The Buyer Representation Agreement

March 4, 2022

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The search for your dream home is an exciting, albeit frenzied, endeavor. It is filled with endless possibilities; do you want to live in the city or suburbs? Will you live in a condominium, townhouse or a detached home? This is essentially the fun part of home buying before you become unnerved by formal REALTOR® language and daunting paperwork.

After making the initial decision to buy a property, the next step would be to seek out a REALTOR®. Almost every prospective buyer looking to enter the real estate market will require the assistance of real estate professionals. They are the experts in the industry, and without them, home buying and selling would be a far more complex process. When you secure a real estate agent and begin to search for homes, the agents will eventually ask you to sign a Buyer Representation Agreement (BRA) prior to putting an offer down on a property. Although it sounds intimidating, the contract is ultimately in the best interests of both the buyer and the real estate agent. Having said that, it is important for you to understand the terms and clauses of the agreements before you sign one.

As a buyer, you need to stay informed and educated throughout the entire home buying process. After all, this will be your home so you will want to be knowledgeable and informed on the entire process. It can be challenging to put your furniture shopping on the back burner when a REALTOR® is asking for a signed buyer representation agreement, it is crucial to do your research before both parties consent to this contract. Ask questions. Seek clarity. Negotiate if you read something you do not agree with.

What is a Buyer Representation Agreement?

It’s a legally binding contract that defines the relationship between a buyer and a real estate brokerage. It details the services the REALTOR® will provide, commissions they will receive from the seller, and includes a specific time period where they agree to work together exclusively. One to three months is common, though that is totally negotiable: it can be two weeks or six months or apply only to a single showing.

Representation agreements can be written, oral or implied. However, your broker or salesperson is required by law to reduce the agreement to writing and provide it to you for your signature. The agreement should be in writing in order to protect the interest of all parties.

The language used in the document is formal in nature and homebuyers should ensure they comprehend the terms of the agreement. This is a great opportunity to clarify expectations, develop a relationship with your agent and most importantly, elevate the services you will receive.

A buyer representation agreement (BRA) is always signed prior to putting in an offer on a property.

One thing to remember: if there’s anything in the agreement you don’t agree with or don’t understand, say so. Ask lots of questions, and if you need to have someone else review it before you sign, that’s okay.

Why do REALTORS® ask me if I have already signed a representation agreement?

REALTORS® have a responsibility to ask if you been working with any other REALTORS® and if you have signed any agreements. If you have signed an agreement, a REALTOR® can not coerce you to break that agreement and they must only communicate with you through the REALTOR® whom you have a signed agreement, not directly with you.

REBBA 2002 – Dealings with other registrants

7. (1) A registrant who knows or ought to know that a person is a client of another registrant shall communicate information to the person for the purpose of a trade in real estate only through the other registrant, unless the other registrant has consented in writing.  O. Reg. 580/05, s. 7 (1).

(2) If a broker or salesperson knows or ought to know that a buyer or seller is a party to an agreement in connection with a trade in real estate with a brokerage other than the brokerage that employs the broker or salesperson, the broker or salesperson shall not induce the buyer or seller to break the agreement.  O. Reg. 580/05, s. 7 (2).

Here is an example of a consumer signing two representation agreements with other brokerages:

Rita signed an agreement that tied her to an agent for three months. But she didn’t realize she’d done so as part of the paperwork in making an offer on a house she didn’t get.

“I decided to find someone else, as I hadn’t been happy for some time, and purchased my current house with a second agent shortly after,” she says.

After the deal closed, the first agent won the commission by going to the Toronto Real Estate Board to enforce the existing contract.

A hearing panel said it was the second agent’s professional responsibility to determine if the buyer had signed an agreement with another agent.

When asked if she had an agreement with the first agent, she’d said no – since it hadn’t been brought to her attention.

“As a result of this, the second agent is now suing me in small claims court for the commission she lost in the hearing, plus interest and legal fees,” says Rita (not her real name).

Before you sign

Your broker or salesperson wants to provide you with the best service he or she can. To make the most of this relationship, it’s important to clarify your needs and expectations. To avoid misunderstandings later on, it’s important not to make any assumptions. You should also take time to ask what the broker or salesperson expects from you and what your obligations are.

Discuss all of the services that will be provided. Take the time to clarify the fees and costs related to these services and make sure the written agreement is clear.

REBBA 2002 – Information before agreements

10. (1) Before entering into an agreement with a buyer or seller in respect of trading in real estate, a brokerage shall, at the earliest practicable opportunity, inform the buyer or seller of the following:

1.  The types of service alternatives that are available in the circumstances, including a representation agreement or another type of agreement.

2.  The services that the brokerage would provide under the agreement.

3.  The fact that circumstances could arise in which the brokerage could represent more than one client in respect of the same trade in real estate, but that the brokerage could not do this unless all of the clients represented by the brokerage in respect of that trade consented in writing.

4.  The nature of the services that the brokerage would provide to each client if the brokerage represents more than one client in respect of the same trade in real estate.

5.  The fact that circumstances could arise in which the brokerage could provide services to more than one customer in respect of the same trade in real estate.

6.  The fact that circumstances could arise in which the brokerage could, in respect of the same trade in real estate, both represent clients and provide services to customers.

7.  The restricted nature of the services that the brokerage would provide to a customer in respect of a trade in real estate if the brokerage also represents a client in respect of that trade.  O. Reg. 580/05, s. 10 (1).

(2) The brokerage shall, at the earliest practicable opportunity and before an offer is made, use the brokerage’s best efforts to obtain from the buyer or seller a written acknowledgement that the buyer or seller received all the information referred to in subsection (1).  O. Reg. 580/05, s. 10 (2).

Don’t sign it if you don’t understand it

Never sign an agreement unless you are sure you know what it means, how long it will be in effect and what the different clauses mean. It’s one of the most important steps you can take to protect yourself. Take the time to read it thoroughly. Ask questions. Your broker or salesperson can’t provide legal advice, but they are familiar with these agreements and should be able to answer your questions and explain what the clauses mean and what effect they will have. Feel free to seek legal advice at any time.

If you choose not to sign an agreement, the brokerage is still responsible for outlining the services that will be provided to you by the brokerage.

What if I don’t sign?

AS I mentioned previously, your broker or salesperson is required by law (REBBA Code of Ethics) to reduce the agreement to writing and provide it to you for your signature…

REBBA 2002 – Buyer representation agreements

14. If a brokerage enters into a buyer representation agreement with a buyer and the agreement is not in writing, the brokerage shall, before the buyer makes an offer, reduce the agreement to writing, have it signed on behalf of the brokerage and submit it to the buyer for signature.  O. Reg. 580/05, s. 14.

REBBA 2002 – Agreements with customers

15. If a brokerage enters into an agreement with a customer in respect of a trade in real estate and the agreement is not in writing, the brokerage shall, at the earliest practicable opportunity, reduce the agreement to writing, have it signed on behalf of the brokerage and submit it to the customer for signature.  O. Reg. 580/05, s. 15.

The Real Estate Business Brokers Act Code of Ethics clearly states that loyalty ultimately rests with the client and that a broker or salesperson must protect and promote the client’s best interests. However, the Code also requires that a broker or salesperson deal fairly, honestly and with integrity and provide conscientious service to all clients and customers. You can decide to be a customer, rather than a client, but should be aware that the obligations of the brokerage will differ.

If you prefer to not sign either the Buyers Representation Agreement or the Buyer Customer Service Agreement; then there is no documented ask from you for services and no obligation upon the brokerage to commit time or resources to provide any services to you.

Why should I sign a Buyer Representation Agreement?

It protects both you and your agent.

Some agents are concerned with a customer using their services and then later trying to avoid paying them by going directly to the seller or to the listing agent. Most agents, if they aren’t sure a client will stick around, will be less inclined to spend a lot of time.

So, it does give your agent something you want them to have: the confidence to commit the time that’s needed to help you buy. There’s a lot more involved than just taking people on showings, opening doors and turning on lights. Great agents also educate buyers on value, guide them through every step of the process, submit offers, negotiate, support them through bidding wars – and fight hard for them when needed.

But you won’t necessarily have to sign on the dotted line right away. While some agents will ask for a BRA before agreeing to take you on a showing, others are a little more flexible and will wait until you’re ready to make an offer on a place. It’s kind of like a first date. After the meeting, you will know if it’s worth continuing (and that goes both ways).

I like to build rapport and trust before asking my clients to sign, so I tend to do what feels right organically. There have been times, with previous clients, when I just get them to sign the BRA before I submit their offer. But when I have potential clients who are looking for a very specific property I know will take a while to find, I’m more likely to ask them to sign earlier. It gives me the confidence I need to invest my time and resources. And with that confidence comes a big benefit to the buyer client: having an agreement ensures you’ll be prioritized over someone who hasn’t signed and get the best service from your realtor as possible.

Five questions to ask yourself before signing a Buyer’s Representation Agreement

Question 1: Is the information on the buyer representation agreement correct and accurate?

The agreement should be sure to include the following sections:

  • Property Type (Commercial/Residential)
  • Location of the Home (City, Province, Country)
  • Names of Brokerage and Home Buyers
  • Closing Date

Question 2: Am I happy with the length stated in the agreement?

The representation agreements should clearly outline the time period for which it is valid:

  • A buyer representative agreement (BRA) is typically valid for a time period of 90 days and rarely exceeds six months.
  • If the period of time exceeds six months, you will also need to initial the agreement document.

Question 3: Do I understand how my real estate agent’s commission will be paid?

Before signing the agreement, the client should know what the monetary expectations are between the buyers and the agent:

  • For most full service brokerages, the commission number is typically 2.0 – 2.5% for the buyer’s salesperson.
  • Usually, the seller pays the commission, unless the property is being sold by the owner, in which case the commission would be taken out of the sold price.
  • During the search for homes, if the listing states a lesser commission than your agreement, you are responsible for paying the difference.

REBBA 2002 – Properties that meet buyer’s criteria

19. If a brokerage has entered into a representation agreement with a buyer, a broker or salesperson who acts on behalf of the buyer pursuant to the agreement shall inform the buyer of properties that meet the buyer’s criteria without having any regard to the amount of remuneration, if any, to which the brokerage might be entitled. O. Reg. 580/05, s. 19; O. Reg. 539/20, s. 4.

Question 4: Do I understand the terms of the holdover clause in the BRA?

There should be one clear section in the Buyer Representation Agreement (BRA) regarding the holdover clause. Let’s say you signed a buyer representation agreement to work with a brokerage and were shown or introduced to a number of homes, but you didn’t enter into a deal on a property before the agreement expired. You could then choose to work with a different brokerage, but if you buy one of those properties during the holdover period, you could also owe commission to the original brokerage. The determining factor is when you were first introduced to or shown the property.

  • Holdover clause is the period after the buyer representation agreement expires that commission will still need to be paid to the broker if the sale of the property is done directly through the seller.
  • The order typically lasts 30 to 90 days after the buyer’s representation agreement’s expiration.

Question 5: Is my agent only representing me?

First a Buyer’s Representation Agreement is an “exclusive” agreement meaning both parties agree to work only with each other. A Buyer Customer Service Agreement is a “non-exclusive” agreement, meaning both parties agree to work with other people. There should be transparency and agreement between the client and salesperson in regards to who the broker is representing in this deal:

  • Multiple representations happen when the real estate agent or brokerage represents both the buyer and other buyers or the home seller in a transaction.
    • The Listing Brokerage must be impartial and equally protect the interests of the Seller and the Buyer. The Listing Brokerage has a duty of full disclosure to both the Seller and the Buyer, including a requirement to disclose all factual information about the property known to the Listing Brokerage.
    • However forms of price, motivation and previous offer information will remain confidential between the two parties in the real estate transaction.
    • In Ontario, a multiple representation agent or broker is required to disclose information to both the buyer and seller, and receive written consent from all parties.

The pros and cons of signing Buyer Representation Agreements (BRA)

The pros of signing a BRA

1) The Buyer Representation Agreement (BRA) is a negotiable form. It gives you the opportunity to outline your wants and needs for a property. If there are reasons why you, the client, are not comfortable with the details and services outlined in the buyer representation agreement, it can be addressed with the agents directly.

2) The real estate agent and brokerage must act with you. By signing the Buyer Representation Agreement (BRA) form, you become clients rather than customers. This means the real estate agents exclusively represent you (unless you agree otherwise) and ensures the brokerage’s responsibility to follow your lawful instructions, protect your confidential information and promote and protect your best interests. This is enforced by The Real Estate Council of Ontario (RECO).

3) The real estate agent acts as your advocate. Home buying can be a stressful endeavor, which is why it is important to solidify your relationship with a brokerage and real estate agent. If you run into a problem, agents will provide you with the right advice and service to ensure you’re making the best decision.

4) The document provides clarity on expectations. When dealing with a real estate salesperson in the purchase of a home, it is helpful to have a legal contract. If there are any reasons for concern or disagreement down the line, it helps provide clarity and order about what was expected from both parties.

5) The document lays out commissions. All information regarding commissions and fees will be made aware to the clients in the BRA. The Real Estate Council of Ontario (RECO) enforces a Code of Ethics that prevents a representative from providing false information. It confirms the relationship with the Buyer and brokerage, which the Listing Brokerage needs to effect payment to your salesperson and their brokerage.

The cons of signing a BRA

1) It limits you to one agent and brokerage. There have been instances where a broker has gone MIA in the midst of the consumer searching for their dream home. It’s always best to do your research on a real estate agent so you can make sure you will receive the services you deserve.

2) It limits your options for that time period and prevents you from a private sale. It happens – once in a while, you might want to purchase a home through a private sale because you know the sellers directly. Just understand that once a BRA is signed, your relationship with the real estate agent and brokerage supersedes the one with the seller.

3) You could be locked into an agreement regardless of your conflicting personalities. Sometimes the relationship between the real estate agent and the customer/client is less than ideal. In the search for a home, there could be a number of reasons for a clash of personalities. Be sure to choose agents who respect you as a client and are willing to put their customers ahead of their ego.

4) The Indemnification Clause means the agent is not liable for any physical condition of the property not disclosed or verified. REALTORS® aren’t property or building inspectors. When you buy a property, you buy any latent defects. This is why it’s important to properly inspect a property before making an offer to purchase.

What happens if I want to work with a different agent?

If it’s been a month and you’re just not seeing eye-to-eye, it’s possible to dissolve the agreement with a release, as long as both parties agree. However, there are situations where you could be opening yourself up to legal action. For example, if your agent helped you find a place you like, but you broke the agreement to buy that property privately…or you decided to work with your sister, who just got her license. The initial agent would be legally entitled to the commission.

Ultimately, we want to work with people who are committed to working with us. And remember, signing an agreement won’t cost you anything as a buyer: the seller usually pays 100% of the commission.

Why do agents ask for exclusivity?

Why would a buyer’s agent need to work with you exclusively, anyway? Because unlike most professionals who receive a steady paycheck, agents typically get paid on contingency and only by commission—in other words, a cut of the real estate deal if it goes through.

An agent typically works with a buyer for a few weeks to several months, and sometimes even longer. The agent’s efforts could include introducing the buyer to potential lenders and obtaining loan preapproval letters. Agents might email listings that fit the buyer’s requirements or call listing agents to determine the availability of properties. They’ll make appointments with sellers or their agents to show their homes, and they’ll drive their buyers from one neighborhood to the next, sometimes touring up to 10 homes a day.

They’ll research comparable sales. It’s a lot of work.

So when showing you properties, answering your questions, and negotiating on your behalf, a buyer’s agent is essentially working for free and covering the necessary expenses. As such, in order for him to devote the time and energy it takes to see this through, he’ll want to know you won’t bail and switch to another agent to get you through the final leg of closing—right when the first agent is expecting a to get paid for all his work and incurred expenses!

What is a buyer’s agent?

A buyer’s agent typically is the point of contact with all listing agents, doing the legwork of researching possible properties, asking questions to make sure they fit the buyer’s parameters, and setting appointments. They’re also supposed to help make sense of contracts, work with mortgage professionals, and assist with due diligence on a property.

Remember, a buyer’s agent doesn’t just find good potential properties for their client. And their job doesn’t end once you’ve made an offer and had it accepted. There are many more places where a buyer’s agent can help or harm. Ideally, they can spot things on the contract that are unfavorable to their client. They can refer to trusted professionals in their circle, like a trustworthy lender. They can also help their clients understand certain challenges or potential downsides to buying in a specific development or neighborhood. If you’ve found an agent who is strong in all these areas, then it could well be worth it to get them fully on your side by signing an agreement.

The other possible answer is that you’ve worked with this person a bit and want them to be a specialist for you, sourcing multiple properties and making sure you get the first look. If that’s the case, a buyer’s agreement makes it more of an official business contract, signifying that they’re part of your team in the long term and not just for a single transaction.

Looking for an agent who will help you navigate the market and find a great place to settle down? Let’s talk!