Buying a home, particularly your first, is likely the most important purchase you will ever make. The huge sums of money involved leave plenty of room for error, which is why most buyers enlist the services of a professional real estate agent. They work closely with their clients, lending their expertise to determine the true value of properties, and aiding in selling or offer strategy in their relevant markets.
When it comes time for a buyer to choose a broker/brokerage to assist them, a buyer representation agreement (BRA) is usually the first point of call. The BRA is a document signed by a client that grants the realtor the exclusive right to represent them with their home search for a set period of time. It’s a mutually beneficial agreement, explains Zoocasa agent Emma Pace, and pretty common in the industry.
What is a Buyer Representation Agreement?
“The BRA ensures that you have a realtor committed to actively helping you in the home search process,” she says. “Your realtor owes you diligence in finding homes that suit your criteria, showing them to you, providing you sales data, etc. The BRA also provides piece of mind that your best interests are protected.”
A BRA is signed with a specific brokerage, with agents/brokers acting as representatives of the firm. The agreement states that if you purchase a home, you are committed to buying through the brokerage you’ve signed the contract with. If you purchase a home within the dates of the contract, the brokerage is therefore entitled to receive a commission of the stated amount in the contract.
Before signing the document, the two sides will establish key terms, including the length of contract, geographical location, and holdover clause.
What is a Holdover Clause?
A holdover clause protects the brokerage and states that if you enter into an agreement of purchase within a specified time after the expiration of the contract, you may still need to pay commission to the brokerage. This reduces the likelihood of a buyer switching brokerages without good reason.
“If a buyer wants to take a stand by saying ‘I’ll just use a different agent every time I put in an offer,’ you’re actually doing yourself a disservice,” says Pace. “There is no relationship built, and there is really no reason why any of those particular agents would work hard to get you the best price or provide you as much information as possible regarding the property and purchase.”
Buying a home hasn’t been easy in the 2017 Toronto real estate market. The start of the year saw rapid price inflation until the introduction of the Fair Housing Plan in April. That intervention saw prices stabilize somewhat, although sales numbers decreased markedly. Buyers clearly wanted to see if the market would drop further before committing, making for a confusing marketplace. This really increased the need for a broker acting as a sounding board as to what presented good value, but these partnerships don’t always work out as intended, even with a BRA.
What If You Want Out of the Agreement?
If the relationship between broker and buyer takes a turn for the worst, the two sides may come to an agreement and sign a mutual release to rid both parties of their obligations to each other. This is a scenario to be avoided, however, and generally the buyer representation agreement works out to the benefit of everyone concerned.
“A BRA is a two-way street – you show commitment to a professional, and they provide you professional service,” say Pace. “If you don’t want to show your commitment, then it is important to note you likely won’t receive professional service.”
