Get Real Estate Agreements in Writing Before Signing to Avoid Legal Issues

March 15, 2013 - Updated: March 15, 2013

Real estate is a business just like any other industry and when you engage in a real estate deal with an agent, buyers need to have a detailed understanding of the nature of the agreement they are entering into and the obligations that each party owes to the other party.

The truth is that most realtors are ethical and honest hard-working people. But, even ethical and honest people forget or there is genuine misunderstanding in what was intended. This is why it is important for buyers, sellers, agents, and everyone involved in a real estate transaction to make sure they put everything in writing to avoid misunderstanding and forgetfulness.

Written agreements can outline specific provisions and offer up solutions and back-up plans if things do not work out as planned. For example, it can outline how many times you see a property, items that are to be included in a deal, when real estate commission is rebated, and any other provisions that are relevant to the deal.

Recently there have been a number of cases that have been brought to the court where real estate agents have sued people over commission that was not paid. While on the surface, many people often jump to the conclusion that this is the work of greedy real estate agents just trying to get more money out of innocent people, there is much more to the story.

While the exact details of the cases vary, the issue in each case involves a buyer’s obligation to pay commission to a real estate agent, if the buyer finds a home on their own, after executing a buyer agency relationship agreement. The truth is that buyers need to be careful if they sign an agreement with a real estate agent to help them find a house and then try to cut them out of a commission because they found the house themselves. You need to make sure how your agreement addresses the issue before you make a unilateral move.

While the legality of the issue is up for debate and outside the scope of this article, it brings to light a number of important points that need to bring to the attention of both buyers and agents when they enter into an agreement with each other.

  1. Get everything in writing: When things are put in writing, you’re more likely to avoid court action at all. And, you will know your obligations. Make sure that each party signs the written agreement.
     
  2. Agreements on email may not hold up: Even if you have written correspondence via email, the legality of the agreement may not hold up in court.
     
  3. Buyers need to know what they are signing up for: When you sign with an agent, it means you agree to pay the agent a commission, whether they find a home for you or you find it yourself. Buyers need to read the fine print and fully understand the agreement.
     
  4. Get commission agreements in writing: Sellers should make sure any agreement to pay commission is in writing before they deal with any offer.
     
  5. Buyers need to be honest with agents: Buyers must understand that when they sign with an agent, they have to tell the agent of any house they find.
     
  6. Avoid shady side deals: If sellers make a commitment to pay commission, they’ll run into trouble if they try to make side deals later to avoid paying.


Whether you are an agent, buyer or seller, you need to ask questions before you sign an agreement. Make sure that you know who, what, when done/completed by, how much, where, and any other obligations you have before moving forward and you will avoid legal issues in the future.


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