A Buyers Representation Agreement (BRA) is a contract between a potential buyer (or tenant) and a Real Estate Brokerage.
The general purpose of the document is to define the relationship between yourself (potential home buyer) and the real estate brokerage. The brokerage is required by law to reduce the agreement to writing and provide it to the buyer for signature before preparing an offer.
There certainly are benefits to the consumer that come from entering into this contract, the Toronto Real Estate Board has even dedicated a website that outlines them. So, rather than tell you about how freaking amazing it is working with a Realtor to purchase property (it turns you into a mystical house-hunting superhero!), I will just refer you to the site: http://www.brafirst.ca
There are a lot of advantages to entering into a BRA, no one is disputing that. However, we like to share all information, the pros and the cons. Now that we’ve got the pros out of the way, let’s focus on the items in the the BRA that consumers should be wary of.
One of my favourite (aka most ridiculous) lines that I hear Realtors say is that unless the BRA is signed buyers can’t even smell the leather in my car. Really? Unless someone is contractually obligated to work with you, they can’t even smell your leather seats? They can’t even talk to you through your car window since they might catch a whiff of that alluring leather scent emanating from your BMW 3 series? Anyway, I digress.
Here are items in the BRA that consumers should be aware of and fully understand prior to entering into the contract.
- It obligates you to work with a specific real estate brokerage for the duration of the contract term. So, if during the contract term you decide that you are no longer comfortable working that particular brokerage you have to get the contract terminated prior to working with another company. The brokerage is not obligated to terminate the contract.
- It sets out the commission payable to the real estate brokerage regardless of the amount being offered by the seller of a potential property. For example, if it is stipulated in the BRA that the brokerage will be paid 2.5% of the purchase price and the seller is offering 2% of the purchase price to the cooperating brokerage, you, the buyer, is responsible for paying the difference (0.5%). If you decide to pursue a property that is a For Sale By Owner listing and the seller is not offering any commission to a buyer agent, you are responsible for paying the entire amount stipulated in the contract.
- Be aware of the holdover section. If it is filled out and you go back and buy a property that was introduced to you while under contract with the brokerage you are responsible paying the commission stipulated if you buy it during the holdover period.
So, understanding the seriousness of this contract, here are some tips to working with a real estate agent as a potential home buyer.
- Interview three or four different agents before deciding on one. Many people interview potential agents prior to listing their property for sale, surprisingly few do prior to working with a buyer agent. It’s just as important. Hire someone who you are comfortable with, who you actually like and who knows the area that you want to purchase property in.
- If you are uncomfortable entering into a BRA right away and an agent insists on it, you can stipulate the length of the contract. Suggest that you start with a trial term of one or two weeks and take it from there. You can also enter into the contract and have it apply to only one particular property.
- Read and understand entire contract in advance. Here is a link to the plain language form: BRA Plain Language Form Still confused? Consider getting legal advice.