I’d like to buy a home, and my salesperson has suggested I should sign a Buyer Representation Agreement – is that necessary? What do I need to know? (Part Two)
In my last column, I wrote that a Buyer Representation Agreement (BRA) is a binding contract. Signing one commits you to work exclusively with one brokerage. The brokerage will owe you a fiduciary duty, which means that its staff must follow your lawful instructions, protect your confidential information, and promote your best interests in a transaction. In return, you agree that the brokerage will submit any offers on your behalf, and you will fully cooperate with your sales representative of the brokerage. This cooperation includes providing accurate personal financial information and telling your salesperson or broker about any properties that you find that may meet your requirements.
I also mentioned that you don’t have to sign a BRA in order to work with a brokerage (you’re also under no obligation to actually purchase a home if you do sign one), but you should consider doing so because your rights and obligations – as well as your needs and expectations – will be in writing. You can agree to the limitations of the BRA – length of time it is in effect, the geographic area it covers or the specific home it relates to.
The BRA will likely include a clause that will establish the terms of the salesperson’s compensation, and a holdover clause that will bind you to the brokerage for a period of time even after the BRA expires. If your salesperson showed you a home when the BRA was in effect, you could still owe their brokerage a commission if you purchase that same property later, during the holdover period. The term of a holdover clause must be clearly stated, and agreed upon by you and the brokerage.
I strongly encourage you to read the BRA and make sure you fully understand its terms and conditions before you sign. Get your salesperson to walk you through it, line-by-line, and consider showing it to a real estate lawyer.
A final word: if you enter into an agreement to purchase a property, and all conditions have been waived or fulfilled, you are expected to go through with the transaction. Failing to do so may be considered a breach of contract. You could lose more than just your deposit if you change your mind and attempt to walk away from a deal: you could face a lawsuit from the seller, and be required to pay the agreed upon compensation to your salesperson’s brokerage, and the seller’s brokerage, too. Get legal advice before you make a mistake that you may regret later.
If you have a question for Joe about the home buying or selling process, please email email@example.com.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.