Do You Sign a Contract With a Realtor?

Engaging with a real estate professional often involves formalizing the relationship through a written agreement. These documents define the roles, responsibilities, and expectations for both the client and the agent. They outline the scope of services and terms of engagement, helping to prevent misunderstandings during the property transaction process.

Types of Real Estate Agreements

Clients encounter various types of contracts when working with real estate agents. For those purchasing property, a buyer agency agreement outlines the agent’s commitment to representing their interests. These can be exclusive, where the buyer works solely with one agent for a defined period, or non-exclusive, allowing work with multiple agents. An exclusive agreement typically offers more dedicated service.

Sellers enter into a listing agreement, granting an agent authority to market and sell their property. The most common is an exclusive right-to-sell listing, where the agent earns a commission regardless of who finds the buyer. An exclusive agency listing allows the seller to find a buyer independently without owing a commission, but grants the agent exclusive representation if they secure a buyer. An open listing permits multiple agents to market the property, with only the agent who procures the buyer earning a commission; the seller can also sell the property themselves without owing commission.

A dual agency agreement involves one agent representing both the buyer and seller in the same transaction. This requires informed consent from both parties due to potential conflicts of interest, as the agent balances duties owed to both. While not universally permitted, it is an option where allowed. Some agreements are mandatory in certain contexts or for specific services.

Key Provisions in Real Estate Agreements

Real estate agreements contain clauses defining the professional relationship. The duration specifies how long the contract is valid, often three to six months for listing and buyer agency agreements, though negotiable. This sets the timeframe for the agent’s authority.

The agreement details the agent’s duties, such as marketing property, showing homes, negotiating offers, and providing market insights. For sellers, this might include photography and listing syndication; for buyers, scheduling showings and comparative market analyses. The client’s duties are also outlined, including cooperating with the agent, providing accurate property information, or being available for showings.

Compensation, or commission, specifies how the agent is paid, usually as a percentage of the sales price (commonly 5% to 6% for listing agreements) or a flat fee. This section clarifies when commission is earned, typically upon successful closing, and when it becomes payable. A broker protection clause, or “safety clause,” protects the agent’s commission if a transaction closes after the agreement expires but resulted from the agent’s efforts during the term.

Termination clauses define conditions for ending the agreement prematurely, such as breach of contract or mutual consent, and any associated penalties or notice requirements. Dispute resolution provisions outline how disagreements will be handled, often suggesting mediation or arbitration to avoid litigation. The scope of representation specifies the geographical area or property type covered by the agreement.

Preparing for the Agreement

Before formalizing a relationship with a real estate agent, clients should take preparatory steps. The agent will require specific information to draft the agreement. For sellers, this includes property details like address, square footage, features, and known defects. Buyers need to provide desired property preferences, budget, and location requirements.

Clients should define their objectives before meeting an agent, setting realistic goals for their transaction. This means determining a desired selling price and timeline for sellers, or establishing a firm budget, preferred property features, and a relocation timeline for buyers. Clearly stated objectives help the agent tailor services.

Prepare a list of questions for the prospective agent. These could cover their communication style, availability, experience with similar transactions, and strategy for achieving goals. Asking about their typical client load, preferred communication methods, and how they handle multiple offers provides insight into their approach.

Clients should verify the agent’s credentials, such as their real estate license status and professional affiliations, often checked through state licensing boards. Consider whether an exclusive or non-exclusive arrangement is preferred, and understand how commissions are structured and paid. This preparation helps clients discuss terms of engagement.

Signing the Agreement

Once preparations are complete and a suitable agent chosen, formally enter the real estate agreement. Clients must read the entire document carefully before signing. This review ensures all clauses, terms, and conditions are understood and align with previous discussions.

Clients should ask the agent for clarification on any unclear terms. A reputable agent explains all aspects of the agreement, including implications of specific clauses and legal jargon. Understanding details helps prevent future misunderstandings.

While many terms are standard, some aspects, such as contract duration or commission percentage, may be negotiable. Clients should discuss these points with the agent before signing. Any agreed-upon changes must be documented in writing and initialed by both parties on the agreement.

Agreements can be signed using physical or electronic signatures. Electronic signatures are legally valid in most jurisdictions under laws like the Electronic Signatures in Global and National Commerce Act (ESIGN Act). After execution, the client must receive a complete, signed copy for their records. The agreement becomes legally binding on the effective date specified, obligating both parties to fulfill their responsibilities.