From the desk:Buyer's Agent (Investor-Focused)

Six month tail clause in a buyer agreement, someone explain the risk to me plainly

I read the buyer-broker agreement an agent sent me before I signed anything, which apparently makes me unusual. Three clauses I want plain-language help on, because I'm coming at this from the paper side and I've never been a buying client before.

One. "Protection period: 180 days following expiration." As I read it, if she shows me a house in March, we don't buy it, the agreement expires in June, and I buy that same house in September from the owner directly, I owe her the full fee. Is that the standard reading?

Two. The property description says "residential property of any type within the county." There's no price range in there and no buy box. So it looks to me like any purchase in the county during the term is covered whether she was involved or not.

Three. Compensation is "3% of the purchase price, or the amount offered by the listing broker, whichever is greater." Which means if a listing side offers 3.5%, she gets 3.5%, and if it offers nothing, I write a check for 3%.

I'm not trying to argue her out of getting paid. She's good. I just want to understand what I'm actually agreeing to before I sign, and I'd rather hear how people who've signed these read them than have the agent tell me it's boilerplate. Which is what she said when I asked.

What's the version of these clauses that a reasonable investor buyer signs?

Answer

2stephen_ok9CO2CPRO6

Your reading of clause one is how those are generally meant to work. The point of a tail is to stop a buyer from touring with an agent, letting the agreement lapse, then going around her. That's a real thing agents get burned by, so the clause isn't unfair in principle. Whether 180 days is reasonable and how a court would apply it to a specific fact pattern depends on your state and your facts, so a real estate attorney is the person to read your version.

What buyers usually negotiate is scope rather than existence. Instead of the tail applying to everything, it applies only to properties she introduced you to in writing, with a list attached or maintained by email. Then the tail can be 180 days and you don't care, because the covered set is four houses you both know about.

Clause two is the one I'd push on hardest. "Any residential property in the county" with no buy box means she's paid on your kid's condo purchase.

3 replies

3brandonlee36Passive

The greater-of language in clause three is common and I've stopped signing it. It means she never earns less than the listing side offers and can earn more than you agreed, so your fee is set by a stranger's marketing decision. I ask for a flat percentage or dollar amount, with any listing-side contribution credited against it. Then my number is my number and if the seller side pays it, great, and if they pay half I pay half.

Also, six units in and the thing I wish I'd learned earlier: the agreement is with her brokerage. Ask what happens if she moves.

1aaron_fitz10 Get yoursPRO6

She said it's boilerplate and that's true in the sense that it's the state association form most people use. Boilerplate doesn't mean unchangeable. Every one of those blanks got filled in by someone and can be filled in differently.

@meridian's fix on clause one is the one I've actually used, a written list of introduced properties. It took one email. If she won't do that, or she won't narrow the county-wide language to something like two to four unit residential between $120k and $400k, that tells you more about the relationship than the contract does.