Why Am I Being Asked to Sign a Written Buyer Agreement to View Park City Real Estate?

Navigating the Changes in Real Estate Practice

As a Realtor in Park City, including Deer Valley real estate, my previous approach was to build a trusting relationship with clients before discussing compensation or formal duties. Traditionally, I would wait until we were ready to make an offer before asking for a signed buyer-broker agreement. This allowed buyers to feel comfortable and engaged in the process.

However, the new guidelines require the buyer-broker agreement to be signed before any property viewings. This shifts conversations about duties and compensation much earlier. While this has added some complexity, it hasn't changed the overall structure of transactions—when we sign the agreement.

What Is a Buyer Agreement?

A buyer agreement, officially called the Exclusive Buyer-Broker Agreement & Agency Disclosure, is a legally binding contract between you and your Realtor. This agreement clarifies several key points:

• Agency Relationship — Confirms that your Realtor represents your interests exclusively.
• Brokerage Fee — Outlines how the Realtor will be paid and allows us to discuss how the new forms have altered our strategy while still allowing us to protect our clients.
• Duration of Agreement — States how long the agreement will last, either for a set period or until the transaction's closing.
• Protection Period — Ensures that if a property shown by the Realtor is later purchased, the brokerage fee is paid even after the agreement has ended.

This agreement creates a commitment from both sides, offering clarity and protection for the buyer and the Realtor.

Pros and Cons of the Buyer-Broker Agreement

The new buyer-broker agreement has advantages and challenges for agents and buyers. For experienced agents, it secures a partnership where they can fully disclose information and provide honest guidance without worrying about losing a client.

It ensures buyers have a dedicated advocate throughout the transaction. That said, I've encountered situations where previous agents failed to discuss important details with their clients, leaving them with blind spots about the general market. This can put buyers at a disadvantage.

In one case, a buyer chose to navigate a transaction without an agent after we had narrowed down the best area. Unfortunately, they ended up paying 40% more per square foot because they didn't have a real estate professional to negotiate on their behalf.

This shows the importance of having an agent who can guide you through every step of the process. While the buyer-broker agreement may seem like extra paperwork, it's essentially an updated version of the agreements that have existed in Utah since before I started selling real estate in 2012. The only real change is in the timing of when it's signed. Once clients understand the benefits, they usually agree that it's a reasonable step.

Understanding Agency in Real Estate

One of the most important elements of the Exclusive Buyer-Broker Agreement is Agency Disclosure, which defines the working relationship between the buyer and the Realtor. Agency establishes who the Realtor represents in the transaction and the fiduciary responsibilities they owe to that party. Here's an expanded explanation of this concept:

1. Exclusive Buyer Agency

When you sign the Exclusive Buyer-Broker Agreement, your Realtor agrees to represent only you in the transaction. This creates an exclusive buyer-agency relationship, meaning your agent's sole responsibility is to protect your interests, provide advice, and negotiate on your behalf. This includes responsibilities such as loyalty, confidentiality, full disclosure, and obedience to your lawful instructions.

• Loyalty: Your Realtor must act in your best interest, even if doing so might conflict with their own financial or business goals.
• Confidentiality: Any sensitive information you share with your Realtor, such as your budget or reasons for purchasing a property, must remain confidential.
• Full Disclosure: Your Realtor must disclose all material facts that could impact your decision-making, including potential issues with the property or details about the seller's situation that could influence negotiations.
• Obedience: Your agent is required to follow your lawful instructions throughout the process.

2. Limited Agency (Dual Agency)

In some cases, a Realtor may represent both the buyer and the seller in the same transaction. This is known as limited agency or dual agency. In this situation, the Realtor must stay neutral and cannot favor one party over the other. Dual agency limits the Realtor's ability to provide specific advice or strong advocacy for either side.

In a dual agency situation, the Realtor still has duties to both the buyer and the seller, such as maintaining confidentiality and treating both parties fairly. However, the agent cannot share certain information, like the lowest price the seller is willing to accept or the highest price the buyer is prepared to offer, as this could give one side an advantage.

One important concern with dual agency is the risk of a conflict of interest. Since the Realtor is trying to balance the needs of both the buyer and the seller, they cannot fully represent the best interests of either party. It's been reported that up to 70% of real estate lawsuits are related to limited agency. This statistic shows that many legal disputes come from situations where one or both parties felt their interests were not properly protected.

While dual agency is allowed and can be successful in some situations, it's important to be aware of its limitations.

3. Transaction Brokerage

In rare cases, a Realtor may act as a transaction broker, facilitating the transaction without representing either party in a fiduciary capacity. In this arrangement, the agent's role is limited to processing paperwork and handling the logistics of the sale. They do not owe loyalty or advocacy to the buyer or the seller. This approach is less common in residential transactions but may occur in commercial or investment deals.

Why Agency Matters

Understanding the type of agency relationship you have with your Realtor is crucial. It defines the level of representation and guidance you can expect throughout the buying process.

• With an exclusive buyer agency, you can be confident that your agent is fully committed to your best interests, helping you find the right property, negotiating favorable terms, and ensuring you are well-informed at every step.
• In cases of limited agency, while the agent remains neutral, it's important to understand that you won't receive the same level of tailored advice during negotiations.

The agency relationship is clearly outlined in the Exclusive Buyer-Broker Agreement, ensuring transparency and setting expectations for all parties involved.

Why Are Park City Buyers Asked to Sign This Agreement?

The new rules from the National Association of Realtors (NAR) require buyers across the U.S., including Park City, to sign a buyer agreement before viewing properties. This ensures transparency and formalizes the commitment from both sides.

For buyers, signing the agreement comes with several advantages, including:

• Exclusive Representation — Your Realtor will work exclusively for you.
• Local Knowledge and Expertise — Agents bring an in-depth understanding of Park City's market trends.
• Negotiation Power — Your Realtor can advocate for you in negotiations, ensuring you get the best possible deal.

What's Next?

If you're ready to explore the opportunities available in Park City real estate, the first step is to contact us to discuss the complexities of the local market and how we can help you find a property that fits your vision. At Derrik & Co., we're committed to providing personalized service and leveraging our local knowledge to guide you through buying a Park City property.

Please note that, under the new guidelines, you will be required to sign a buyer-broker agreement before viewing any properties. This agreement ensures that your interests are protected and that you have a dedicated advocate on your side throughout the transaction.

The Park City Real Estate Lifestyle

Beyond the legalities, it's important to remember why Park City is a sought-after destination for real estate buyers. Whether you're drawn to the upscale living of the Park City golf course communities or the vibrant energy of ski-in-ski-out properties, Park City offers an unbeatable mix of adventure and tranquility. From world-class skiing to luxury dining and outdoor recreation, owning property here is about embracing a unique lifestyle.