If I sign a Buyer Representation Agreement, what are my responsibilities?
This past spring, I wrote that a Buyer Representation Agreement (BRA) is a legally binding contract that commits you to working exclusively with a single real estate brokerage for an agreed-upon period of time when you’re in the market to buy a home. While it’s possible to become a client of a real estate brokerage without entering into a BRA, it may be a good idea to sign one because your rights and obligations will be set out in writing.
When you’re a client, the brokerage owes you a fiduciary duty. The brokerage and its employees must follow your instructions, protect your confidential information and promote your best interests. In return, you will also have some contractual obligations.
As a client, you agree to submit any offers on a property only through your brokerage, which will then present them to the seller or the seller’s representative. You also agree to cooperate with your real estate salesperson, which includes providing accurate financial information, defining your needs, and telling them about any properties you come across that you may wish to purchase.
Even if you find the perfect home entirely on your own and then submit an offer without involving your salesperson, you may still owe the brokerage a commission if the seller accepts and the BRA is still in effect. And if you enter into a second BRA while the first is still valid, you could be on the hook to pay two brokerage commissions in the event that you purchase a home.
A BRA is a contract, just like an agreement of purchase and sale for a home. You should be mindful that you don’t have to buy a home during the term of the agreement, but if you submit an offer and the seller accepts, you are obligated to complete the purchase, as long as any conditions in the offer are either satisfied or waived. A buyer who attempts to walk away from a deal in bad faith could face both a lawsuit from the seller and a demand from the buyer’s brokerage (and potentially the seller’s brokerage) to pay the commission. You could also owe your salesperson a commission if you purchase a home during an agreed-upon period of time after the BRA formally expires. That’s if they showed you the property when the agreement was in effect and the BRA includes a holdover clause.
As a buyer, you also have a responsibility to perform your own due diligence. That’s why I advise consumers to interview at least three salespeople to find the one who is right for them, read and understand the BRA before signing it, carefully examine properties and surrounding neighbourhoods, ask questions at every stage of the process and consider having the appropriate inspections performed.
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.