Most people confuse the terms ‘real estate broker’ with ‘real estate agent’. The difference between the two designations lies in the years of experience and education. Both the agent and broker will have to undergo the same intensive training. However, the broker will have taken additional courses and will have more experience in the field. The real estate broker will help you find the right community, the right size of home, the location, and they will help you negotiate the price. The real estate broker typically works with a real estate agent to help them with all the tasks mentioned above. If you are thinking about working with a real estate broker it will help to know the three most common buyer-broker contracts.
Nonexclusive not-for-compensation contracts: The contract will describe the broker’s duties and obligations, where the agent will be your main point of contact. In the contract you will also find a list of buyer’s responsibilities and the contract will describe the relationship between the broker and the agent. In this type of contract there will be no compensation to the broker and the buyer is not limited to only work with this brokerage. Either party can cancel the contract. This type of contract typically lasts for up to two months.
Nonexclusive right-to-represent contracts: The contract will describe the broker’s duties and obligations, and aside from the agent being the main point of contact the buyer will also be working directly with the broker. If the buyer decides to buy the home the broker proposed the broker will need to be compensated. This compensation the buyer is required to pay will be waived if another party pays the commission to the broker. The buyer can buy a home through another broker as long as the home was not proposed by the previous broker. This type of contract typically lasts for up to two months.
Exclusive right-to-represent contracts: The contract will outline the responsibilities of the broker, and the buyer, and will also explain the relationship between the broker and the agent. If the buyer enters this contract they will not be able to work with other brokers. The broker is entitled to a commission even if the buyer chooses to buy a home not proposed by the broker, or if another broker assisted them with their choice. The buyer will not be required to pay commission to the broker if another party chooses to do so. The exclusive rights contract typically lasts longer than the non-exclusive contracts and can run up to a year. Usually this contract cannot be revoked. This is the most common contract between home buyers and brokers.
When you are thinking about what the best option for you is thin about the key elements; broker compensation, contract duration, and broker exclusivity.