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What is a Buyer Representation Agreement?

What is a buyer representation agreementBuying a home is likely the largest purchase you’ll ever make and crossing that milestone without the services of a professional realtor, while not impossible, is the riskier move. Yet, deciding to play it safe isn’t as simple as hiring an agent.

It’s critical that you clearly discuss the relationship between you (the client) and your agent in detail – from the expectations of the agent to the services you require as a home buyer.

This is where a Buyer Representation Agreement (or BRA for short) comes into play.

What is a Buyer Representation Agreement?

A Buyer Representation Agreement is a contract that formalizes your relationship as a home buyer with a real estate brokerage. By choosing to sign a BRA, you enter a legal agreement to work exclusively with one brokerage for a designated period of time.

In turn, you receive the unbridled commitment of a real estate agent to find the exact home you’re looking for while ensuring your priorities are put ahead of all other parties, including the home seller and listing agent.

Quik Notes:

  • As a buyer, you’re not legally required to sign a BRA with a brokerage and you can work with a real estate agent without formally outlining your relationship with them on paper
  • If you do sign a BRA, you’re not required to purchase a home during the agreement period. The time frame of a BRA is completely negotiable
  • As an extra measure of protection, you must sign off on the contract’s expiry date with your initials if the duration of a BRA stretches over six months
  • View The Ontario Real Estate Association’s (OREA) Buyer Representation Form 300 here

Benefits of an OREA Buyer Representation Agreement explained

The real benefit of a BRA is it clarifies your expectations from your agent in writing.

In the Buyer Representation Agreement, you can outline all your requirements in detail – from the exact property type you’re looking for and your desired geographical location to your complete list of home must-haves. Moreover, the BRA clarifies the agent’s commission structure and compensation. This not only removes any room for potential miscommunication but also contractually commits your agent to find the right residence for your needs.

The Buyer Representation Agreement also fully entitles you to have complete access to all of your agent’s knowledge about the marketplace.

Lastly, a BRA protects your interests, as all the information you provide your agent must be kept confidential by law. For example, a BRA ensures anything you’ve told your agent that may influence home buying negotiations is kept confidential and is not shared with the selling agent (such as how much you would pay for a home).

For more information on the benefits of a Buyer Representation Agreement, please visit the Toronto Real Estate Board here.

Read the fine print

While there are benefits to signing a BRA, by doing so, you’re legally obligated to work exclusively with one brokerage for a specific time frame. Therefore, it’s highly recommended you read the terms and conditions thoroughly, as you may otherwise end up locked in a contract with a brokerage that is wrong for you for however long the Buyer Representation Agreement is active.

Below, TheRedPin has highlighted two important clauses that must be closely looked at by buyers reviewing a BRA:

  • Commission Clause

As a home buyer, you don’t pay any commission to a realtor as all commissions are paid by the home seller. Yet, if your agent doesn’t earn the minimum compensation outlined in the BRA, you could be liable to pay the difference.

For example, if the home you purchased only earns your agent a commission of 1% but the Buyer Representation Agreement states a minimum of 2.5% must be paid, you may be obliged to pay the remaining 1.5%. Depending on the price of the home, that could amount to several thousand dollars. (For more on real estate commissions, click here).

  • The Holdover Clause

The holdover clause (or holdover period) stipulates that if you purchased a home after your BRA with a brokerage has expired, in certain situations, you may still be liable to pay them a commission. 

The holdover clause only applies to specific properties you were introduced to while you were under an agreement, as outlined in the example below:

The brokerage you originally signed a BRA with introduced you to a property (Home X). However, you only purchased Home X after your BRA expired and you did so through a separate brokerage. If you signed paperwork to buy during the holdover period, you could still be on the hook to pay commissions to the original brokerage as it was your previous brokerage who was responsible for introducing you to the property. 

It’s essential you speak with your agent about the details of the commission and holdover clauses. Note: home buyers can negotiate both these terms with their respective agent and brokerage.

Buyer Representation Agreement cancellation

Buyer representation agreement cancellationIf you sign a Buyer Representation Agreement but later decide that you’re not satisfied with the services provided by your agent, the obvious question to ask is how do I terminate a BRA?

As a legal contract, signing a Buyer Representation Agreement legally locks you to working with a brokerage for a certain period of time. While some agents may agree to cancel the agreement early, they’re not legally obliged to do so and can take legal action in response.

How do you avoid the repercussions of breaking a Buyer Representation Agreement contract?

If issues arise after you’ve signed a BRA, communicating and raising your concerns with your agent is always a good first step. The agent may be open to referring you to another realtor in the same brokerage or canceling the agreement altogether. In the latter case, it’s highly suggested a lawyer review the paperwork to ensure you’re fully protected from legal recourse.

If your agent isn’t responsive to the idea of cancelling the BRA, directly contacting the brokerage (or in certain cases, the Toronto Real Estate Board) is an alternative course of action you can take in order to ensure your concerns are addressed. Remember, a BRA is a legal contract between you and a brokerage, not an individual agent, so working with a different realtor is still an option in many cases.

The post What is a Buyer Representation Agreement? appeared first on TheRedPin Pulse.

Source: Redpin

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