The Iowa Association of REALTORS® now offers an Exclusive Buyer Agreement (EBA) for use by members, local boards/associations, and brokerages.
In 2024, the National Association of REALTORS® and IAR are working to make Exclusive Buyer Agreement a standard in Iowa to best equip members for the changing real estate landscape.
The form, created by IAR and the IAR Forms committee, aims to help elevate the real estate business by creating contractual relationships, explaining REALTOR® value propositions to buyers, and protecting member interests in the transactions.
What follows is a breakdown of the sections of the new IAR Exclusive Buyer Agreement. The instructions provide some direction on the purpose of certain sections and the intention for filling it out. If you have any questions related to the document, you can reach out to legalhotline@iowarelators.com.
EXCLUSIVITY, RETAINER PERIOD, AND PROTECTIVE PERIOD
The Exclusive Buyer Agreement is meant to be an exclusive agreement between buyer and broker.
By signing the agreement, the buyer represents that they are not a party to another agreement and will not sign another Exclusive Buyer Agreement during the retainer period. Signing with other brokers during the retainer period would be a breach of contract and they would be liable for certain damages.
A restriction with the exclusivity is that it’s limited to the geographical region as agreed up by the parties in section 8 of the Exclusive Buyer Agreement. The purpose of this is in the event that a buyer is working in two different geographical markets (for example Davenport and Sioux City) having two active Exclusive Buyer Agreements is permissible. If section 8 is not filled out, the agreement will be effective for the state of Iowa.
In Section 3, the broker will fill out the retainer period, which may not exceed twelve months unless a pending closing exceeds the twelve month timeframe. This section also contains a termination option specifying the broker may terminate at any time. There are three ways in which this agreement may be terminated. One, the retainer period runs out, two a transaction is completed, and three the Broker terminates it.
In Section 4, the protection period is left blank so the broker can set a time period. It is triggered when a buyer tries to purchase a house with another broker within the stated time frame contained in this section that was presented to them by the broker who is a party to the Exclusive Buyer Agreement. The consequence for a buyer engaging in this behavior results in default causing payment to be due under section 11 (Brokers Compensation).
An important note here is that properties must be presented to the buyer from the broker in writing in order to be enforceable. Due to the protection period section, IAR highly recommends that our members get the Exclusive Buyer Agreement signed before showing a buyer a home and to keep track of what properties you show in the event that the Exclusive Buyer Agreement is terminated.
DUTIES & OBLIGATIONS
The next three sections of the Exclusive Buyer Agreement relate to the duties and obligations of the buyer and broker.
Section 5 relates to the minimum requirements of a brokerage service agreement in Iowa law.
Section 6 outlines the obligations the broker owes to the buyer and section 7 is the duties the buyer owes the broker. Explaining these duties to the buyer will be vital in preparing these agreements.
If the buyer is not compliant with their obligations the broker has the option to terminate the agreement. However, failure of a broker to follow the duties of the contract would result in a breach of contract and could allow the buyer to terminate the contract. While there is no written termination section for the buyer in the Exclusive Buyer Agreement, there is always the right of a party to terminate for breach of contract. If a broker/agent are not meeting the standards of section 5 and 6 of the Exclusive Buyer Agreement, it is well within the right of the buyer to terminate the contractual relationship. Therefore, it is vital that IAR members clearly understand their obligations to the buyer and take reasonable efforts to meet the contractual standards.
A final note on section 6, there is a clause in the Exclusive Buyer Agreement stating that once a buyer is signed to a purchase agreement, unless authorized in writing, the broker does not need to continue to seek additional properties. Further, the clause states that the broker is not obligated to show properties when there is no written agreement to pay compensation to the buyer’s agent.
The “Property Type Desired” in section 8 is where your buyer will fill out types of property and geographical range where your search will take place. The property types can be quite basic, such as residential property, condo, or acreage, or more specific, such as a four bedroom house. For filling out geographic locations, the form provides several examples such as specific cities, counties, or metro areas. The city/locations portion does tie to the exclusivity portion of the contract, so brokers should be aware of what locations are being filled out by the buyer. The broader the scope the better.
For example, if someone is searching for a home in Des Moines, the broker may recommend putting “Des Moines metro area” as that would encompass the surrounding suburbs and counties. A broker can show properties that do not exactly match what is described in this section. The goal is to establish a basic idea of what the client is looking for.
DUAL AGENCY & COMPETING BUYERS
The next two sections, section 9 and 10, relate to dual agency and competing buyers. Section 9 states dual agency may arise, is permissible, and requires written consent by both buyer and seller. The Competing Buyers provision in section 10 is another protective provision for brokers. It establishes that a broker can show a property to more than one prospective buyer, the broker can show the same properties they show the buyer to other prospective buyers, and the broker can act as real estate broker to help the prospective buyer secure competing properties the Buyer may seek to acquire.
BROKER COMPENSATION
Broker’s compensation is a critical component of the Exclusive Buyer Agreement and provides the guidelines for how the Broker will be paid for their services. First, the broker will put their fee in the blank space available. It can be a percentage, flat rate, or other form of compensation. The compensation section then describes a prioritization of who will pay compensation to the broker. The contract states that broker will prioritize compensation from the seller, listing broker, or an offer of compensation through the MLS. Brokers must show and document reasonable efforts to secure compensation through those sources before they could move to receiving compensation from the buyer. The Exclusive Buyer Agreement further states that if the offer for compensation is higher than the fee specified in the contract, the broker is entitled to the difference, and if the offer for compensation is lower from the above entities, then the buyer must pay the difference. Finally, if compensation cannot be secured from the above parties, the buyer must pay the negotiated fee.
The broker compensation section also talks about default. If the buyer fails to comply with the Exclusive Buyer Agreement, they must immediately pay the fee specified in section 10. The collection of the fee would also include attorney fees that result from seeking legal action to enforce the default provision of the contract.
STANDARD LANGUAGE
Sections 12 through 19 are standard contract terms, including disclosure of buyer’s identity, specifying broker provides brokerage services only, request to complete form document and permission to contact, modification of the contract, communication of agreement, a clause stating this is the entire agreement, assignment of the contract, and a clause on the severability of the contract.
Section 20 and 21 are indemnification and remedies of parties. These sections are mirrored off sections from IAR’s updated Listing Agreement that was released in 2023. These sections are meant to maximize the legal protections for the broker and protect their interest in the contractual relationship. IAR highly recommends you keep these sections intact when working with Buyers, but can be altered if the buyer is resistant to certain clauses.
Section 22 and 23 are the fair housing disclosure for the buyer and a clause stating that the document could be signed by electronic means and it would still be valid.
Finally, the signature block is a standard block reflective of other IAR forms.
View the Exclusive Buyer Agreement at Form Simplicityor Remine.