on here?

Well, on the disclosure form that was presented to Buyer Bob, it reads that if a buyer or seller does not enter into a written contract, that they:

will be treated as a customer and will not receive any representation from the broker or salesperson…and will be working as a facilitator

Yes, there is a difference between a “client” and a “customer”. Buyers and sellers do not become clients until they sign a written agreement with an agent. So, this leaves us with the question, what is a facilitator?

For the simplest definition, a facilitator performs limited services for a buyer or seller. They do not owe any Fiduciary Duties to the customer, except confidentiality. Oh, no, I have brought up another topic! What the heck are Fiduciary Duties?

Whenever an agent represents a client, that agent owes the client certain duties:

  • Loyalty (agent acts for the client’s best interests)
  • Obedience (agent will carry out the client’s lawful instructions)
  • Disclosure (agent will disclose all material facts known by the agent)
  • Confidentiality
  • Reasonable Care (agent will use reasonable care in performing duties)
  • Accounting (agent will account for client’s funds received)

You get all these rolled up into a nice package when an agent represents you as a Seller’s Broker, Buyer’s Broker, or Dual Agent, but if a buyer refuses to sign the Buyer’s Broker Agreement, then the only thing an agent owes you is the right of confidentiality.

Now I ask you, what type of relationship do you want to have with an agent? One in which you can actually say she is “your agent” (because you entered into a written agreement). Or do you want the other one, where no one is really looking out for your best interests and you are left out in the cold, blowing around, lost in the wind?

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