State of Minnesota
More about
Attorney General
Lori Swanson

Minnesota Attorney General's Office

1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101

(651) 296-3353
(800) 657-3787

M - F 8 am - 5 pm

TTY:(651) 297-7206
TTY:(800) 366-4812


Home Buyer's Handbook

APPENDIX A: Real Estate Agency Disclosures

If you work with a real estate agent, you will be asked to sign several contracts to clarify your relationship with the agent. Don’t sign the forms until you understand them. Make the agent keep explaining until you do. These forms are signed when you have your first significant contact with the agent (for instance, when you contact the agent about representing you), or when you are ready to sign a purchase agreement.

Most of these disclosures relate to something called “dual agency.” The term refers to an agent representing a buyer in an offer on a house when that agent actually owes a duty to the seller of the house. An agent in this situation has dual loyalties. This situation arises when your agent finds you a house listed for sale by his or her agency. In some areas there are thousands of homes for sale and just a few big real estate agencies, so there is a good chance your agent will show you homes listed by his or her agency.

Some people say it is nearly impossible for an agent to represent the buyer and seller equally because the seller is trying to get the highest price possible for a home, while the buyer is trying to get the lowest price. Owing a duty to the seller may mean that the buyer’s agent will disclose confidential information about the buyer to the seller. For example, the agent may disclose to the seller that the buyer is able to come up with another $2,000 to get the seller’s house, if necessary. State law requires agents to clarify their role and the information they will share before an offer is made.

Buyer’s Dual Agency Disclosure Agreement and Representation Election

This is a form signed at the first significant contact with an agency. A buyer signs this agreement to become either a “customer” or a “client.” The difference between the two is important.

A customer of the real estate agency is shown houses and is given help with the mechanics of the transaction. Customers elect not to have an agent help with price and terms of the sale. The agent is a messenger, merely delivering the customer’s offer to the seller.

A client of the real estate agency does have an agent assist them with price and terms of the sale. If you decide to become a client, you sign one of two agreements:

  • Contract for Exclusive Right to Represent Buyer: You agree to work only with that agent for a specific period and to pay the agent either a commission or flat fee. The drawback is that if you later decide you want to work with someone else or go it alone, you may still owe the agent a commission. These contracts have expiration dates, so you can always change agents later. On the positive side, an agent with an exclusive agreement may be more inspired to work hard on your behalf because he or she is assured of being paid when you buy a home. If you decide on an exclusive contract, put in a clause stating that your agent may contact sellers who are not using an agent to negotiate a commission. That way youíre not limited to just purchasing homes listed by an agency.
  • Contract for Nonexclusive Right to Represent Buyer: Signing a nonexclusive agreement will allow you to switch agents if youíre not happy. Of course, under this agreement, your agent may give priority to other clients with whom they are assured of making a commission.

Clients may also be asked to sign the following:

  • Addendum to Buyerís Representation Agreement. Some agencies ask you to sign this dual agency disclosure if your agent is not an exclusive buyer broker and finds you a home listed by his or her agency that you want to make an offer on. The disclosure form specifies that the agent will keep information about the price or terms youíll accept confidential. When agents work for the seller, their commissions rise with the price of the home. Itís wise to keep quiet about the price youíre willing to pay for a house in a dual agency situation.
    You may refuse to agree to dual agency if you are worried about the agent also representing the seller. Unfortunately, not agreeing to dual agency may prevent you from buying a home listed by your agentís company. You can cancel an agreement to dual agency for a particular property, if you choose.
  • Business Relationship Disclosure. This form is signed when you are ready to sign the purchase agreement. Whether you are a client or a customer, youíll receive this disclosure if you are working with a real estate agency that is affiliated with another company that provides real estate services. For example, several Minnesota agencies own title and mortgage companies. Your agent may receive a referral fee or other benefits if he or she directs your business to these companies. Agents can be paid according to the number of referrals they make to an affiliated company.
    Itís important for you to know that an agent could refer you to one of these ďinsideĒ companies because of the referral fee, not because the company provides good services. The costs associated with using the company could be higher than those of competitors. The best advice is to research lenders and title companies. You may end up using your agentís company, but if you do, youíll know itís truly the best deal for you.
  • Agency Disclosure to Buyer and Seller at Time of Offer to Purchase. This form also is signed at the time youíre ready to sign the purchase agreement. Once again, agencies and their regulators want to make sure you know if you are in a dual agency relationship. With this form, you will acknowledge your understanding before you sign a purchase agreement.


Problem with an Agent?

The Real Estate Recovery Fund Can Help.

The Real Estate Education, Research and Recovery Fund is run by the Minnesota Department of Commerce. The fund is used for educational purposes, and also to pay uncollected claims against licensed real estate agents. If you bring a lawsuit and succeed in obtaining a court judgment against a licensed agent for fraudulent, deceptive or dishonest practices, and cannot collect from the agent, call the Department of Commerce at (651) 539-1500 or 1-800-657-3602. Contact the department within a year after obtaining a judgment to see if you can collect from this fund.

APPENDIX B: Inspection Checklist

APPENDIX C: Sample Purchase Agreement

Next Page: Appendices D-G