BUYER BROKERAGE AGREEMENTS BECOME MANDATORY FOR CLIENTS JAN. 1 2017.

ARE YOU A CLIENT OR CUSTOMER? 

Depends on what you need and what you are prepared to pay for. Keep in mind that the old days of a Real Estate Agent stating “Don’t worry - my services are free - the seller pays my commission!” are over. This is no longer always the case. If you sign a buyer agency agreement with a Real Estate Brokerage then you will need to be prepared to pay for these services, either as a transaction cost or directly to the brokerage you have hired to represent you.  Enter into this agreement with your eyes wide open.

Starting January 1, 2017, the Nova Scotia Real Estate Commission will require all brokerages to sign a brokerage agreement with buyers who agree to be clients of their brokerage. This move is aimed at enhancing consumer protection by improving transparency between the brokerage and buyer by clearly outlining expectations at the time they agree to work together.

The purpose of buyer brokerage agreements are to: describe the role and services of the brokerage; outline the obligations of the client; establish  clear start and finish dates for the relationship; address conflicts of interest and most of all CLEARLY OUTLINE THE COST OF THESE SERVICES TO THE BUYER.

Every buyer does not have to sign a Buyer Brokerage Agreement. Brokerage Agreements are reserved solely for clients of a brokerage.

Not sure if you’re a client or want to be?

WHAT IS A CLIENT?

When initially meeting with a real estate agent about the prospect of a future relationship, all real estate buyers and sellers will be presented with a disclosure form that details the various forms of relationships they can receive for the brokerage. One of the options outlined in this disclosure is a client relationship.

As a client, brokerages and/or designated agents are legally obligated to:

• protect and promote your negotiating position at all times;
• disclose all relevant facts about a property or a transaction, including material latent defects;
• obey your lawful instructions;
• provide undivided loyalty;
• act in your best interest;
• keep your confidence;
• exercise reasonable care and skill in performing all assigned duties; and
• account for all money and property placed in their possession while acting on your behalf.

BUYING REAL ESTATE WITHOUT SIGNING A BROKERAGE AGREEMENT

A buyer can use the services of a real estate agent without requiring a brokerage agreement if they do not enter into an agency relationship. A buyer may not want to be tied down to one real estate agent, or limit themselves to  having to pay for services they may or may not need.

CUSTOMER RELATIONSHIP

A buyer or a seller may choose to use the services of a real estate agent  without requiring an agency relationship. For example, this might occur when an agent  is showing an unrepresented buyer their seller-client’s property or when they approach a seller directly on behalf of their buyer-client.

In a customer relationship, the real estate agent has a legal and ethical duty to provide accurate and honest answers to questions and can provide the following services to you:

• explain real estate terms and practices;
• provide you with all relevant market data
• provide and explain real estate forms;
• identify and estimate service costs of other professionals involved in a transaction;
• prepare offers and counter offers at your direction;
• present all offers and counter offers promptly; and
• give you true (identical) copies of all agreements.

The real estate agent cannot:

• make recommendations about the transaction, for example, what you should offer or counter offer;
• assist you with negotiation; inform you of their client’s top/bottom line; or
• disclose any confidential information about their client unless specifically authorized to do so.

FEES and REMUNERATION

If you want the services of a real estate agent as a client they you need to understand that there will be a cost to you for this. The Buyer Brokerage Agreement outlines this. You will need to know how much your real estate agent is being paid PRIOR to beginning to work together or if you are already a client PRIOR to writing an offer. This is a good thing! It is about time the general public understood that real estate services come at a cost.

Although historically it was usually the seller that paid the commission, today this is not the case. Often these fees are  a transaction cost - they seem less enormous that way. Organized real estate still promotes this practices as being the norm. Change is happening and it is high time organized real estate disclose these fees fully.

SHOULD REALTOR FEES BE DISCLOSED TO BUYERS WHEN VIEWING PROPERTIES? 

To go even further in creating open transparent real estate, the real estate industry would need to make available to the buying public, the commissions offered to agents as an incentive to sell a listed property. Currently these fees are not given freely to a buyer client until they are about to write an offer. If the commissions offered as incentives for agents to sell a property were advertised freely to the public, then customers and clients would know, at the time of viewing a property what benefit the agent had or did not have in showing the property. Different brokerage models offer different compensations to outside agents to aid in selling property.  Ask about the commission offered on every property viewed.

Commission rates are negotiable and not set by law. There is no standard rate.  However, without compensation there is no incentive for an agent to ever introduce or sell a property to their client. You either want the help of outside agents or you do not. If you are discounting the selling commission offered, and all the houses around you are not then perhaps agents are steering buyers away from your property. The public should know the commission the agent is being paid at the time of viewing. The buying client can then make the decision to purchase the property and pay for the brokerage services that they agreed to in their buyer brokerage agreement OR they can ask the seller to pay this fee as a transactional cost, and make it included in the purchase price.

Although these new changes are a step forward in making for open and transparent real estate services, it is still not quite enough. If you want to pay for the services of a real estate agent then you should know if their actions are motivated by your best interests or the amounts of commission offered as an incentive.

TERMINATING THE AGREEMENT

If you believe you can fire your real estate agent if you are unsatisfied, it unfortunately isn’t that simple. Firstly, all brokerage agreements are legal contracts, which mean that both parties must agree to terminate. Secondly, all brokerage agreements are with the brokerage itself, not the licensee you’ve agreed to work with. This distinction is important because it is possible that the broker could assign a different licensee to the client and continue on with the initial brokerage agreement.

It is important to note that even if both parties agree to a termination clause, the client may be charged a fee for the work done up to the termination date.

It is important to understand the contract that you are signing. The intent is to clearly outline the obligations of all parties and the cost of these services.

Keep in mind these services are NOT free, and if you want to be a client expect to pay for these services.

Assist 2 Sell has been working with buyers on both a customer and client basis since 2001. We offer customer services to buyers interested in our brokerage listings that enable our sellers to sell their home for a reasonable low flat fee. By offering customer services to buyers who do not need or want to pay the extra cost of buyer agency services our clients and customers can save money. Everyone wins. To date we have saved metro homes ellers 16.9 Million dollars in commissions!