Pros and Cons of a Buyer Representation Agreement in Colorado

Colorado buyers may have noticed the term "real estate agent commission" garnering a lot of attention this year.

Though the information has always been available, how commissions work and how buyers are represented are hot topics as recent changes went into place in August 2024 following an important court settlement involving the National Association of Realtors (NAR).

As real estate agents across the country aim to highlight transparency in the real estate market, Colorado buyers will want to familiarize themselves with a buyer representation agreement, especially if they decide to work with an experienced buyer’s agent.

Yet, signing a buyer representation agreement entails a certain level of commitment. Naturally, there are pros and cons, so the team from Prevu Real Estate will highlight some considerations below.

What is a buyer representation agreement in Colorado?

At its core, a buyer representation agreement establishes the fiduciary duties that the agent owes to the buyer and outlines how agent compensation will work.

In Colorado, these agreements typically specify the duration of the relationship, the services provided, and the buyer’s agent compensation. The duration can vary but usually spans a few months up to one year, giving both parties ample time to find the right property and complete the transaction. 

The services can be negotiated and agreed upon between the buyer and agent. They can include property searches, arranging and attending showings, writing and negotiating offers, and assisting with inspections and closing procedures.

Pros of a buyer representation agreement in Colorado

• Understanding of the services provided
• Compensation is clear from the start
• Commitment to the buyer-agent relationship

Understanding of the services provided

Clarity is always a plus, and everything is often clearer in writing. 

A buyer’s representation agreement outlines the duties and responsibilities the agent will perform from the get-go. This helps ensure transparency and sets clear expectations, preventing surprises or stand-alone efforts you may not have wanted the agent to undertake.

This clarity is particularly beneficial in complex and competitive markets like Colorado’s, where having a knowledgeable and dedicated agent can make a significant difference. Buyers can trust that their agent is committed to providing comprehensive support tailored to their specific needs, which can enhance the overall home-buying experience.

Compensation is clear from the start

Payment of commission can be a touchy topic, especially if no set legal agreement outlines every possible scenario regarding your agent’s compensation. A buyer’s representation agreement helps take care of that issue.

The agreement should clearly explain how the buyer’s agent will be paid, typically detailing whether the compensation can be collected from a seller or if the buyer will be responsible to pay their buyer’s agent out of pocket if there is seller does not offer to incentivize buyer’s agents.

This clarity from the beginning helps buyers understand their financial obligations towards their agent. Historically, the seller would agree to pay the commission of both the listing and the buyer’s agent, but the agreement can specify scenarios where the buyer is able to capitalize the commission in the deal via the seller or pay the commission out of pocket along with other buyer closing costs. 

By addressing these details upfront, both parties can avoid potential misunderstandings and disputes over buyer agent compensation later in the process.

Knowing exactly how and when their agent will be compensated gives buyers peace of mind, allowing them to focus on finding the right property without worrying about surprise costs. 

Commitment to the buyer-agent relationship

It’s always helpful to feel secure that your agent is not only interested in representing your best interests but is legally required to.

Whether the relationship is exclusive will depend on your agreement with the agent, but whatever you agree upon will be clearly outlined in the contract.

When an agent knows that a buyer is committed to working exclusively with them, they are more likely to invest their time and resources into finding the best possible property. This commitment fosters a strong working relationship, where the agent can better understand the buyer’s preferences, needs, and budget, ultimately leading to more tailored and effective property searches.

Additionally, this agreement ensures that the agent will prioritize the buyer’s needs above others, offering dedicated support throughout the home-buying process. 

Cons of a buyer representation agreement in Colorado

• You’re usually bound to one agent
• Legal agreements can be intimidating

You’re usually bound to one agent

This con depends on whether you enter an exclusive relationship with your agent. 

Exclusivity can be limiting if your agent's style or approach does not align with your preferences or if you encounter issues with their performance.

In a dynamic real estate market like Colorado's, being restricted to a single agent might mean missing out on other agents who could offer better service, lower compensation requirements or have access to different listings. If your agent is unavailable or not as responsive as you would like, you may feel frustrated by the lack of flexibility to seek assistance elsewhere.

Additionally, if you come across another agent who specializes in a particular type of property or neighborhood that interests you, the exclusivity of your agreement might prevent you from benefiting from their expertise. 

To minimize the risks of exclusivity, request to sign a non-exclusive agreement that restricts your relationship only to specific properties your agent shows you or assists you on. If a buyer’s agent does not offer non-exclusive agreements, you could ask to limit the term of the agreement with your buyer’s agent to a few months instead of six months or a year, to reduce the period of exclusivity.

Legal agreements can be intimidating

For some buyers, signing a legal contract may induce anxiety or uncertainty, particularly if they are unfamiliar with the typical terms and conditions outlined in these agreements. 

This can be alleviated when working with an experienced and understanding agent. The agent should be willing to explain every clause and aspect of the contract before offering to represent you.

Ultimately, the issue comes down to preference.  

Some buyers might worry about being locked into an agreement that could limit their options or lead to unforeseen obligations. Others prefer to have everything pre-planned and outlined during the entire home buying process. If you prefer flexibility, you may want to consider negotiating what works best for you before signing a buyer representation agreement. 

The benefits of Prevu’s buyer representation agreement in Colorado

At Prevu, we believe the homebuying process should be as transparent, flexible, and consumer-friendly as possible. That’s why our buyer representation agreement in Colorado is designed to work for you.

Here’s what makes our approach stand out:

• Non-exclusive flexibility
• Potential financial benefit of a commission rebate
• Consumer-first approach

Non-exclusive flexibility

Unlike traditional agreements, Prevu’s buyer representation agreement is non-exclusive, which provides homebuyers with greater flexibility during their search. The agreement applies only to specific properties where you’ve engaged Prevu for tours, due diligence, or the offer through the closing process. This tailored approach puts you in control and allows you to explore the market without pressure.

Potential financial benefit of a commission rebate

One of the standout benefits of working with Prevu is our commission rebate. In the majority of scenarios when a seller offers a buyer’s agent commission or Prevu is able to negotiate a seller-paid commission, we pass a portion of that commission back to you. This potential rebate incentivizes savings and ensures you get more value out of your homebuying experience.

Additionally, in the rare scenario where a seller does not offer to pay buyer’s agent compensation, Prevu offers the most cost-effective buyer’s agent services compared to traditional brokers.

Consumer-first approach

Our goal is simple: to make buying a home in Colorado more accessible and affordable. By focusing on specific properties and offering a rebate, Prevu empowers you to potentially save money while maintaining the freedom to make decisions that best suit your needs.

Whether you’re touring homes, evaluating potential properties, or preparing to make an offer, Prevu’s buyer representation agreement is structured to give you confidence and flexibility every step of the way. It’s just one more way we’re redefining the homebuying experience for consumers in Colorado.

Interested in buying a home in Colorado? Browse listings and see how much you can potentially save with Prevu’s Smart Buyer Rebate.