Buyer Agency Agreement Must Be In Writing To Be Valid

On July 1, 2000, the rules were changed. State law now prohibits a Broker from "representing a Buyer as a client without first entering into a written agreement". In other words, real estate practitioners are not allowed to perform certain services without the buyer signing the Buyer Brokerage agreement.

While we are all used to the idea of a seller signing a written listing agreement with a real estate broker, the practice of written agreements between buyer and broker has been much less common. As of July 1, however, Georgia law mandates that a broker and buyer must have a written agreement before the broker can represent the buyer as a client. So what does this mean in practical terms? Can a buyer still work with an agent without signing anything? Does this change the way buyers agents get paid? Does the buyer have to now pay a buyers agent?

In practical terms, the effect of this legislation is that brokers will not be allowed to offer "client level" services to buyers without a written agreement. They instead would be limited to "customer level" services. Customer level services are basically acts which do not require that the broker offer opinions, advice or expertise. When a buyer has a client relationship with a broker, the broker is free to advise, and guide the buyer more fully through the buying process.

A buyer certainly can work with an agent without having to sign a buyer brokerage agreement, but the level of service they receive from the agent will be severely curtailed. For example, an agent working with a customer is only allowed to fill in exactly what the buyer tells him on the purchase and sale agreement. The agent could not offer any advice or help with the offer or the special stipulations included in most offers.

This does little to change the way that buyers agents get paid, however. The commission still typically comes out of the seller's side at closing. Buyers will not be obligated to pay a commission to the buyers agent unless they have entered into a prior agreement to that effect. The agreement also does not unduly bind buyer and agent together. Either party can terminate the agreement at any time by giving written notice.

The July 1 changes protect both buyers and brokers by setting forth explicitly the terms under which they are working together. Because of this, each should have a better idea of what to expect from the other.