Homebuyer Q&A
There have been a few changes to the homebuying process that impact how clients work with their REALTORS® – here are a few common questions (and answers) for buyers:
Why do I have to sign an agreement to start working with my REALTOR®?
An Indiana law passed in 2024 requires all licensed real estate brokers to have written agreements to formalize their professional relationships with homebuyers.
Consistent with this state law, buyers working with a broker who is a REALTOR® will sign a more specific representation agreement that includes more details on services and compensation before touring homes listed on an MLS.
These agreements help buyers understand their rights, the responsibilities of their broker/REALTOR® and compensation – which is always negotiable and not set by state law.
Why can’t my REALTOR® show me a home without signing an agreement?
Indiana law requires a written agreement for real estate brokers to represent a homebuyer (an “agency” relationship) – touring and talking about how a home matches your preferences (and fits your budget) likely crosses the line into representation, especially if you’re interested enough to start thinking making an offer.
MLS rules are even more specific than state law: REALTORS® must have signed agreements to represent buyers and show homes listed on the MLS.
What is the ‘agency relationship’ between real estate brokers and clients?
“Agency” defines the relationship between a real estate licensee and a buyer, minimum duties and other legal obligations of real estate brokers to their clients.
So for homebuyers, signing an agency agreement only puts the relationship that already exists in writing to confirm your broker is representing your interests.
Does this lock me into a contract with a REALTOR®?
As a consumer, you have choices when it comes to the agreement: Terms of a buyer agreement are flexible and can be short-term, signed for a weekend, a single day, or even specific to one property.
An agreement with a REALTOR® will also include details on compensation so you understand how your REALTOR® can be paid after a successful sale.
REALTORS® understand the that saving a down payment is tough, and cash is tight at closing; you’ll learn about options for seeking buyer broker payment from the listing (seller’s) broker or the seller directly as you negotiate an offer on a home, just like closing costs.
When do buyers need to sign a representation agreement?
A written buyer representation agreement must be executed when a buyer becomes a client; this doesn’t include casual conversation, general advice or some preliminary discussion of the real estate market and the types of homes you’re interested in.
An agreement should be signed before you share any confidential information with your broker; more specifically, an agreement must be signed with your REALTOR® before they can tour a home listed on an MLS with you (this includes “virtual” showings).
Does a buyer have to sign an agreement to be represented by a real estate broker?
Without a written agreement, a licensed real estate broker cannot provide agency services to a client in Indiana. Buyers can always choose whether to be represented by a real estate broker but cannot be represented without a signed agreement.
Buyers can browse homes online and even be shown a home on the MLS by the listing (seller’s) broker – however, there is no agency relationship between unrepresented buyers and listing brokers: They represent the seller only (unless both the buyer and seller agree in writing to have the same broker represent both sides of the sale).
Are buyers better off ‘going it alone’ without signing a representation agreement?
Clients sign written agreements with attorneys, financial advisors, accountants and other professionals to formalize these important relationships; you should expect the same protection and clarity through the process of one of the largest and most complex transactions of your life – buying a home.
There are literally hundreds of steps between spotting a home and taking possession with a successful purchase, all taking time and professional expertise; many of these steps have significant financial and legal ramifications that could be easily overlooked. Buyers deserve to have an expertise representing their interests – representation agreements only put this important relationship in writing.