Real Estate Contracts – Should I Be Signing One with My Agent?

Buying and selling real estate is not only one of the biggest financial transactions you will ever make, but it is also likely one of the most emotional too. The intrinsic value is endless, particularly for those buying and selling owner occupied properties. The memories you hope to build with your partner, kids, pets, or even just personal milestones you will achieve will be something you will carry with you for a lifetime. Unfortunately, you are likely to carry that into a transaction which most commonly only furthers to complicate an already tumultuous situation.

Real estate contracts don’t carry a lot of appeal but are often used in conjunction with transactions. Buying gum at a convenience store may not carry a contract, per se, but even the receipt outlines some basic terms of your purchase. When you are under contract on a home, to buy or sell, you are signing off on offer contracts, purchase and sale contracts, closing contracts, and often additional stacks of written agreements outlining parties performance. So why is it when you start this journey and select someone you are confident with to guide you through the process, does signing a contract seem so unsettling? We take the time to outline the different types of real estate contracts and what they mean for you as a buyer or a seller. 

Seller Contracts

real estate contractsIn an area with a mixed relationship between consumers and contracts, seller contracts are usually the easiest ones to wrap your head around. There is a perceived, and real, belief that a seller’s agent is move involved and thus committed to the process and so it seems more consumer accepted that a contract is a must have. There are several other reasons why this is the case.

  1. This sentiment has been unwavering, even before buyer agency became a thing. Most folks shopping these days don’t even realize that buyer agency was not truly in existence until 1993 when the Board of Registration of Real Estate Brokers and Salespersons officially revised their definition of agency and recognized buyer brokers. Seller’s agents often carry an air of success from an agent perspective and more substance from a consumer perspective which leads to a stronger belief in “safety” to sign.
  2. There is more upfront work and skin in the game. Between weeks or months of prep work and vendor referrals to get a home ready for all of the showing coordination not to mention offer screening, private touring, document retrieval, etc. On the surface, it appears the seller’s agent’s do much more work, whether that is true or not is truly deal to deal, agent to agent.
  3. The relationship formed between seller(s) and listing agent is where commission is negotiated for the listing agent and the buyer’s agent. Sellers want to be sure they outline terms like this, price, marketing strategy, and how long before they can back out if unsatisfied.

These may not be the only reasons why you might feel comfortable signing a real estate contract and perhaps these could be used as arguments to do the opposite in some cases. Oftentimes it boils down to the pomp and circumstance that surround the presentation of the contract. Sellers, particularly in a hot market like ours, want flexibility, top end marketing services, and competitive competition before they sign on the dotted line. If you can’t deliver that, they are likely willing to shop around until they find someone who can check most if not all of their boxes.

Buyer Contracts

real estate contractsThis dance between buyer and agent is certainly a higher degree of difficulty than that between seller and agent. There are mixed feelings about whether this is required, beneficial, or ultimately detrimental for a buyer in their search to buy a home. There are also an endless amount of buyer’s agents to every 1 listing so it’s hard for a buyer to commit to one before seeing if they can actually deliver the goods for them. Some other key considerations for buyers are.

  1. The lazy factor of an agent can suddenly shine through after a contract is put in place. The promises made to get the business may not ultimately be what you receive. As robust as buyer commission can be, agents are often over juggling too many clients. This can lead to  either intentional or incidental placement of their own financial needs first. This often translates to little agent to client interaction and an agent push for their clients to see homes on their own. 
  2. As briefly touched upon above, there is little consistency from agents and agencies on the utility of buyer agreements. Many agencies do not require a buyer contract while some agents in those agencies may elect to have one signed anyways. On the other hand, many agencies require it for an agent’s to receive payment post closing. This lack of continuity across the industry leads to large scale confusion for buyers.
  3. Commission is also something that by law, is not set in stone. It is determined between the seller and the listing agent and compensation is often offered from that predetermined percentage. Buyer’s contracts may stipulate all sorts of agent friendly terms to up the chances of getting paid and to maximize how much commission they can actually earn. This adds to confusion when different agents are requiring different terms, particularly when it comes to cutting funds out of their own pocket to pay you.

There is far more uncertainty towards the need to have a buyer contract and if one is indeed putting the clients needs first. What is more important for an agency and its agents is to have a firm policy of requiring them or not requiring them so the message is clear to all consumers. Also key is abiding by state and national fair housing laws as you do not want to be requiring a specific race/gender/sexual orientation etc to be signing a contract while you are not for another protected class.

Breaking a Myth – Mandatory Relationship Disclosures

This is a document that often falls into contracts for consumers and requires a brief but thorough explanation of why it is not. The devil is in the details here as the title offers up some pretty big clues to why it is not a contract. 

Unlike buyer and seller contracts, this one is “mandatory” and is provided by the state not created in a real estate office. It also stipulates in the title that it is a “disclosure” not a “contract”. The meat of the two page document is filled with an explanation of agency both from the agent and agency side then subsequently followed with the corresponding license numbers. This serves to protect the consumer and allow them to easily report an agent or agency who does not serve them in a proper, fiduciary manner under an agent client relationship. Page two of the document goes into additional detail if a consumer is still struggling with what the denotation of this document truly is. It breaks down types of relationships and makes clear what the corresponding disclosures above ultimately mean. 

It is crucial to explain what this is required but also why this is not a contract. It may also be beneficial to note that these unpresented and acknowledged could result in a fine up to $11k per instance for the brokerage. This is a simple but crucial document that is not only required by the state but is often required in an offer package.


Consumers are often plagued with fear around the word “contract” but they don’t have to live in fear if they choose their agent wisely. A good agent will ensure to tackle all needed documentation early on, likely before finishing their pitch, and will walk you through in detail to make sure you feel comfortable signing. Best practice is to make both the agent and the client feel equally valued and the parties should feel confident in staying as well as that they can walk away without punitive damages should the relationship sour. 

Inconsistency is what often makes this process hard, even for the best agents out there. If you are a salesperson working under a broker, look to your broker and the office policies and procedures to outline what is required. If you are a consumer, ask a lot of questions and be skeptical of insufficient answers, signing without vetting the potential agent, or reading terms that put your interests below those of the agent.

This is another reason why real estate in the 2020’s is increasingly becoming based on gut feeling and the potential fit of the relationship not previous agent volume. Trust your gut over online posturing that can often be manipulated. Interview a couple of agents and trust personal referrals of those you believe will always put your interests first. Agents are a dime a dozen, make sure your agent values every one of your dimes and is always putting you and the relationship formed first. Contact us today to schedule a call with one of our agents!


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