We’ve written before about the things to look out for when signing a Buyer Representation Agreement (BRA), (nickandhilary.com/beware-buyer-representation-agreement-toronto-real-estate) including the buyer’s potential commission obligation.

Quick recap, the BRA is a binding contract between a real estate brokerage and a client interested in purchasing property. 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%).

Let’s dig a little deeper into exactly what commission obligation a buyer client might have when under contract. Typically, a Realtor working with a buyer is paid a commission, via the listing brokerage, in the amount that is offered to any co-operating brokerage in the listing agreement. This listing agreement is a contract between the listing brokerage and home seller. Most of the time (in Toronto) the amount offered to the co-operating brokerage (buyer agent) covers the amount stipulated in a BRA.

However, if the commission offering in the listing agreement is less than the amount agreed upon in the BRA on a particular property, the buyer is obligated to pay the difference between what the Seller is offering the Co-operating Brokerage and what has been agreed to in the BRA.

This difference could be a significant amount of money, commissions are not standardized and there isn’t a set amount offered to Buyer Agents.

We suspect that a buyer paying commission directly to their Realtor will be more common place in the years to come as the real estate industry continues to change and adapt. This isn’t necessarily a negative thing, there are some potential bargains out there on for sale by owner properties and listings by brokerages not offering (much) commission to a co-operating brokerage. Some agents might, kinda, shy away from those properties. Not us, we recognize them for the opportunity that they are.

Bottom line when signing a BRA, read the fine print and understand what commission obligation you might end up having to your agent.