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Buyer’s Representation Agreements and Commission Fees Explained

A lot of buyers are uncertain about whether or not they should sign a BRA with their agent and concerned about how exactly their agent gets paid. Here are two frequently asked questions and how I like to answer them for my clients:

Q: What is a buyer’s representation agreement (BRA) and why should I sign one?

A: I strongly suggest signing a BRA with whichever agent you chose to work with. For many years the sellers had the benefits of Exclusive Client Status and so should you! It is in your best interests to work with one salesperson instead of several, for the following reasons:

  • Excellent communication between the salesperson and the buyer is critical to getting the right property for you, the buyer. The communication is diluted if you are dealing with more than one salesperson.
  • The BRA enables the parties to agree on and document in writing the terms and limitations of their agreement, including geographical limits, property types, commission rate, and duration of the relationship, just as a listing contract does with a seller.
  • With the comfort of the BRA in place, the salesperson will have no concern about introducing all properties of interest to buyer client, regardless of the commission being offered.
  • If the buyer refuses to sign the BRA, it is usually a “red flag” to the salesperson, indicating that the buyer is likely working with other salespeople. That may act as a disincentive to the salesperson.

Q: Am I going to get a bill for commission on my closing date?

A: Absolutely not! In 98% of deals the listing brokerage pays for the commission. Only on rare occasions will there be homes of interest that do not offer to pay commission. An example would be a property that is For Sale by Owner. In this case I would ask for your permission to contact the owner and request that they co-operate in paying the 2.5%. If the owner is unwilling to pay commission and the price is right, you may want to proceed anyway.

Sellers who do not use a Realtor are looking for the buyer to pay market price so they can pocket the commission themselves. The buyers who buy these homes are looking to pay less because the seller is not paying commission. Not a very good situation for either party!