5 Tips for a High Integrity Buyer Representation Agreement

Five important tips for a good buyer representation agreement that maximizes value for the home buyer and buyer agent.

Buyer Representation Agreement, Falcon Expenses

What is a buyers representation agreement?

A Buyer Representation Agreement (BRA) is a legal agreement between a buyer real estate agent and a home buyer. Most importantly, it formalizes the working relationship between a home buyer and a real estate agent. Further, it details what the buyer agent expects in return for their services provided to the home buyer.

Why do buying agents and buyers need a BRA?

The BRA serves many purposes for both parties. Overall, it develops mutual loyalty and clarifies expectations. Further, it helps to avoid misunderstandings. Most importantly, it establishes a dedicated team of buyer agent with the homebuyer in search of the perfect home.

Now let’s move on to the tips.

1. Specify a Duration of No More Than 6 Months

A BRA can be as short as 90 days, or even 30 days. However, the standard duration is six months. This is a detail in a BRA that must be specified. Specifying this detail allows the real estate agent and home buyer to understand the expected duration of the relationship. Further, extend the duration of the contract at any time. In addition, a new contract can be signed if the duration of the previous contract is exhausted.

Note, the buyer needs to initial every area on the BRA that lists the expiration date if the agreement is more than six months.

2. Specify a Reasonable Geographic Area

You want to specify a geographic area that the buyer agent has proven expertise and that the buyer is interested in. Don’t specify an area that is too broad. Also, don’t specify an area that is too narrow so that the buyer keeps their options open.

Also, this detail of the agreement allows the buyer to work with agents in other areas at the same time. Essentially, it allows the buyer agent to focus on what they do best while empowering the buyer to hone in on the buyer agents with strengths in specific areas.

3. Clearly List the Commission Rate

Expectations should be aligned and understood. Therefore, it is important that the home buyer understands what is expected of them and that the buyer agent understands what is expected of them. With that said, buyer agents typically work on commission for their services. Industry standards are three to six percent commission of the sale price of the home. Often there is a split with the selling agent. A split results result in a three percent commission versus a six percent commission rate. Also, clearly state where the commission funds come from. For more details on realtor and real estate agent spilts and commissions please review the following resources.

This article was published by Investorpedia. It provides great tips for selecting a buyer agent if you’re buying a home and selecting a seller agent if you’re selling a home.
How Real Estate Agent and Broker Fees Work

This article was published by Redfin, a real estate brokerage firm.
Home Selling Guide Commission Fees Explained

4. Specify a Price Range

Specifying a price range provides the buyer agent and the home buyer a clear range about what houses to shop for. In addition, this allows the real estate agent to perform their job better. This is because the agent has a clear and agreed upon understanding of what the home buyer is looking for. Further, in the event that the buyer’s price range changes the buyer representation agreement can be modified. Also, this gives the homebuyer the flexibility to work with more than one buyer agent at the same time by specifying different price ranges in the BRA’s with each respective buyer agent.

5. Holdover Clause

A holdover clause specifies the time period from when the BRA ends until when the buyer agent is no longer entitled to their commission. What does this mean? This means that even after the buyer representation agreement expires the buyer agent is entitled to their commission. More specifically, the buyer agent gets their commission if a home buyer buys a home that their buyer agent showed them after the expiration of the BRA, but within the duration specified in the holdover clause. This is an important clause that protects the buyer agent from working for free. Most importantly, it establishes a documented understanding of integrity in the relationship between the two parties.

Final Notes

A buyers representation agreement is signed between a real estate broker and a home buyer. It is not signed between a real estate agent and a home buyer. A real estate broker carriers a higher level license than a real estate agent. Brokers employ real estate agents. To be a real estate broker comes with more responsibility. Therefore, before signing a buyer representation agreement a home buyer should evaluate both the real estate brokerage firm and the real estate agent.

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