A buyer agreement with a realtor can be risky
http://www.moneyville.ca/article/967562–roseman-a-buyer-agreement-with-a-realtor-can-be-risky
By Ellen Roseman | Sun Apr 3 2011
Jim Southgate, a first-time home buyer, worked with a real estate agent for six months before putting in an offer on an income property that met his needs.
“While signing the paperwork, I signed a buyer representation agreement without its being fully explained,” he says.
He didn’t get the property because of multiple offers. Then, his relationship with the agent soured.
When he wrote to her and said he didn’t want to work with her any longer, he received an invoice for the cost of her services: $15,604.50 in total, with $8,123.75 payable on receipt.
Since his buyer representation agreement didn’t expire for two more months, he had to stick with the agent or buy his way out of the contract.
“I don’t understand how signing an agreement that was billed as ensuring my best interests as a home buyer could land me in this situation,” he complained.
Luckily, the brokerage owner tore up the invoice when I highlighted his case in my Moneyville blog.
Southgate is not alone in feeling pushed to get into an exclusive relationship with a realtor. I’ve heard from others in the same boat.
Traditionally, real estate agents and brokers work for the seller. Even those “representing” the buyer legally work for the seller.
This means confidential information you give your agent can be conveyed to the seller.
If you sign a representation agreement, the agent has to protect your interests and not release information that could hurt your bargaining position.
Rita signed an agreement that tied her to an agent for three months. But she didn’t realize she’d done so as part of the paperwork in making an offer on a house she didn’t get.
“I decided to find someone else, as I hadn’t been happy for some time, and purchased my current house with a second agent shortly after,” she says.
After the deal closed, the first agent won the commission by going to the Toronto Real Estate Board to enforce the existing contract.
A hearing panel said it was the second agent’s professional responsibility to determine if the buyer had signed an agreement with another agent.
When asked if she had an agreement with the first agent, she’d said no – since it hadn’t been brought to her attention.
“As a result of this, the second agent is now suing me in small claims court for the commission she lost in the hearing, plus interest and legal fees,” says Rita (not her real name).
In another case, Linda signed a six-month agreement with an agent who left the brokerage under a cloud. So, she asked the owner about cancelling early.
“He demanded an email listing all the negatives I could think of about the agent I was working with. I’m afraid this information will provide ammunition for a lawsuit between the owner and the agent,” says Linda (not her real name).
“I feel I’m stuck in the middle of a legal battle. If I purchased a home any way but through that brokerage, I would owe a commission to that brokerage.
“All I want is to cancel the contract and work with an agent to find a home, as I’ve already sold my other home. Every day wasted is a day closer to closing without a home to move to.”
Buyer representation agreements became popular in Ontario when the Real Estate and Business Brokers Act was amended in March 2006, says Tom Wright, president and chief executive at the Real Estate Council of Ontario.
“Buying a home is the biggest purchase you’ll make in your life,” he says. “So, you need to be informed and to understand what you’re signing.”
Wright has a few recommendations: Get referrals from family and friends. Interview several real estate agents. Ask yourself if you feel comfortable with them.
“Is this the sort of person you want to work with? Make sure the person is registered with RECO. We have an online search, which is easy to do.
“Read everything in a contract before signing. Make sure you agree with all the terms. What is the expiry date? Are there any cancellation privileges?”
You can ask to change the contract language with a realtor representing you. If you feel hesitant, talk to a lawyer before signing an agreement.
“You can limit an agreement to 30 days, which is a pretty good period to decide if things are going well. You can limit it to a particular property,” he says.
“There’s no fixed expiry date. It’s entirely negotiable for how long it remains in place.”