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Buyer Representation Agreements

I recently saw a question posted on an online form about buyer representation which I answered and thought it would be nice to post it here as well for your review.

In a nut shell, a buyer representation agreement is a contract which like any other contract is completely negotiable. It’s an express authority that a party is providing to a Brokerage to work on their behalf and exclusively to find, negotiate and acquire real estate. This can be for a lease or a purchase.

The buyer representation is a relatively new concept compared to traditional real estate. When I had started my study in real estate back in 1998, all rights of the REALTOR/Brokerage were owed to the Seller. Which meant that there was no one representing the Buyer in the transaction. This all changed with the implementation of Buyer Representation where the Brokerage was serving the buyer as a CLIENT vs. a customer.

You probably are thinking, why am I mentioning a brokerage as a party while the agreement is signed by the Real Estate Sales Representative /Broker? Legally speaking, any agreement such as listing agreement, buyer representation agreement, Seller Customer Service agreement, Buyer Customer Service Agreement are all between the client and the Brokerage and the Sales Representative / Broker has the express authority from the Brokerage to enter into agreements on their behalf.

The buyer representation is quiet detailed in what services are offered and for how long and what the end result would be including the commissions. Following are some of the concerns the buyers have when signing the agreement:

– What’s the difference between a Client and a Customer according to the buyer representation agreement?
The difference between the two are the duties that are owed to you as a consumer. If you choose to represent yourself and act as a customer, the brokerage can provide many valuable services in a fair and honest manner but as a Client, you’re owed more duties as they will be acting in a relationship of trust. The services include:

Disclosure: The Brokerage is supposed to disclose any information available to them that effects
the value of the property being acquired.

Confidentiality: The Brokerage is to keep any information provided to them in confidence. For example, how much would a buyer pay for the property. If the Brokerage is under an agency agreement, they can’t disclose that information where as in a customer service agreement, they are SUPPOSED to disclose the information to the seller if asked.

Competence: The Brokerage is competent in the service that they provide.

Obedience: The Brokerage will be obedient to your instructions. They will consult with you on your options and will do as instructed. A point of clarification is that the REALTOR are the expert in their profession which is real estate and their input is very valuable because they deal with situation day in and day out. Pay attention to what they have to say and understand the options presented before making a decision!

Loyal: They are to be loyal to your needs. This is a very important duty as it speaks to the integrity of our business. We are in position of trust when helping our clients transact in real estate and loyalty to our clients should be a priority. The client should also make it a priority to maintain the relationship of trust with their agent. Keep them posted on any issues that they might foresee coming so they can be avoided.

Accountability: The Agent is accountable for their input and actions. A lot of times, Agents are reluctant to provide advice due to this duty so they can’t be held accountable. I, on the other hand, like getting involved in the process and understand what the dire needs of my client are and to help them accordingly. This is the reason why my clients prefer to deal with me over and over again because they know I understand where they want to go!

– Can I find a property on my own if I have a signed agreement?
Yes, you can find a property on your own but you are required to notify your brokerage and have them transact it for you if you choose to do so.

– Do I have to pay commission when I sign an agreement?
Yes, legally you’re the client and would have to compensate for the agent’s services. However, in the MLS, it is not permissible to have a property listed with no commission to the cooperating brokerage. There are standards on how much is offered to cooperating brokerages depending on the region the property is being sold in.

When working with a Real Estate Agent, he’s NOT allowed to omit properties based on the commission being offered unless there has been a discussion about it in which you (client) had instructed that you’re not looking to pay for his services and can omit the properties. Also, a point worth noting is that the commissions are negotiable and can vary depending on the contract.

– What if I want to cancel a buyer representation agreement with a brokerage?
An agreement is two sided and outlines what the respective duties of each side is. If you or the brokerage is canceling an agreement without a cause then they would be found negligent and punitive measures can be taken against them. However, if any party is found to be not performing to the standards set in the contract then it’s considered due cause to cancel the agreement.

Contracts are negotiable and can include a cancellation clause given due notice to either side. This is something that can be negotiated between the parties.

I hope this is useful information! Don’t forget to comment on it or throw any questions that you may have and I’d be obliged to answer them.

The contributing factor,

Addy Saeed
Real Estate Sales Representative,
Re/max Active Realty Inc., Brokerage
Http://www.HeyAddy.com

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5 comments

  1. What if the property we are looking at has no agent? The sellers are the homeowners and they do not want to have an agent. The only way they will sell their home is without an agent (she works in a law office). We signed a form called “Working with a Realtor – The Agency Relationship” (OREA) is that the same thing?

  2. I’m not sure why you would be signing an agency relationship disclosure form when there’s no agent involved.

    You can transact without an agent, just make sure you have a lawyer review your documentations before you sign them so you know what you liabilities are.

  3. We have a relationship with our realtor – she sold both our houses in the last 3 months and we are actively looking for a new home. We have already put an offer in on another property (but lost to higher bidder) and we signed a Confirmation of Co-operation and Representation for for the property that we lost, but we also signed the form Working with a realtor when she first started showing us homes.

  4. The confirmation of cooperation and representation deals with the transaction that it’s signed for. So which ever property and agents sign the documents are the ones that are bound by it and it explain who represents who and in what type of relationship.

    Since you’re looking to buy a property without the help of a REALTOR, you need to confirm that you don’t have a buyer representation agreement with your agent otherwise you will be liable for their commission as well which is normally paid by the seller.

    I would recommend talking to your real estate agent and talk to them about the property that you’re interested in. Let her review the situation and help you purchase the property. It doesn’t cost you anything to use her services and she’s already help you transact two properties so there’s a high level of trust already in place.

    I hope this helps…

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