In a recent class we were discussing the benefits of the Buyer Brokerage Agreement to the buyer. One of the agents in attendance recently had a buyer pose some very interesting questions regarding the agreement. We decided to address these questions as a group and also come up with a few additional questions concerning this form. Please let me know if you think of any additional questions and we will address them here.
1. The main question with the “Buyer Brokerage Agreement” pertains to the Commission and which subparagraph applies to the buyer.
Answer: To help clarify this section, the order in which they would apply would be ”A” first then “B” then “C” would apply.”C” would be filled in either as a specific amount or more often as a percentage of the sale price, typically 3%. With listed property, as stated in paragraph “A”, the seller agrees to pay a commission to the listing broker who in turn agrees to pay the selling/ buyer’s broker. Here is what the agreement states:
Paragraph 6. Commission.
A. Custom in Georgia Is That the Seller Pays the Real Estate Commission. Buyer acknowledges that the custom in Georgia is for the seller of property to pay the commissions of the real estate brokers. Normally, this obligation is created in a listing agreement in which the seller agrees to pay the listing broker a commission in certain circumstances including the sale of the property. In most cases, these agreements also require the listing broker to share the commission it receives with the broker, if any, working with or representing the Buyer in the transaction if that broker is the procuring cause of the sale (or exchange) of the property. This broker is commonly referred to as the selling broker and in this Agreement is also referred to as “Broker.”
B. Broker Shall Seek to Be Paid Commission from Either the Listing Broker or Seller. In all transactions in which Broker is entitled to a real estate commission hereunder, Broker shall seek to be paid its commission from either the listing broker, if the property is listed or from the seller directly if the property is not listed. In any purchase and sale (or exchange) transaction in which Broker is paid its sales commission from either the seller or listing broker, Buyer shall have no further obligation to pay Broker a commission relative to the purchase and sale (or exchange) of the property. Broker agrees to disclose to Buyer any properties in which the seller or listing broker thereof are not offering to pay the selling broker a real estate commission if the selling broker is the procuring cause of the sale.
C. Situations Where Buyer Agrees to Pay Commission. In the event the prospective seller or listing broker does not pay Broker a sales commission, then Buyer shall pay Broker the following commission (“Commission”) at closing on all real property which Buyer purchases, acquires through an exchange or contracts to purchase or exchange during the term of this Agreement (or during the Protected Period after the termination or expiration of this Agreement as discussed in greater detail below).[Select one or more of the following sections below. The sections not marked shall not be a part of this Agreement]:
???? $_________________________________________________________________________________________;
???? (Other)____________________________________________________________________________________;
???? ______________________________________________________________________________ percent (%) of the sales price;
2. My wife and I have looked over the contract (something we did not have to sign before searching last year) which seems to protect you much more than it does us, but rightly so, in our opinion.
Answer: In 1993 the Georgia State Legislature passed one of the most comprehensive consumer protection laws ever enacted regarding real estate. This law is titled the “Brokerage Relationships in Real Estate Transactions Act” and is known by its initials – BRRETA. Prior to this law going into effect in January of 1994, all agents involved in a particular transaction represented the seller. Just imagine that you have been looking at homes with an agent and have shared your personal information with this agent only to have the agent represent the seller. That doesn’t sound very beneficial to you as a buyer does it? Well it didn’t appeal to the Georgia Lawmakers either.
In today’s real estate market in Georgia; in order for an agent to represent a buyer or tenant, law requires that the buyers first enter into a written agreement with the real estate agents. This ensures the buyer that their agent is representing their best interest in the transaction. The agreement spells out the duties that the agent will perform as well as how the agent will be compensated.
You should have been given the opportunity to enter into a buyer agency agreement with the agent to represent your best interests in your transaction.
3. Also, what is a situation under which you, as Broker, would not be willing to consent to terminating the contract? Please know that we have no fraudulent plans in mind, of course! We’re simply trying to understand our rights in this process.
Answer: If I identify a property for you and show you the property and for some reason you then decide to work directly with the other party or parties then I would not consent to terminate.
4. I hate contracts, but I hate signing something out of ignorance and laziness more! We’re basically trying to figure out how much is coming out of our pockets according to this contract.
Answer: There are no stupid questions. After all we have been taught for years that knowledge is power and my intent is to provide you with the knowledge that you need in order to make an informed decision.
The only way that this agreement will contractually cost you anything is if you select a home where the seller refuses to pay a real estate commission. This will not be the case in any home that is in the listing services that I provide to you. As indicated in Question 1, at the time a seller lists their home they agree to pay a commission to the listing agent who in turn agrees to pay a cooperating agent, buyer’s agent, a portion of that commission.