Buyer Representation Agreements – What You Need To Know

Effective July 1, 2014, Buyer Representation Agreements (BRAs) become mandatory in Alberta.  If you are interested in buying residential property and are the client of a real estate professional in Alberta, you will be asked to sign a written service agreement.

Frankly, I’m not a big fan of these written service agreements for buyers.  I enjoy building rapport with my clients so that there is mutual trust and respect.  I prefer having buyers that want to work with me instead of being contractually obligated to.

Fortunately, there are ways to retain the status quo going forward.

Consumer Relationships Guide

Before we look into the different BRAs, there is another mandatory form that real estate agents have a regulatory requirement to present and discuss with you.

It’s called the Consumer Relationships Guide pdf

Don’t worry – this particular form isn’t a contract.   Signing it simply means that you have read the Guide, discussed it with your agent, and got satisfactory answers to your questions.   It prepares you by explaining the different options you have about being represented (or not being represented) in a transaction.  This guide is a segue into having to sign documents about the type of consumer relationship you will have with your REALTOR®.

At the bottom of page 1, under the subheading “Your Responsibilities To The Agent” it states:

You must:
• give the agent any information or facts that could affect the transaction or their ability to act as your agent.
• pay the fees you’ve agreed to pay your agent. Your written agreement will list these fees.
• pay the agent’s expenses as outlined in your agreement.

Your responsibilities

Screenshot of part of the Consumer Relationships guide

The fees that are to be paid are outlined in the Buyer Representation Agreement that you will be presented with after you sign the Consumer Relationships Guide. This is where you need to pay especially close attention.

Which Buyer Representation Agreement Should You Choose?

These written service agreements will be mandatory, there’s no way around it.  What you need to know is that there are six different types of BRAs available from RECA alone.  Yes, six.

Three of them are essentially duplicates depending on which brokerage model the agent is working under:  designated agency or common law.

My brokerage, First Place Realty, is under common law so I’ll be reviewing the 3 different types of BRAs available to my clients.

Note: AREA also has BRAs that are slightly differently worded as well.  Read through each carefully before signing.

Non-Exclusive Buyer Representation Agreement 

There are two different non-exclusive agreement forms:

1. Non-Exclusive Buyer Representation Agreement: No Fee

By signing this BRA, you authorize my brokerage to seek payment from the seller or the seller’s brokerage. This is how you’ve been used to buying real estate all these years: with a verbal or implied buyer brokerage agreement.

It’s clause 6 that you need to pay careful attention to.    In this BRA, it’s short and sweet.  You will not be paying me directly out-of-pocket to have me represent you.   My brokerage will be getting paid through either the seller’s brokerage or the seller directly.   

You can download this BRA here: click to download pdf

(click to enlarge)

Fees for Non-Exclusive BRA #1 (click to enlarge)

2. Non-Exclusive Buyer Representation Agreement: Fee Payable 

This particular agreement sets out a fee. You authorize the brokerage to seek payment from the seller or the seller’s brokerage.  However, you will have to pay the fee or portion of it if it’s not fully paid by the  seller or seller’s brokerage.

If you read clause 6 in the screenshot below, you’ll notice it’s definitely more involved.

First, the agent stipulates what their fee is in 6.1.  Let’s say it’s 3.5% of the first $100,000 and 1.5% of the balance of sale price.

But what happens if the seller’s brokerage is only offering 1% of the total sale price?  Then you as the buyer would have to “top-up” the difference:  2.5% of the first $100,000 and 0.5% of the balance of sale price.    That’s likely an expense you weren’t expecting to pay upfront and out-of-pocket.

Notice, however,  in 6.4 that if the seller’s brokerage pays the buyer brokerage more than the fee indicated in 6.1, you would get the difference.

Whether or not it’s in your best interest to sign this particular BRA depends entirely on what the fee in 6.1 is and what seller brokerages are offering buyer brokerages in your home search area.

You can download this BRA here: click to download pdf

(click to enlarge)

Fees for Non-Exclusive BRA #2 (click to enlarge)

Exclusive Buyer Representation Agreement

Finally, the third type of agreement is the Exclusive BRA which is an entire page longer than either of the non-exclusive agreements. It’s the most restrictive of all three and where things can get really ugly for a buyer  if they don’t read through all the clauses carefully.

There are hold-over clauses, retainer fees, liability for expenses even if you don’t end up buying a home, and more.  Of course it all depends on how the BRA is drafted, but you need to pay extra close attention.

You can download the Exclusive BRA here: click to download pdf

Exclusive Fees

Fees for Exclusive BRA (click to enlarge)

Recap

Phew, that’s a lot of information to go through.  Here’s a  TLDR version of it:

Consumer Relationship Guide:  Not a contract.  Read through it, ask questions, sign that you have read and understood it.

Non-Exclusive Buyer Agreement-No Fee:  Sign this one if you want to stick to the status quo.  You don’t pay your agent directly.  It’s how you’ve been used to working with buyer agents all these years up until now.

Non-Exclusive Buyer Agreement-Fee Payable:  You may end up having to pay out of pocket to “top-up” the brokerage fees payable.  You may end up getting a refund.  It all depends on what the fee payable is in 6.1 and what seller brokerages are offering.

Exclusive Buyer Agreement:  This one is the most restrictive, but depends on how it has been drafted. (Ie. long or short holdover clauses, retainer amount, etc)  Read it over carefully.

The comments expressed in this article are for information purposes only and serve to highlight general principles. Each situation is different and you should seek legal counsel before pursuing any particular course of action. This article do not create a client relationship and does not constitute legal advice.

 

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