Court Ordered Buyer To Pay $37,000 Commission To Their Agent. 

In Vaughan, a couple bought a home in the overheated Real Estate market hoping they could sell their home for a good price. The market cooled, and they were caught with two homes depreciating. Since they could not sell their home at a reasonable price, they backed out of the purchase and settled with the sellers. Their Realtor sued for the commission based on the Buyer Representation Agreement his client signed which stated that even if a transaction is not completed because of the buyer neglect, they are obligated to pay the commission.

Buying a home involves signing piles of papers. Among the piles, is a Buyer Representation Agreement (BRA), a binding contract between the buyer and the Brokerage. The buyer must work exclusively with that Brokerage during the contractual period. If the buyer is under contract and buys a home from a different brokerage, then the buyer is on the hook to pay commission to the first brokerage while his current Realtor receives payment directly from the seller.

There are many benefits in signing a BRA. With a BRA, the Brokerage has a fiduciary duty to represent the client. A Realtor, under the law, must follow their client’s legal instructions along with other responsibilities such as duty of care, being loyal, maintain confidentiality, providing full accountability and full disclosure. Signing a BRA is not a legal requirement. The buyer can choose to be represented as a customer and does not rely on the Realtor for guidance. 

It is a good practice to review contracts at least 24 hours before signing. Also, you are entitled to keep a copy of every document with your initial or signature. When signing a BRA, there are a few key things to consider. The length of the contract is cardinal. In my practice, I came across contracts that are valid for over one year where the buyers are bound, and the agent refused to cancel the contract unless compensated. My advice is to sign a contract for two months. If you are satisfied with the performance of your Realtor, you can always modify the contract. 

Signing a BRA does not obligate you to buy a home, but pay attention to the holdover period. The holdover period is a clause in the contract that states that if you were introduced to the property during the time you were under contract and decided to buy that property when the contract expired, you will be responsible to pay the Broker’s commission if you buy privately. In the event you choose a different Realtor to represent you during the holdover period, then the commission owed is reduced by the amount paid to the other brokerage. It is best to keep the holdover period as short as possible. 

Another area of importance is the commission paid to the buyer Realtor. Usually, the buyer Realtor’s share of commission is paid for by the seller. If the commission on the BRA is higher than that paid by the seller, then the buyer is responsible for the difference. The normal commission is 2.5% but I saw agreements where the BRA suggest 4% and the buyers were caught paying the difference plus applicable taxes.

The BRA should be explained by the Realtor in its entirety to buyers at the earliest opportunity. Some Realtors usually arrange for the client to sign the BRA simultaneously with the Agreement to Purchase without explaining the contract. It is crucial to read the fine prints since BRA can be difficult to cancel.   A BRA can be very specific. Buyers can stipulate the type of property, for example residential, in a specific area such as Ajax.  Some buyers would sign a Buyer Representation Agreement for a specific property and limit the contract to a few days.

BRA is a legal document and many buyers got trapped into long term agreements they wish that they never signed. The bottom line is to choose a Realtor you can trust and review all the contracts prior to signing them. With the BRA, keep the contract short and review the commission structure carefully.