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Should I sign a Buyer Representation Agreement with a real estate agent?
When buying a home, it’s important to find a reliable real estate agent who has a strong understanding of the housing market and who will guide you through the search and purchase process in good faith. In Ontario, you are only required to sign a Buyer Representation Agreement (BRA) when you are ready to work with a particular agent and start putting in offers. The agent will then present your offers to the selling agents on your behalf.
A BRA or Form 300 is a contract between you (the buyer) and the real estate agent and their brokerage firm that sets out the terms of their representation in the home-buying process. It’s an agreement of representation, so when you sign this contract you are agreeing to have that agent exclusively represent you when putting offers forward to the selling agents.
In a BRA, the representing agent and their brokerage firm have a “fiduciary duty” to represent you. A “fiduciary duty” is a legal commitment to represent your best interest in the transaction as their client and to handle your confidential information responsibly. But just like the agent and brokerage has a responsibility to you, you must also understand your responsibilities.
Once you sign a BRA, you can see homes and look around for sale properties on your own or with another agent but you can only put in an offer with the representing agent you signed the BRA with. Failing to do that, can result in commissions owed to the agent and brokerage you signed the contract with even after you pay commissions to a new agent. Typically, a BRA term is anywhere between 90 days to 6 months.
Before you Sign
Always take the time to read over and understand all documentation you are being asked to sign by the agent. There is no obligation to sign any document if you are just viewing homes for sale. When you are ready to start working with a specific agent, it’s tempting to want to skim through documents in order to speed up the process. Rushing through the review process can be an expensive mistake because you might sign and agree to terms you weren’t aware of.
Be suspicious of agents that try to rush you through the signing process or that fail to explain properly what you’re signing. Sometimes, unethical realtors target newcomers because it can be easier to trick you into signing things you aren’t familiar with.
Don’t Sign Unless you Understand
Don’t sign anything unless you fully understand what you are signing. If you are unsure of what is being requested of you in the BRA or any other documentation pertaining to the home purchase, ask the agent to clarify and explain what you don’t understand. If you are still unsure of what you are signing, ask your lawyer for clarification first.
When reviewing the contract, make sure all the things you discussed with the real estate agent are clearly listed. Look for things like:
- Services included, agent and brokerage’s duties to you as the buyer and your duties to them.
- Length of representation (typically 90 days but could be 6 months or longer).
- If you sign a contract longer than 6 months the agent must ask you to initial the expiration date in acknowledgement that you agree to a term that is longer than 6 months.
- Fees and commission percentage expectations.
- Any other conditions or terms that are important to you that were discussed verbally.
Make sure to obtain copies of all documents the agent has you fill out and sign.
There is no obligation to purchase a home during the term specified in the contract. However, if you do wish to put in an offer, you are required to make the purchase with that agent and brokerage only. The expectation is that you are working with that agent now and they will be showing you listings and handling the offers. Whether you find a home on your own or through another agent during that time, the purchase must go through your representing agent.
Another thing to keep in mind is for example, if you signed a BRA with a 6 month term while looking for a home in Ottawa but get a job in Windsor and transfer there before the 6 months expires. If you want to make a purchase in Windsor instead, you would still be required to use the representing agent and brokerage in Ottawa. If you move outside of Ontario, this might change things depending on the rules in that province. Some provinces have different rules than Ontario. If you are house-hunting but also thinking of moving due to work reasons, always ask what happens if you sign the BRA and then have to move?
The Holdover Clause
The “holdover clause” refers to a period after your BRA contract expires and purchasing a home that was shown to you during the BRA term period. If your contract expires but you decide to buy a home that your representing agent showed you before the expiration date, you would still be required to pay them the commission fees during the holdover period if you go with a different agent. Make sure you ask how long this period lasts before you agree to it, so you are aware of when you are free to make a purchase with a different agent once the contract ends.
Breaking a Buyer Representation Agreement
If you are unhappy with how the agent is representing you or you feel that you were wronged in any way, you can file a complaint with the Real Estate Council of Ontario (RECO). RECO is the regulatory body that enforces the rules that real estate agents, brokers, and brokerages must follow. They will investigate the situation and let you know how you can proceed. The only way to terminate or break an agreement is if both the brokerage and you agree that the contract must be terminate. You will need to prove why you want to terminate the BRA or "fire" your agent so make sure you keep documented proof to support your request.
Choosing a Real Estate Agent
Ideally, you want to work with an agent that is referred to you by someone you trust. You can find out if the agent is licensed by researching them on the RECO website. The (RECO) Registrant Search page will give you information about the agent, their brokerage, and will disclose any charges or disciplinary actions initiated against by clients.
For More Information
- Buying your First Home in Canada - A guide for newcomers on everything you need to know about buying your first home.
- Looking to Move - Watch this video from RECO with 4 tips on what you should do before you start planning your home-buying activities.
December 16, 2021