A BRA, or Buyer Representation Agreement, is a standard agreement in real estate. It cements the relationship between a home buyer and the agent representing them. Its a legally binding agreement that means that the buyer has a representative who is legally bound to look after their best interests. This same agreement also comes with responsibilities for the home buyer.
So let’s say you are planning to buy a home in Barrie, Ontario. You meet with a Real Estate agent and they ask you to sign a BRA. They are going to go through all the clauses and explain it to you. Some will explain it differently, put emphasis on different sections. Without going through the entire document here I want to highlight some of the parts of the agreement that will have the highest impact potentially.
Location
In the BRA you will have to fill out a location that its valid for. That means that whatever location you put here, if you buy a home you will be represented by this agent. If you don’t use this agent they will still legally be entitled to the commission. So if you’re buying in Barrie, you may put down Barrie. If you’re buying in Angus you could just put down Angus. You can even be more specific than that. You could put down specific street names or even just a single property. That’s right, you could legally sign a BRA for every single property you see with a different agent. Is that smart? Of course not, but its legal.
If an agent is asking you to sign for “GTA” or even “Ontario” then run away. That is way to broad. You want something specific and clear. If it says Barrie that means the Barrie city limits. If you you buy a house one step outside they aren’t representing you. Where does the GTA end? Is that clear boundaries? Some may say Barrie is part of the GTA, others won’t. Its too vague. Ontario is just too wide. No agent has the local knowledge of the entire province.
Time Frame
The second part to watch out for is the time frame of the agreement. So you’ve listed Barrie as the location but how long is that valid for? Its only applicable to that location for the amount of time specified in the agreement. Here, just like in the location section, you can make it as specific as you want. It could be for one day, legally it could probably be an hour but thats just a waste of time. It could also be for a year or even more.
If you sign a BRA for more than six months you have to specifically initial an extra spot to acknowledge the long length of the agreement. That should give you a clue as to how long most BRA’s are usually signed for.
Why is this important? Because during that time frame you are legally bound to use that agent to buy a property in the area listed. If you have a falling out during that time and they don’t release you from the BRA you have to either wait out the time to buy your next house or have them entitled to commission.
Commission
While the buyer doesn’t typically pay their real estate agent directly you could come up to situations where you owe them money. So lets take a look at a hypothetical situation and I’ll randomly pick some even commission numbers to make it easier for the sake of calculations.
So someone selling their home in Barrie has hired an agent to represent them. They charge that seller 5% total commission. They are going to give 2% to whoever represents the buyer and keep 3% for themselves. Now you have on your own signed a BRA with your agent. In the commission section you have actually agreed that their compensation will be 2.5%. There is a 0.5% discrepancy. So what happens? Technically, the buyer is responsible for that extra 0.5%.On a $300,000 home that means you would have to come up with an extra $1,500.
Just like with time frame and location there is no standard for what has to be put into this section. On the extremes you could put $0.01 or $1,000,000. That part needs to be be dealt with with your real estate agent. Just make sure you have the conversation before you sign about what will happen if the amount offered by the seller as compensation is different than what you’ve signed. How will the shortfall be made up?
A Buyer Representation Agreement is a legally binding document. You do need to know the implications that signing it can have on you. If you’re buying a home in Barrie you will most likely sign a BRA, so please make sure you understand it before hand.
