Buyer Representation Agreements: What You Need to Know Before You Start House Hunting

In the short time my husband and I have been shopping for a house (or condo, or townhouse, god we’ll take anything we can actually afford in this ridiculous market!), we’ve learned a ton. For instance, never look at a place without a handy house hunting checklist. Another thing we learned is the importance of understanding what a buyer representation agreement (BRA) is.

What is a Buyer Representation Agreement (BRA)?

What the what you ask? Yeah, that’s what I said when I first found out about it. In a nutshell, it’s a contract a realtor will get their buyer to sign that locks the buyer into using their services for a set amount of time. If you want to get technical, here’s what the Toronto Real Estate Board says about it:

The Buyer Representation Agreement signifies that for a designated period of time, the buyer has engaged a specific REALTOR® firm to work exclusively on his or her behalf at finding a property. The agreement confirms the REALTOR®’s commitment to make his or her best efforts for the buyer.

On one side of the coin, it makes sense. A realtor wouldn’t want to spend a bunch of their time showing places to a buyer only for that buyer to go ahead and purchase a place with another realtor or buy it without a realtor entirely.

It’s a simple way for realtors to protect themselves and their business efforts. That being said, I’m still not quite sure how this protects the buyer? Quoting the real estate board once again:

It’s an agreement that works in favour of buyers, guaranteeing the very best in real estate service.

Uh, vague much? From the research I’ve been able to do, there isn’t a lot of good stuff floating around about buyer representation agreements. To explain what I mean, here’s a completely hypothetical example of some of its hindrances.

Say a couple is looking to a buy a place and finally find a property they want to bid on. Along with the offer paperwork, the realtor asks the buyers to sign the buyer representation agreement to guarantee that they (the realtor) will get the commission on that sale if it goes through. That’s fair, I don’t think anyone would disagree with that.

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But here’s the thing, the realtor explains the contract to the couple, but doesn’t fully explain the time period portion of it all. Realtors can write in any time period they want on the contract, which, if you sign it, will essentially force you to use their services until that time is up.

Maybe that’s not such a bad thing. Maybe you really like your realtor and agreeing to stick with them for 3 months, 6 months or even a year is a fine idea by you. Hell, you probably won’t even need them for that long if you find a place to buy soon.

Yeah, that’s what I thought before I read Ellen Roseman’s article about some BRAs gone wrong. You see, if for some reason you want to get out of your agreement with your realtor and they refuse to release you from it, you’re pretty much screwed. What if you want to find another realtor you ask? Well, contractually you can’t use anybody except your first realtor, unless you’d like to get sued.

That of course is the worst case scenario. Hopefully your realtor isn’t dodgy and won’t hold you to a contract when the realtor-buyer relationship just isn’t working. But as I always say, better safe than sorry. Since the realtor can write in any time period into the agreement, you should make sure you are the one to choose the how long it’ll last for.

Personally, I’d say only go with a couple weeks in length, or better yet, have the time period apply only to one specific property (one that you’d obviously be making a bid on, so if you don’t get it, the time period portion of the agreement is nulled).

Besides being locked into one realtor, BRAs also stipulate the realtor’s commission. As a buyer, you normally don’t have to worry about paying your realtor. They are paid their commission by the seller and you get a home for practically free (minus the 30 years of debt of course).

But, as illustrated on Nick and Hilary’s blog, if your agreement says that your realtor will collect 2.5% commission on the sale, but the seller is only offering to pay 2%, you get stuck with the remaining 0.5%. Scary stuff!

So, before you start obsessing over MLS listings and go searching for a realtor, make sure you know the facts. If you have to sign a buyer representation agreement, make sure you are the one who decides on the time period and that the contract outlines clearly how the realtor’s commission will work (and if you can put a clause in there that protects you from paying any commission yourself too, all the better).

It would also be a good idea to ask for a termination clause to be added to the contract, so you can terminate the contract at any time if you are unhappy with your realtor’s services. And last but not least, if you really want to be safe, talk to a lawyer. It’s expensive, but not as expensive as being sued or having to pay your realtor an unexpected $25,000 in commission.

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Showing 27 comments
  • Rob
    Reply

    “That of course is the worst case scenario.”

    Actually, no it’s not Jess. Did you know that if you sign a BRA and then happen to find and buy a house all on your own, without any help from your agent whatsoever, that even if neither you nor the seller use an agent, your agent (whom you signed a BRA with) can still claim his commission on that sale, regardless of having not spent a minute working on it. Garth Turner has, in his blog, recommended that if at all possible to try to avoid signing a BRA at all. Of course, even if you are successful in doing that, don’t expect that agent to work as hard for you as for his/her other buyer clients who did sign such an agreement. That’s the way it goes unfortunately.

    The only other option is to house hunt without ever using any agent in the first place. And these days, in many parts of Canada (with the economy slowing down) and especially out in Alberta, it’s becoming a hot buyer’s market, as more and more houses go on the market and the asking prices are starting to drop.

    • Jessica Moorhouse
      Reply

      Maybe I should start looking for a property in Alberta? I bet I could get something for a fraction of anything I’d find in Toronto! Hmm…something I might have to think about.

  • Petrish @ Debt Free Martini
    Reply

    I remember signing one of those when I bought my home and I was so naive and so caught up with the shopping for a home that I gave no thought to it. I think that its awesome that you and your hubby are really paying attention to all the paperwork and reading the fine print. Good luck with finding a home.

    • Jessica Moorhouse
      Reply

      If we don’t, man I know we’d regret it. Buying a place will be the biggest purchase of our lives so I want to make sure we don’t do anything stupid really.

  • Taylor Lee
    Reply

    USA here, but at least state-side my understanding is that BRA’s are a consumer protection, required by law, to indicate to a consumer engaging with an agent their ties. The issue being that sometimes seller’s agents would be representing the buyer without the buyer knowing they’ve been led to some property by someone really interested in having in sold. Separately, with my realtor, I have signed a contract in which it states I am using his services exclusively (I can’t just find a house and get it sold to me on my own) in exchange for a 2.5% commission. Which to me has been fine, since my realtor has been great at pointing out structural issues with the property pre-bid and inspection, can point out to me the major failings of each condo, and can keep my mind settled without getting engaged in bidding wars without a firm basis behind what a property is worth.

    • Jessica Moorhouse
      Reply

      Thanks for the comment, always nice hearing the differences in real estate and BRAs in Canada and the U.S. 🙂

  • Will - First Quarter Finance
    Reply

    “if your agreement says that your realtor will collect 2.5% commission on the sale, but the seller is only offering to pay 2%, you get stuck with the remaining 0.5%. Scary stuff!”

    WTH, how is it my responsibility to pay what the buyer doesn’t want to???

    Nick and Hilary rock.

  • canadianbudgetbinder
    Reply

    I guess it pays to read before you sign. My wife said when she sold her first house she hired the realtor for 3 month periods full-stop. You are right though if you aren’t aware of what you are signing you might get looped into a year or even longer agreement. I think 3 months is reasonable and if you want to re-sign again then go for it but if the realtor sucks and many do then you can get rid of them and find another. We have a friend who is a realtor and trust but when it comes time to selling our house we’ll be doing it on our own.
    Good luck finding the “one”.
    Mr.CBB

    • Jessica Moorhouse
      Reply

      Even 3 months can feel like a long time if you want to fire your realtor. It’s probably best just to agree month to month or something. The shorter the time period, the better in my books.

  • Carly
    Reply

    So scary! I agree that people have to be vigilant when buying a home. I know we didn’t sign a BRA until we found a house we wanted to buy, but if that sale had fallen through, who knows how long we would’ve been stuck with our realtor. We didn’t pay much attention to it and we should have. Looking back, I have so many things to ask/question our realtor on as she was quite pushy.

    Also, we kept asking to see a house that had been on the market for weeks, but she kept saying no, because there as already a conditional offer on it, blah blah blah. Well, it turns out that she never even tried to get us to see the house since it was listed by Royal LePage and she worked for ReMax. We should have contacted the seller’s agent to see it, but we felt we had to keep an ‘alliance’ with her. Real estate is a completely different world to most, including myself!

    • Jessica Moorhouse
      Reply

      That sucks! The job of any realtor is to show properties to the buyer that meet their criteria. I can’t believe she did that. Not cool.

  • Shanondoah
    Reply

    I recently read a CBC article about a man who signed a contract thinking it was part of the sale of the house and his realtor sued him for commission on the house he bought a long time afterwards. When I purchased my place, my realtor never asked me to sign one.

  • Christine Weadick
    Reply

    Wow things sure have changed since we bought last!!! There are only a couple of realtors here that I know or trust to deal with. I’m in a small town so I tend to run into people at the post office or other places around town and we stop and talk about this and that. I can’t imagine doing that in Toronto!!! Good luck!!!!

    • Jessica Moorhouse
      Reply

      Definitely different in a big city like Toronto I think. Man, small town life sure sounds nice 🙂

  • Reply

    I’ve never bought anything that was valued at more than 1k- no car, no house, nothing. Honestly, reading so many things like this makes the idea terrifying to me.

    • Jessica Moorhouse
      Reply

      It really does. Buying a house sure isn’t simple that’s for sure!

  • ARBM
    Reply

    My opinion may be slightly biased, because my dad is a real estate agent, but reading this post got me a bit on the defensive of real estate agents. Don’t get me wrong, there are some shady people out there, and the stereotypical salesman can definitely have some shady qualities.

    However, a well done BRA with your agent works for both parties. It allows you to work out the details of your working relationship and puts the agreement on paper. For example, it allows you to put in legal terms that your agent will not be representing both sides of the transaction (something that is legally allowed, but feels a bit off to me – how can you best represent both sides?). I think it is very important to read through the agreement before you sign and make sure that you understand and are aware of what everything means, but a good real estate agent will walk through it all for you. If they don’t, then maybe you haven’t found the right agent.

    My personal experience with them (yes, I have signed buyer and listing agreements with my own father) has been great.

    • Jessica Moorhouse
      Reply

      It’s all about being informed that’s for sure. I guess no matter what, even if the real estate is great and trustworthy, at the end of the day they are sales people. Their job is to makes sales, so it’s always important to keep that in the back of your mind.

      • ARBM
        Reply

        Totally true.
        After reading this post, I actually had dinner with my dad and ended up chatting with him about BRAs. Turns out I was wrong… he actually doesn’t use them ever. He believes that if he does his job right, then his buyers will stay with him. I only signed a listing agreement with him… so I was wrong.

        So, I take back my words… and apparently I wasn’t as informed as I thought. Which of course emphasizes the point, make sure you are well informed. LOL.

  • Melissa
    Reply

    Wow, I have NEVER heard of this before! Maybe my (US) state doesn’t have this, or maybe the home my fiance bought last was too cheap for the realtor to care… yeah, that’s probably it haha.

    But wow, that’s… interesting. I can see the pros and cons, but personally, it doesn’t sound like something I’d be down with. I’d sign it if the contract stipulated “working with this realtor only for this house”, like you said, but I wouldn’t put myself in a 3 month or longer contract with one person! Shoot, if they can’t get the job done within 3 months, I’ll just take some time off from the whole home-buying shenanigans. I’m young. I’ll wait the older folks out… 😉

    • Jessica Moorhouse
      Reply

      Exactly my thinking. If it’s not working out after 3 months, I think you should have the freedom to walk away.

  • No Nonsense Landlord
    Reply

    It really depends on if you want someone working for you, or you want to buy a place the agent is working for the Seller.

    When the buyer is representing you, you get more protections. Plus, if they show many homes to you, and you go out and buy a home through some street sign, you should pay the one who spent all the time and effort on you something.

    Remember, you get what you pay for. And in this case, the fee is typically paid for by the seller.

    • Jessica Moorhouse
      Reply

      I’d like to think that BRAs are to protect the buyer, but I think they can be easily used to hurt the buyer too if they aren’t informed or they are working with someone not trustworthy.

  • Earl Williams
    Reply

    Rules and standards in the US appear to be different, as Taylor noted. In my opinion it’s essential for several reasons to use a buyer’s agent, but you do have to be careful. The US National Association of Realtors reported in its 2014 Profile of Home Buyers and Sellers that, “two-thirds of recent buyers only interviewed one agent before they found the agent they worked with.” That’s astonishing to me! Most people don’t buy a house very often, so why not choose an outstanding realtor, rather than the friend of your sister’s hairdresser?

    Experience and past performance are only part of what makes a realtor worthy of your business. In the end, its’ critical that your relationship be based on mutual trust and respect. Both trust and respect must be *earned*, based on how you interact with each other during initial meetings and showings. If a realtor insists on signing a BRA too early for your comfort, find another one you can trust. In my opinion you should only sign a BRA with a reasonable termination clause, and if a realtor isn’t OK with that, find another one who will trust you.

    Just do realize that each party wants the other to be trustworthy; the buyer wants their realtor to represent them vigorously and faithfully (fiduciary responsibility), and the realtor wants their buyer to not waste their time (by demanding lots of showings but then buying via a different realtor).

    Don’t be a guinea pig for a new, part-time, or just flat-out poor realtor, unless you’re really sure that the benefits will outweigh the risks! Find one of the 5% or 10% of realtors who are an outstanding buyer’s agent, committed to your homebuying success and interested in building a long-term relationship with you (since one day you will probably sell and they’d like you to remember them fondly).

  • Sam B
    Reply

    Southeast US here. We’ve bought three homes. The last transaction was twelve + years ago. At that time there were no BRA’s. We began looking again recently and were confident in our business savvy and past experiences. An agent who is an acquaintance was sure she could find what we wanted. We did find something. We, not the agent, but we then asked her to make an offer. She put together the offer along with a BRA and told us we had to hurry and sign everything to get the offer in. My spouse did hurry and sign and did not adequately look over the BRA paperwork (our fault). Nothing was explained about the agreement, termination clause, etc. I find it shady this was not presented to us well before making an offer. We had no time to look over the agreement, research it, or make any amendments.

    The agent did not represent us well and the deal did not culminate. Our final offer was not presented as we had instructed nor was it even presented via a written document. According to the BRA we remain bound for another three months.

    I have no issue with an agent having a right to protect their interests. However, this agreement (which is a standard one) is horribly one sided and favors the realtor. It states no recourse available to us. More sleuthing gives me a glimmer of hope that we can terminate and, hopefully, move forward. My experience with this agreement is awful. We will never sign one again without serious amendments. I am very agitated that it was not disclosed well before an offer. There also should be clear termination instructions on the form. What a mess.

    Reading through this forum and others leaves me with the impression only realtors are happy with these forced agreements. I’ve not read one positive comment from a buyer. Leads me to believe this needs to be reworked.

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