I’m buying a house, and I’ve found a great salesperson who wants me to sign a BRA. Is this just a formality?
I’m glad you’ve found a salesperson who’s right for you; I’ll assume you interviewed at least three candidates, first. While I’m sure your new salesperson is eager to get started and demonstrate value to you, buyers and sellers alike have a responsibility to exercise due diligence. That includes reading and understanding every document you’re asked to sign. A Buyer Representation Agreement is a legally binding document. Placing your signature on one is not a mere formality, and you don’t have to sign one.
You can expect your salesperson to walk you through the proposed BRA, line by line, and encourage you to ask questions if anything is unclear. Since you will need a real estate lawyer to finalize any transactions, it’s a good idea to hire one early in the process and show them a copy.
A BRA establishes what property types and geographic areas you want to look for, lists the services that will be provided by the brokerage, determines the commission that will be owed to the brokerage, and sets a time commitment – if it’s more than six months, you will be asked to initial the expiry date, in addition to signing the document – this is a legal requirement to ensure you understand how long the contract will be binding.
The BRA will likely include both a holdover clause, which could bind you to the brokerage for a period of time after the agreement expires (meaning you could owe a commission if you purchase a home that was shown to you by a representative of the brokerage), and a commission clause which sets a minimum compensation. It’s important that you fully understand how long the BRA will last, and how your salesperson’s brokerage will be paid, and that you get any promised commission rebates documented in writing.
Once you’ve found the home you wish to purchase, you should review the offer with your salesperson and your lawyer to confirm that it meets your needs regarding the timing of pre-closing visits, the inclusion of items (such as kitchen appliances or a security system) in the sale, and any terms you feel may be necessary, such as making your offer conditional upon the home successfully passing a home inspection. And if you have your eye on a lovely antique chandelier, make sure it’s included in the Agreement of Purchase and Sale before you sign.
A little due diligence can go a long way. RECO does a lot to ensure a fair, safe and informed marketplace, but remember: we can’t get you out of an agreement you’ve signed with a brokerage or a buyer/seller.
If you have a question for Joe about the home buying or selling process, please email firstname.lastname@example.org.
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.