Be on the lookout for these six red flags in the homebuying process. It could save you thousands, a real-estate attorney said.

• Douglas R. Miller has been a real-estate and consumer-protection attorney for more than 25 years.
• He said real-estate agents can work in their best interest, not their clients', if a contract is weak.
• Almost everything is negotiable and buyers should closely read contracts before signing, he said.

Buying a house is already a difficult process, and compounding that with an unhelpful — or even devious — real-estate agent as a co-pilot can add stress and even unnecessary costs. 

Purposefully confusing contracts and some real-estate agents' self-serving motives have some homebuyers getting themselves into tricky positions, said Douglas R. Miller, a veteran real-estate attorney in the Minneapolis-St. Paul area. 

Miller is also the executive director of Consumer Advocates in American Real Estate, a nonprofit that deals with consumer protection in residential brokerage, title insurance, and real-estate related legal services.

He said he's seen homebuyers jump through unnecessary hoops that end up costing them, especially during the housing-market frenzy that was 2020 and 2021, when some buyers felt rushed to purchase a home. (It's worth noting that some of those buyers already regret their purchases.) 

While real-estate agents can help guide you on the right path to homeownership, Miller said they can also be destructive in their attempts to line their pockets.

He's seen agents sneak unrelated fees into contracts as well as represent both buying and selling parties without disclosing it, which can be detrimental to unbiased negotiation. It's more common than you'd think, he added. 

Miller laid out six of the most important things to be on the lookout for in your contract when buying a home and working with an agent.

You can (and should) negotiate your right to cancel

If you're unhappy with your agent, you should have the ability to walk away without drama.

Yet, a buyer's agent, who works with potential buyers to help them find the right property, might make it hard to do just that, Miller said.

"If you are working with a trusted individual, like an attorney or a doctor, and you don't like them, you need to be able to walk away and go to somebody else," he said. Miller said it's essential to ensure any contract signed with the buyer's agent early on includes a right to cancel clause, where agents or brokers can be dismissed without repercussion to the client. He added, "Brokers can hold you hostage if you don't have a right to cancel in the buyer-broker contract."

Buyers' agents can sneak terms into fee agreements where even if you relieve them of their duties before a purchase is made, they may still be entitled to a commission months down the road. 

For example, if you use a different agent to buy a home, your first agent could potentially still profit.

The right to cancel clause allows buyers to dismiss their agent with no strings attached.

Make sure you're not on the hook to pay your broker even if a deal falls through

In fee agreements, agents can include terms where they collect commission even if you back out of a deal. Commissions are usually around 6% of the home's sale price and split between the buyer's agent and the seller's agent.

"You don't want to be paying a commission if the deal doesn't close," Miller said.

In order to prevent this, it's possible to negotiate that out of your contract early on. 

"It's perfectly acceptable if they only get paid when you end up buying a house," Miller said. "These are very reasonable terms that anybody should agree to."

Negotiating your broker's fee can be key in saving you money

In a home sale, buyers' agents are actually paid by the seller. In reality, their commission is baked into the total cost of the house, which hurts the pockets of the buyer if the commission is high.

Because of this technicality, negotiating the fee seems unrealistic because ultimately the buyer does not come up with the number to begin with, but buyers can recoup some of that money through a rebate, Miller said.

"You have to ask your broker for a rebate — these realtors are prepared for you to ask for a rebate," he said. "It's supposed to be a negotiated fee. I don't want the seller or the listing broker determining how much my broker gets paid. I, as the buyer, want to make that determination."

Be wary of double-dealing agents and brokerages

An agent representing both the buyer and seller may seem harmless — and even efficient by cutting out the middleman — but realistically, the financial incentives for agents can be too tempting to act in good faith as a fiduciary for both the buyer and seller.

Miller said representing two opposing interests in a transaction is illegal in other forms of law, but not real estate.

"You can't serve two masters," Miller said. "Realtors have a financial incentive to convince people to engage in dual agency because they get a double fee."

Miller warned to not only look out for one agent repping both sides, but also brokerages. Two agents under the same brokerage is also considered dual agency, Miller said.

He suggested that brokerages can negotiate in-house to receive the best commission instead of the best deal for their clients.

Don't always choose financial firms your agent refers you to

When your agent suggests a title company or mortgage lender to use, always take that advice with a grain of salt — your agent might profit off of the referral. "Affiliated business arrangement" is the textbook term, and it can be dangerous for buyers, Miller said.

"Title companies are supposed to be making important decisions about the closing and the insurability of a file," Miller said, which is lawyer code for a folder with all of your necessary documents that ensure your ability to buy the home. "If they're owned by a realtor who's got a $100,000 commission riding on the deal closing, guess what? They're just going to rubber stamp that deal."

Miller suggested looking for an independent title company to ensure a safe transaction.

Stay far away from arbitration

Arbitration is an alternative to litigation, meaning any legal dispute you may have during the homebuying process can be settled through arbitration instead of going to court. But it's not advantageous for buyers and they shouldn't agree to it, Miller said.

"They can't force you to agree to arbitration," he said.

Buyers should just stick to litigation if they have a dispute. One of the major consequences to agreeing to arbitration is that it waves your right to a jury trial. According to Miller, arbitration in real estate is often a kangaroo court that leads to biased outcomes.

"When we're talking about realtors, arbitration is set up through their own rules," he said. "That means the decision maker is selected by the realtors."