The following article by Mark Weisleder was originally published in MoneyVille. The article was written for the public, but has valuable lessons for REALTORS® as well.
The agreement you sign with a real estate agent should set out clearly and simply what you can expect from the agent and what the agent can expect from you. But this important document may be one of the least well understood, based on emails I get from buyers and agent.
Here’s an example. Thought it took over three years to get to trial, the lesson is clear; understand what buyer agency means before you start working with an agent or visiting agents at open houses.
Jean Kagemana and Mediatrice Mulcanyandwi were looking for a home in Milton and saw a For Sale sign of Sanjay Babbar, an agent with Sutton Group. Over the period of a few days Sanjay showed them several homes.
The couple decided to put an offer in on a house on Hood Terrace in Milton, with Sanjay acting as their agent. Before Sanjay did so, he sat down with the couple and gave them a Buyer Representation Agreement, the standard document that sets out what the agent will do for you. It also sets out important legal terms and conditions, including:
- The length of time the agent will act on your behalf. It can be as short as a day or six months or more;
- Where the agent will look for homes;
- An obligation for you to refer any property you find to the agent; and
- An agreement for you to pay the agent commission, if the seller refuses to pay it.
The couple’s first offer for the house was not accepted and they went directly to a builder, without Sanjay, and bought a house.
Sanjay sued for $11,000 commission in a case heard in small claims court in Oakville. Sanjay argued he spent two to three hours with the couple explaining everything. The couple argued Sanjay was at their house for just a few minutes and had to hurry off because another offer was coming in that night.
The couple also argued through their lawyer, Paul Marshall, they thought the only reason they had to sign the Buyer Agreement was so that they could put in an offer on Hood Terrace and it was not explained that the agreement would continue for another six months.
In a decision on March 27, Judge Karen Thompson accepted the couple’s story about the night they signed the buyer agreement. She noted that the agent did not have clear notes or recollection of the time and dates involved, while the couple did. She said that Mulcanyandwi could remember that it was late at night and she felt rushed putting the children to bed, and that she was not even at the table while most of the papers were reviewed by her husband.
Judge Thompson ruled that the contract terms were not understood by the buyers and that when they signed the Buyer Agreement, they thought it meant something else. She denied Sanjay’s claim for commission.
This case contains important lessons for buyers and real estate agents.
Buyers, if you want a buyer agent to be loyal only to you, consider signing a Buyer Agency Agreement; do not try to use someone’s services then avoid paying commission later;
Buyers, also understand that you can negotiate the terms of this agreement, including the commission payable, time period and territory. For example, if you only want it to apply to resale homes and not new homes, include that in the agreement;
Agents, make sure that buyers clearly understand all the terms of any Buyer Agency Agreement before it is signed. Have the buyers initial all key paragraphs and leave them a copy of the agreement as well. Keep notes of everything that was discussed.
When everyone understands what Buyer Agency is all about, costly legal proceedings can be avoided later.
(Reprinted with permission)