Understanding a Buyer's Representation Agreement

When you're on the journey to buy a home, deciding whether to work with a real estate agent is a significant step. If you do choose to enlist an agent's help, you'll come across a document known as a Buyer's Representation Agreement (BRA). This agreement formalizes your relationship with the agent, but it's crucial to fully understand what you're signing. Here's what you need to know about a Buyer's Representation Agreement and why you should be cautious before putting pen to paper.

What is a Buyer's Representation Agreement?

A Buyer's Representation Agreement is a legally binding contract between you, the homebuyer, and a real estate agent or brokerage. This document outlines the terms of the agent's services, what you can expect from them, and the duration of your agreement. Essentially, it sets up a professional relationship where the agent commits to acting in your best interest throughout the homebuying process. You will be forced to agree to these terms before touring a home with an agent. 

Key Components of a Buyer's Representation Agreement

1. Scope of Services. The agreement will detail the services your agent will provide, such as finding properties, arranging showings, assisting with negotiations, and guiding you through closing. This ensures you know exactly what your agent is responsible for.

2. Exclusivity. Many BRAs are exclusive, meaning you agree to work only with the specified agent or brokerage for a set period. This exclusivity ensures your agent can dedicate their efforts to helping you without competition from other agents.

3. Compensation. The agreement will outline how your agent will be paid, typically through a commission that's a percentage of the home's purchase price, usually paid by the seller. Make sure you understand this and any potential additional costs.

4. Duration. The agreement specifies how long the agent will represent you. This period can vary, so choose a duration that matches your buying timeline and comfort level.

5. Duties and Obligations. Both you and the agent have specific duties outlined in the agreement. The agent must act in your best interest, maintain confidentiality, and provide competent service. You agree to work exclusively with the agent, communicate your needs, and cooperate in the process.

6. Termination Clauses. The agreement will include provisions for ending the relationship if things don't work out. Reasons could include lack of communication, unmet expectations, or changes in your circumstances.

Why am I forced to sign this?

Before touring a property, real estate agents are required to have you sign an agreement confirming that you will pay them for representation. Usually, this is a commission-based fee and by signing the agreement you are often bound to pay this commission.

Be Cautious Before Signing

While a Buyer's Representation Agreement can provide many benefits, it's crucial to be very careful before signing. Make sure you fully understand all the terms and feel comfortable with the agent's commitment to you. Here are a few tips:

• Read Thoroughly: Don’t rush through the agreement. Take your time to read every section and understand what you're agreeing to.

• Ask Questions: If there's anything you don't understand, ask the agent to clarify. A good agent will be happy to explain every detail.

• Consider the Duration: Ensure the time frame suits your needs. If you're unsure, negotiate a shorter term to start with.

• Understand the Compensation: Make sure you're clear on how much you will be expected to pay. You should never assume the seller of a house will cover this. 

Consider Alternatives: Before you legally bind yourself to pay an agent, consider alternatives such as Shay that will enable you to buy a house without an agent.