What is a Buyer Brokerage Agreement?
Buyer Brokerage Agreements are used by many brokers and agents to confine an individual buyer’s loyalty to that one broker. Typically, this is in exchange for the assistance and support the agent will provide through the home buying process. However, in Georgia, what exactly is a Buyer Brokerage Agreement and what can you expect from it? This section will attempt to answer some of those questions.
In Georgia a Buyer Brokerage Agreement ("BA") is known as a Buyer Broker Agreement ("BBA"). Georgia law, O.C.G.A. 10-6A-1 et seq., states that a BBA is a written agreement between a broker and consumer (e.g., you), whereby the broker is authorized to procure property for the consumer. These agreements also create an agency relationship between the broker and the consumer.
A BBA is similar to agreements in other states, however, unlike some other states, it is not mandatory under Georgia law . However, brokers and agents working in Georgia frequently insist on having BBAs signed before they work with you.
BBAs are used by real estate brokers who "own" the relationship with particular buyers. By this we mean that the agent will attempt to work exclusively with one buyer at a time to find them a new home. This is in contrast to real estate agents who must by law represent the interests of the seller of the property first.
Keep in mind that Georgia has a very strict law concerning acting as a buyer’s agent. A licensee must operate as a buyer’s agent unless the BBA states differently. Further, a BBA can never be in contravention of the Georgia real estate code. For example, a BBA can never state that the agent/agency can represent the seller if they already represent the buyer.
Essential Components of the Georgia Buyer Brokerage Agreement
A Georgia buyer broker agreement lays out the terms of representation between a buyer and a broker. A buyer who signs a written buyer-broker contract is assured of representation. There are several key elements to these contracts that are essential to ensuring satisfaction with any purchases the buyer makes.
Buyer Contract: The most important part of a buyer broker agreement is the contract itself. Without the contract, there is no guarantee that the buyer will be represented, his or her rights are protected, or that the buyer even employs the broker for the role in which they are assumed to serve.
In general, a buyer contract should state the following:
• Definition of the scope of duties the buyer may expect from the broker.
• A timetable stating for how long the buyer will be represented by the broker.
• The conditions under which the buyer can terminate the contract before it expires.
• Compensation, including commission and who pays it, whether the seller pays it as a subagent, or if it’s set up in a dual-agency situation.
• A listing of all properties the buyer has previously purchased with the broker, and an outline of how long the buyer will continue to be represented on such purchases.
• Indication of the buyer’s obligations in the transaction.
Some real estate agents in Georgia may try to make a buyer feel uncomfortable about taking the time to read a proposed buyer contract. However, it’s important that you don’t sign it without doing so. Your signature commits you to a legal contract, and you need to understand exactly what you’re signing. Make sure to have a discussion with your real estate attorney about the contract to address any questions or concerns you may have.
Buyers and Brokers: Roles and Expectations
Buyers and brokers have a shared responsibility. Real estate professionals are held to the highest standard of care, and this applies to representing buyers as legal consumers in Georgia.
Under Georgia law, the broker must act as a fiduciary to the buyer (OCGA 10-6A-1). What does that even mean? It means the broker is legally bound to put the buyer’s interest first – ahead of everyone else’s, including his/her own. The broker must act with the utmost good faith, loyalty and fidelity. Get it? Good.
Don’t be fooled, though. Just like the broker has responsibilities, so does the buyer. Buyers also have obligations of honesty and fair dealing. (OCGA 10-6A-2) Do not think you can pull a fast one on a broker. That would not go well for you. Buyers should keep their noses clean, too. Make sure you have the money you said you had. The funds must show up on time. Otherwise, the earnest money deposit will be at risk, not to mention your reputation.
The rights and responsibilities discussed above are not exhaustive. There are plenty of hurdles for brokers (and buyers) to clear. There are also benefits for buyers. All real estate contracts, including the buyer brokerage agreement, fall under the Georgia statutory enactments. (OCGA 10-6A-3). This means that the contract will be interpreted in accordance with the rules set out in the statute.
In sum, be honest, be fair, and don’t skip straight to the closing table.
The Benefits of a Buyer Brokerage Agreement
From the perspective of both the buyer and the brokerage, a buyer brokerage agreement may complement the purchase and sale process by memorializing the general agency relationship that exists and a general understanding between the buyer and the broker. The buyer brokerage agreement may also serve two important purposes. A buyer brokerage agreement can help buyers who are interested in the services of one particular broker find and obtain the services of that broker. A buyer brokerage agreement can also ensure that the buyer commits to the commission arrangement for broker services and materially aids in the determination of the total costs of the transaction as agents are entitled to be compensated for their services.
A buyer brokerage agreement can be beneficial to brokers in two main ways. One, a buyer brokerage agreement can facilitate the transition and confirm that the buyer is now represented by the broker and a member of its firm. Two, a buyer brokerage agreement can allow the brokerage to identify and advise the buyer about the difference between the confidentiality of a client/agent relationship versus that of a non-client.
Buyer Brokerage Agreements: Myths and Misconceptions
In Georgia, there are common misconceptions about buyer brokerage agreements. First, I often hear someone say that they will sign a buyer brokerage agreement, but only if they have not found a house or have not begun negotiating the price. In other words, they want to get rid of their broker later if they find a house before signing the buyer brokerage agreement. This is not true. A buyer brokerage agreement is an employment agreement for the broker and the signing clients. Once the buyer brokerage agreement is signed, it establishes the broker as the buyer’s agent. Until it is signed, the broker is only a facilitator without fiduciary duties to the client.
For all listings, the seller has entered into a listing agreement with the broker, so you do not need to sign a buyer brokerage agreement before scheduling a showing. However, if you would like the broker to begin working as your agent for all property and negotiable items related to your interests, a buyer brokerage agreement will clarify the scope of the representation. Another misconception I have heard is that a buyer can continue to work with the same broker on various transactions indefinitely without signing a buyer brokerage agreement . If you have never entered into a buyer brokerage agreement with the broker, you need to understand there is no protections for you or your broker for the various property purchases and sales you will make.
For example, you will no longer have a loyal and devoted buyer’s broker if you walk into a new construction site (where you may have been previously represented by a different broker) and one of the builder’s on-site representatives is present and ready to help you in the purchase of a new construction home. Your broker will be prevented from negotiating on your behalf because of misrepresentation in this interaction. A common way this occurs is when you introduce the builder’s agent as your agent and hand over your driver’s license. In short, once you found a property and expressed your interest to a broker, you can waive your right to exclusive representation by falsely representing your agent. The bottom line is you want to limit the liability of misrepresentation and best serve your real estate needs by entering into a buyer brokerage agreement.
Addressing Legal Complexities of Buyer Brokerage Agreements
Even the most well-drafted buyer brokerage agreements can run into legal issues or challenges, such as clarity or coverage. Buyers and even brokers themselves may not understand some of the legal jargon or have a solid grasp of how certain provisions work. For example, a broker may be uncertain of what their commission would be if the agreement is terminated before a home is purchased and whether their duties or potential commissions under exclusive buyer agency agreements still apply if a buyer purchases a home without a broker in attendance.
Legal challenges can also arise over consideration, which is defined by Georgia law as the bargained-for exchange of value. Georgia case law holds that valuable consideration is an essential element for the existence of a binding contract. The courts have held that a reputation of good faith will be deemed consideration where a party undertakes to do well and performs upon that undertaking. In a buyer-brokerage agreement, the consideration flows from the buyer to the broker and includes services to be performed by the broker for the buyer’s benefit, such as advising the buyer about real estate matters and providing a property search for residential properties customized to the buyer just for starters. In some cases, brokers or agents may have no legal standing against individuals or companies that later purchase a property in question. This can happen if a property is sold to a third party after the initial buyer decides not to go through with the sale and the third party believes that the broker did not fulfill their obligations under the agreement. In this situation, the buyer may claim that they were entitled to purchase the property at issue through a buyer-agent. If the seller had obligations to pay the buyer-agent, then the buyer would also claim that they intended to assign those rights. In addition, the courts have determined that a broker that participates as an agent of the seller or landlord has no right to recover compensation from the buyer or landlord. Compensation earned by a broker in these situations qualifies as compensation that is "earned by the broker without regard to whether compensation is paid by the party represented by the broker or by another party." Buyer brokerage agreements are often drafted as contracts and are therefore covered by Chinese wall statutes, meaning that a broker cannot represent both a seller and a buyer in a transaction. This could lead to litigation under the Broker Law if a buyer believes that they were mistakenly represented as a client or customer.
Selecting the Best Broker in Georgia
The successful acquisition of your dream home will directly relate to your choice of a real estate agent. Take time to select the right agent and you’ll be pleased with the results. Take your best friend’s recommendation and you may end up regretting your decision. The focus here is on selecting a real estate agent in Georgia to work with rather than trying to explain how to sell your current home or purchase your first home. Selecting the right real estate agent is critical as a poorly trained or untrustworthy agent can make for a very stressful experience.
The new real estate contract form issued by The Georgia Association of Realtors on March 1, 2014 now has two different listings for buyer brokerage agreements – exclusive buyer brokerage agreement and non-exclusive buyer brokerage agreement. Most real estate agents around the state of Georgia will use the exclusive agreement. There’s nothing wrong with the non-exclusive buyer brokerage agreement except that in Georgia it is generally used to track down your unrepresented friends getting ready to buy a home who may or may not ever sign anything. So keep in mind that unless the agent provides full services, the agent’s service may be worth what you paid for it – nothing. I would not sign a non-exclusive buyer brokerage agreement unless you are certain you are working with somebody for real that you want to do business with.
So when it comes to finding the right real estate agent – do your research. Ask your friends and neighbors who they have used in the past and what their impression was. Verify their license number with the Georgia Real Estate Commission. Even Greater Atlanta Realtors do not know every real estate agent in the state and can’t vouch for them .
Once you have narrowed the list down of real estate agents to use in Atlanta (or your home town) do an internet search on them and/or go to Yelp.com and realtor.com. See how long they have been in business and licensure history. Examine their online presence – it’s 2014 so they most likely will be very visible online. Check out their social media presence, Twitter, Facebook, LinkedIn, Pinterest etc. Do a search for some of their clients from past home sales and see if there are any reviews or testimonials online. Find out if they are members of any professional organizations. If you find two agents that look good – compare the two. If you’re unsure call and interview them.
Some agents will do a free home buyer consultation and discuss your needs in more detail and begin to build rapport with you. If you feel comfortable with them on the phone you can ask them to come to your home and visit you in person.
A very good source of information is the local MLS. Search in the MLS for your supervisor or designated broker of the brokerage they work with. If they have been doing business for a while they should show up in the statistics of that MLS. Look for agents that have closed a lot of homes in the price range you are looking at as being possible. Keep in mind that some buyers agents only do one or two deals a year and some do 50 or more.
The experience of other people with real estate agents can help you to avoid using a bad real estate agent. Remember if you have problems it’s always best to not get mad at skill level or personality differences but to simply move on to another relationship with a different real estate agent that can help you. Never stay with somebody for years who is not giving you the attention you deserve as a buyer in today’s competitive market.