UNDERSTANDING BUYER AGENCY
UNDERSTANDING BUYER AGENCY, PART I
BUYING A CALGARY HOME? LET A BUYER’S AGENT WORK FOR YOU!
Buying a Calgary home for sale can be overwhelming. Finding the right property takes time, knowledge of the local market, negotiating skills, and the expertise to deal with contracts. Each buyer has a different story. Maybe you’re a first-time buyer, or perhaps you have to sell your home before you buy a new one. A buyer’s agent understands these situations and is there to promote your interests and represent you through the entire process.
WHAT CAN THE BUYER’S AGENT DO FOR ME?
Once you’ve found a property, you need to decide what price to offer. Your agent can prepare a comparative market analysis (CMA) that can help you decide on a price. Once you’ve named a price, your agent writes an offer and works to negotiate the price, terms and conditions in your favour. Your buyer’s agent can help wade through all the paperwork that’s part of a real estate deal.
Knowing all you can know about a home for sale is an important factor in your decision-making. For example, it’s important to know what repairs are needed, what nearby future developments are proposed or, in the case of agricultural properties, the state of wells and quality of water.
Your buyer’s agent must disclose everything known about the homes for sale that could impact your decision. For example, a neighborhood might be known to have water problems or homes built by a particular developer might have a history of foundation problems. If you have concerns your agent can’t answer, you’ll be advised to ask for advice from other professionals.
Buyer’s agents can also lead you to other services necessary in the home buying process. The buyer’s agent can search title and provide guidance on financing, property inspections or arranging for a real property report.
YOUR BUYER’S AGENT WORKS FOR YOU
Your buyer’s agent has certain obligations, or fiduciary duties that they must fulfill to you, the client:
- Loyalty: The agent must protect your negotiating position at all times and work in your best interest.
- Obedience: The agent must carry out all of your lawful instructions.
- Confidentiality: The agent has an obligation to keep information confidential.
- Reasonable care & skill: The agent must exercise this when performing all duties.
Full disclosure of all relevant information that is known by the agent and that may influence your decision or affect the value of the home for sale.
Full accounting of all money and property placed in the buyer’s agent hands while acting on your behalf.
Your agent will promote your interests, represent you throughout the transaction and will act only as your agent unless you agree otherwise. For example, you might be interested in a property listed by the agent or another agent in the same brokerage. In this case, you may want to allow your agent and the brokerage to act as a dual agent, representing both you and the seller. In a dual agency situation, the fiduciary duties the agent owes to you and the seller change. Learn more about this in the next section, “Understanding Buyer Agency, Part II”.
UNDERSTANDING BUYER AGENCY, PART II
The Buyer Brokerage Contract is the written agreement that establishes an agency relationship between you (the buyer) and the real estate brokerage (and its agents). When you sign the agreement, you agree to be represented by only the agent you’ll be working with and all other agents in the same brokerage.
The Buyer Brokerage Contract sets out duties and responsibilities of both parties. Your agent must provide you with information about the property and guide you through the transaction. Buyers have obligations under the contract as well. In signing the contract with a brokerage, you agree that all agents in the office can find suitable properties and help you negotiate the terms of any Purchase Contract. You need to provide information to enable the brokerage to search for properties that make the most financial sense for you. Finally, you need to inform the brokerage of any properties you’re interested in viewing. The buyer’s responsibilities under the contract enable the buyer’s agent to do the best job she can for you.
You’ll also find a section in the contract about agency disclosure. This authorizes the buyer’s agent to act as a dual agent and outlines the duties the agent owes to you in a dual agency situation. A dual agency situation could occur if you’re interested in making an offer on a property listed by your agent or another agent in the brokerage. In this case, the agent and the brokerage act for both you and the seller and can’t fulfill all of the fiduciary duties owed to both parties.
In a dual agency situation, the agent doesn’t owe a duty of confidentiality and will disclose to you and the seller all defects and information known about the property that may affects its value. The only information that the agent will not disclose to the seller is the minimum or maximum price you (the buyer) are willing to pay. The agent will also not disclose any information about the price the seller will accept or the reason they’re selling. Further, in a dual agency situation, the agent will not disclose to you or other buyers the terms and conditions of competing offers on the property.
PAYING YOUR AGENT
Another important part of the Buyer Brokerage Contract is the section that determines the brokerage’s compensation. Real estate commissions are negotiable in Canada and you and your agent have to agree on a suitable amount of compensation. Usually, the contract will state that the brokerage will receive either a portion of commission offered by the seller’s brokerage or a fee that is negotiated between you and your agent. If the seller’s brokerage doesn’t offer a portion of commission to your buyer’s agent, you may want to take that into consideration when making an offer. Some agents might ask for a deposit on their fee to be held in trust and applied to any commission payable or refunded to you if the contract expires.
ENDING THE CONTRACT
The Buyer Brokerage Contract is in effect until the expiration date negotiated between you and your agent. The contract can be renewed or extended if you and your buyer’s agent need more time to search for a property or close a deal.
The Buyer Brokerage Contract is a legally binding agreement but it can be amended or cancelled under certain circumstances. For example, if you or your spouse are suddenly transferred, talk to your agent about terminating or amending the contract. Make sure to ask your agent about any ongoing obligations on your part if the contract is terminated.
UNDERSTANDING BUYER AGENCY, PART III
WHY DO I NEED A BUYER’S AGENT?
A buyer’s agent promotes your interests and represents you throughout the home-buying process, beginning with the search for the perfect home until you have the keys in your hand. A buyer’s agent can provide you with many important benefits such as knowledge of the local market, negotiating skills and expertise in working with contracts.
WHAT IS A BUYER BROKERAGE CONTRACT?
A Buyer Brokerage Contract is the legal document that sets out the relationship between you and the real estate brokerage (and all of its agents). The contract also establishes the obligations of each party: you agree to have only the brokerage represent you and the brokerage agrees to represent you and act in your best interests.
DO I HAVE TO SIGN A CONTRACT FOR A SPECIFIC LENGTH OF TIME?
The expiration date on the Buyer Brokerage Contract is agreed upon between you and your agent. There is no requirement for the contract to last any predetermined amount of time. The contract should be written to expire in a time period that works for both you and your agent.
WHAT HAPPENS IF I SIGN A BUYER BROKERAGE CONTRACT AND THEN FIND A HOME LISTED THROUGH ANOTHER AGENT?
Any time you find a property you’d like to view, contact your buyer’s agent. The buyer’s agent will contact the seller’s agent to arrange a showing.
WHAT IF I DECIDE TO BUY A HOME DIRECTLY FROM A BUILDER?
With a buyer agency relationship, there is no obligation to purchase a resale home. Tell your agent you’d like to look at a new property. Your buyer’s agent will help you navigate through all the information on new homes and neighborhoods. More importantly, your buyer’s agent acts for you and represents your interests when negotiating with a builder. Your agent can help you work with the builder from the planning stage, or help you finalize details for your new home. Your buyer’s agent can also assist you through other unique issues that new homes present such as warranties, GST, builder’s liens or encumbrances. Buyer’s agents also have access to standard contracts and schedules that protect you, the consumer, when buying your new home. Commission is paid per the terms of your Buyer Brokerage Contract.
CAN I LOOK AT OPEN HOUSES WITHOUT MY BUYER’S AGENT PRESENT?
Yes, you can view open houses without your buyer’s agent but as a courtesy you should inform the agent at the open house that you are already represented. If you want to see the property again, your buyer’s agent will make arrangements for a showing.
HOW IS MY BUYER’S AGENT PAID?
The terms of payment should be contained in the Buyer Brokerage Contract. Usually, the contract will state that the brokerage will receive either a portion of commission offered by the seller’s brokerage or a fee that is negotiated between you and your agent (whichever is greater). Real estate commissions are negotiable in Canada and you and your agent have to agree on a suitable amount of compensation. If the seller’s brokerage doesn’t offer a portion of commission to your buyer’s agent, you may want to take that into consideration when making an offer on a property.
Source: Alberta Real Estate Association