The first step to buying a home is finding an agent you can trust. This person will be representing your best interests and helping you meet all of your real estate needs.
You want someone who knows the area well, has great negotiation skills, and most importantly, is dedicated to serving their clients with honesty and integrity.
For first-time buyers, buying a home can be an intimidating process. There are so many things to remember and do that it’s easy for something to slip through the cracks or get forgotten.
While you may have done your research on how much house you can afford, what kind of loan options are available to you, and what neighborhood will fit both your needs and budget best, there is one more important part of the process that first-time homebuyers often overlook: The Buyers Representation Agreement.
The following blog post will explain what is a Buyers Representation agreement and why it’s important for every buyer to have one before they start house hunting!
What Is A Buyers Representation Agreement (BRA)
A Buyers Representation Agreement is a legal contract between a buyer and a real estate agent. It outlines the various responsibilities of both parties, as well as compensation for services rendered.
In addition to providing representation in the search for appropriate properties, your agent will provide assistance with negotiations on behalf of you as well as help you move forward with the purchase process.
In a buyer’s representation agreement, the buyer’s agent is obligated to get the best price and terms for the buyer.
When there is a buyer’s representation agreement the buyer’s agent has a fiduciary duty to represent the buyer.
The Listing Agent has a fiduciary duty as well but when there is a buyers representation agreement between a Buyers Agent and a Buyer.
The buyer will then need to make sure that they are going thru their Agent for all communication about the transaction.
Listing Agents are not supposed to be in communication with the Buyer. When a Buyer Representation is signed, typically a Listing Agent will refer the buyer back to their agent.
How Does A Buyer Representation Agreement Work
The buyer representation agreement outlines what the duties are for each party. It also states how the commission is to be split between them, what happens in case of default, and any other conditions that both parties have agreed on.
A buyer representation agreement must be drafted by an attorney or is typically a form that is presented by the Real Estate Agent that has been prepared by their local Real Estate Commission.
Note: The name of the form will vary from state to state.
The way that it works is when you are looking to purchase a home you will call up an Agent who will set your appointment to view the home.
There are normally three ways the Agent will present the agreement.
The first way is they will present this agreement when they show you the first or second home.
The second way that an agent will present this agreement is the moment that you call them up and want them to show you properties.
The third way would be when you decide to put in an offer on a property and they will send over your Buyer’s Representation along with the Residential Real Estate Contract.
How Are Commission Paid In A Buyers Representation Agreement
A commission is a fee paid to an agent or a broker. Commissions are usually paid after the sale has taken place.
The commission is one of the major income sources of agents because agents are compensated through commission rates that are either flat rate, percentage rates, or tiered rates depending on the structure between the Real Estate Agent and the Broker.
So who pays the commission? When you think about who pays commission you have to know that sometimes the Listing Agreement might not cover all of the commission that is in the agreement that you sign with the buyer’s agent.
This is why you must understand the Buyers Representative Agreement.
For example, if you sign a Buyer Representative agreement with the agent, and you agree to pay the agent 3% to find a property. Your Agent views the MLS and sees that the property you want to make an offer on only wants to give the Buyers Agent 2.5%. Then there is still a .50% that is due to your agent.
Typically, you will cover the .50% because you said in your agreement that you would be willing to pay 3%.
So now let’s take a look at how this looks in a scenario.
You find a property you like which is listed at 425k. Your agent goes and takes a look and realizes that they are only willing to pay 2.5%.
This would make the commission amount $10,625.00. You signed with your agent on the Buyers Representation Agreement to pay 3%.
$425,000 x .03 = $12,750.00. This is a difference of $12,750.00 – $10,625.00 = $2,125.00.
This is something to keep in mind when signing a Buyers Representation Agreement. Stating that you understand that you will pay your agent the amount that you and your agent agree to.
How To Fill Out A Buyer Representation Agreement
How To Fill Out A Buyer Representation Agreement
So you want to know how to fill out a Buyer Representation Agreement? In the next few paragraphs, we are going to explore what this looks like.
The first part of the Buyers Representation Agreement will be where the Real Estate Agent will have your name and information filled in.
Below that you will see the Broker information filled in. This is where the Real Estate Agent will fill in the name of their brokerage firm and put in the address, phone number, and email information.
Under number 3 the Agent most likely will add the areas that you are interested in moving to. For example Collin County, Dallas County, or Denton County.
It could also read as Richardson Texas, Plano Texas, or Frisco Texas.
Another section to pay attention to in the Buyer Representation Agreement is the Intermediary section number 8. This section lets you know whether or not you are ok with the idea of having one Broker Representing you.
Another section to pay attention to in the Buyer Representation Agreement is the Intermediary section number 8. This section lets you know whether or not you are ok with the idea of having one Broker Representing you.
For example, your Real Estate Agent shows you a property that is listed under Realty T and the listing agent is a Real Estate Agent with Realty T.
The Real Estate Agent who is Representing you is also a Real Estate Agent with Realty T this would place the listing you want to bid on under Intermediary Status. The reason for this is that it is only one Brokerage firm that is doing the transaction.
If for some reason you don’t want that. The section check box allows you to opt-out of it. Typically most Real Estate Agents will check off the first check box.
Number 11 is one of the most important sections of the Buyer Representation Agreement. Here you will see the commission pay structure.
Under (#1) is typically used when you are trying to buy a property. Under (#2) this is typically used when you are leasing a property.
Under (F) this is typically used for any additional charge fee your Real Estate Agent might have if they help you to negotiate with a general contractor to help you do repairs on your property.
Under the second part of that section it lets you know that your Real Estate Agent might receive a referral fee from services providers that they might recommend you to.
The Real Estate Agent has to be transparent when it comes to referring out knowing they will be receiving compensation.
Many buyers will call up a Real Estate Agent to show them properties with no Buyer Representation Agreement signed and have the Real Estate Agent show them 5 to 9 properties, and then go to another Real Estate Agent to make an offer.
So now you are starting to see upfront fees being charged. Some Real Estate Agents will give this back to clients as a credit at closing. But, others may not. So it is important to know these types of things and how the fees work.
How Long Does A Buyer Representation Agreement Last
When thinking about how long Buyer Representation Agreements Last in the Texas Buyer’s Representation Agreement you will need to pay attention to number 4. Under number 4 this is where you and your agent will come to terms on a time frame.
Remember, there is no set amount of time frame under these agreements. They are based on what you and the Real Estate Agent agree upon.
So to answer the question of how long does a buyer representation agreement will last? It all is determined under the terms area of the Buyer Representation Agreement.
For example, if you and your Real Estate Agent decide to do a three month agreement. Then you will have to be willing to work with that Real Estate Agent for the duration of the three months.
Know that most Real Estate Agents will ask you have you signed a Buyer Representation Agreement with another Agent.
If you answer yes then it’s the responsibility of the Real Estate Agent that you signed a Buyer’s Representative Agreement with to show you the property that you are interested in. Not the Listing Agent.
The reason for this is that you have agreed to allow the Real Estate Agent to represent you and they are the ones who are responsible for showing you the homes that you are interested in.
How To Terminate Buyer Representation Agreement
So you want to know how to terminate a Buyer Representation Agreement? The best way to do this is to make sure that you do this in writing.
You will send either a written letter to your Real Estate Agent or you would send them an email. Make sure that you do either one of these. Sometimes if you send a text, a text message can get lost.
So it would be a good idea to send this via email so that you will have a date, time and be able to show that you did send over a Termination of Buyer Representation Agreement.
When you do this you must know that some Real Estate agents do charge a Termination of Agreement fee. This fee varies from state to state so make sure that when you sign your Buyer Representation Agreement. All of these things are spelled out in your agreement.
You want to be as transparent as possible because you want to make sure that there is no misunderstanding if you feel that you are not being represented correctly by your current Real Estate Agent.
Here is a typical way to write this out
Dear Real Estate Agent,
I would like to thank you for your time in helping me search for properties. At this time we have decided to go in another direction and we would like to exercise our right to terminate the Buyer’s Representation Agreement with you.
Please send us the Termination of Buyer/Tenant Representation Agreement. Again we would like to thank you for your time and service.
Sincerely,
Buyer Doe
You would send an email or a letter to the Real Estate agent. From there the Real Estate Agent should send you a Termination Buyer/ Tenant Representative Agreement.
Keep in mind that there could be a termination fee associated with terminating the agreement. Make sure you understand this when you are signing a Buyers Representation Agreement.
Every Real Estate Agent is different, so make sure you are clear on what is expected from both parties
Sometimes it’s good to get all of this information upfront with the agent before you sign the Buyers Representation Agreement.
Conclusion
A Buyer Representation Agreement (BRA) is a contract between you and your real estate agent. The BRA spells out the duties and obligations of both parties, as well as the rights and privileges of each party.
It’s important to have a clear understanding of what’s expected of everyone involved to avoid any misunderstandings or conflicts down the road.
If you have any questions about how a BRA works or need help with being Represented in a Real Estate transaction and you live around the Dallas FT Worth area, please don’t hesitate to get in touch with me. I would be more than happy to assist you!