Understand What You’re Signing When Working with a Real Estate Agent

 Hey future home buyers and sellers!

Are you ready to jump into the real estate market?

Before you do, let's talk about something important that often gets overlooked: Brokerage Representation Agreements!

Signing a brokerage representation agreement is legally required in Alberta and it is your real estate agent's responsibility to explain this document to you in detail. So, let me explain this to you so you know exactly what you and your Realtor® are committing to.

Imagine you’re getting ready to buy or sell a property and have chosen your Realtor®. Before you start, there’s an essential document that both parties need to sign – the Brokerage Representation Agreement. Here’s what you need to know about it:

When you sign this agreement, you agree to the REALTOR® that is named on this document to be your guide for the whole transaction. This document outlines the duration of your partnership, which can range from a few months to a year, or even longer, depending on your situation. You set the timeframe. Timing is crucial in real estate. Your agreement will have a start and end date, clearly stating how long your Realtor® will be your guide. If you feel your Realtor® isn’t the right fit, you can discuss it with their Broker to find a better match.

Designated Agency vs. Common Law Agency

There are two types of agencies in real estate: Designated and Common Law.

• Common Law Agency allows anyone from the brokerage (not just your assigned Realtor) to represent you. This can lead to conflicts of interest. For instance, if you’re a buyer and your brokerage already represents the seller, all agents at the brokerage have access to the seller’s information, creating a conflict. In this case, you have two choices:

  1. Become a customer of your agent, meaning they can still assist with the transaction but can’t advise or negotiate for you.
  2. Find a new agent at another brokerage, which is not ideal when you’ve found your perfect home and need to act quickly.

• Designated Agency is what Royal LePage Benchmark is. I prefer designated agency and that is the reason why I chose to work with this brokerage. Even though the agreement is with the brokerage, the relationship is directly between you and your designated agent. Your confidential information stays with your agent, reducing the risk of conflicts of interest. Your agent must inform you which type of agency they belong to.

Regardless of the agency type, Realtors® must adhere to fiduciary duties – Loyalty, Ethics, Obedience, Confidentiality, Competence, Disclosure, and Accounting.

Exclusive vs. Non-Exclusive

• An exclusive agreement means your Realtor® is your sole representative.
• A non-exclusive agreement allows you to work with multiple Realtors® simultaneously. However, be careful! If you sign multiple exclusive agreements but close a deal with only one agent, you could owe commissions to all agents you signed with.

Commission

The standard commission is 7% on the first $100,000 of the sale price and 3% on the remaining balance, split equally between the seller’s and buyer’s agents. Commissions are paid when the buyer gets the keys to their new home. While it seems like the seller pays the commission, it's essentially the buyer's money completing the transaction.

Important for buyers: If you buy a home where the seller doesn’t pay the standard commission (e.g., for sale by owner or discount brokerages like 1% and 2% Realty), you may have to pay your agent’s commission out of pocket. The Buyer Representation Agreement specifies the agent's commission, and if it’s not fully covered, you’re responsible for the difference.

What’s in it for you?

This agreement details your Realtor’s responsibilities, from finding properties to negotiating deals to safeguarding your privacy. It’s like a job description, ensuring you know what to expect and can hold them accountable for working in your best interest.

Communication is Key

Navigating real estate requires teamwork. Real Estate Professionals are there to educate, guide, and protect you. Open, honest, and direct communication ensures a smooth experience. Buying or selling a home is a significant decision, so let the experts help you make informed choices.

In real estate, the Brokerage Representation Agreement is your guidebook. It clarifies expectations and keeps everyone aligned, ensuring a positive experience. Before you start your real estate journey, take a moment to understand and value this important document.