Everyone knows (or should know) that when you have your home professionally listed with a licensed REALTOR® your interests are protected. When a Seller lists their home for sale with a REALTOR® they will sign what’s commonly called a Listing Contract. This contract outlines the services the ***Real Estate Brokerage owes to the Seller (install a lockbox, print hi-lite sheets, market property online, install a ‘for sale’ sign and more) and how much the Brokerage will be paid once the property is sold. The contract also outlines how the Seller’s interests are protected. The Listing Contract is a service agreement between the Seller and the Listing Brokerage.
But what about a buyer? How is a Buyer’s interests protected?
They often don’t sign anything as they house-hunt, and the pen goes to paper only during the process of writing an offer with their REALTOR®.
How Are Buyers Protected?
Until now, most buyers have never been required to sign anything. But as of July 1, 2014 all REALTORS® licensed in Alberta are required to have a special service agreement signed by their buyer clients. This is called an Exclusive Buyer Representation Agreement (EBRA). Now you, as a buyer, will have your interests protected exclusively by the Brokerage and REALTOR® of your choice.
What Is In An Exclusive Buyer Representation Agreement (EBRA)?
As a buying client you are owed the following duties from your Realtor:
- Undivided loyalty means an agent will act in the client’s best interests, above all others. For example, if you ask your REALTOR® not to show your favorite property to any other buyers, you are actually asking that REALTOR® to be loyal to you, above other buyers. **This is a duty not owed to a customer, just to a client.
- Confidentiality is the agent’s duty not to share a client’s confidential information (finances, family makeup, motivation to buy, etc.). **Buyers who are customers must understand that REALTORS® have no obligation to keep a customer’s information confidential, especially if that information benefits one of their clients. Best practice is to not tell the agent anything personal until you’ve signed an Exclusive Buyer’s Representation Agreement with them.
- Full disclosure to a client means the agent must share all information relevant to the client’s decisions. (The exception is disclosure of confidential information from another existing or previous relationship with another client.) **If you are a customer and you tell the agent confidential information and that information is of value to the agent’s client, then the agent must disclose the information to their client. This is why customers need to know they should not share their confidential information.
Choosing to become a client and not a customer is a valuable decision!
What is the difference between a customer and a client?
There is a very distinct difference between a customer and a client.
- Essentially represent themselves in a transaction.
- not have an agent acting their best interests, although the agent is still committed to do a reasonable job, be honest, and comply with provincial regulations.
- not have relevant information disclosed to them other than factual information because the agent is not working for the customer.
- not have your confidential information protected if you choose to tell the agent.
- Benefit from the loyalty and services of an agent committed to acting in their best interests – a duty not owed to a customer
- Obtain the relevant information an agent is obligated to disclose to a client but not to a customer
- Be able to tell their agent the confidential information necessary to allow the agent to better understand and meet their needs
- Know their agent will protect their confidential information
** If you still wish to be a customer and not a client when you make a purchase, you will be asked to sign a Customer Status Acknowledgment which means you intend to represent yourself in the transaction.
FAQ About Customers vs Clients
- “I’m meeting a Realtor for the first time at a property. Do I have to have an EBRA signed before I go in the house?” No, the mere showing of a property does not mean you a client of that REALTOR® Be aware that you will only be getting factual information from the REALTOR® and not information that will benefit you directly unless you choose to become a client.
- “I met an agent at an open house and wanted to know more about condos in the area. Will the agent give me that information before I have the EBRA signed?” Yes, you will be provided with factual information as a customer, but you will not receive advice, as that is reserved for clients only.
- “I am reluctant to sign an agreement until I know the REALTOR® better. How can I still be protected?” Compare your role as a customer to that of a client to ensure that you, as a buyer, know the limitations of a customer relationship. If you’re still reluctant, you may sign an EBRA for a short time – a week, a day, or even for the showing of one property to have your interests protected for that amount of time.
** Caution – Most REALTORS® like helping people reach their real estate dreams. This willingness to help might lead you, as a buyer, to ask for customer services owed only to a client. In this case, do not be surprised when the agent asks you to sign an EBRA. If you are asking the agent for client services then you will be expected to sign an agreement.
I’ve Chosen to Be a Client. Who Pays My REALTOR®?
The EBRA also outlines how the agent will be paid. This is also an important thing to discuss with your agent once you’ve chosen to become a client since REALTORS® are licensed professionals who (like anyone) don’t like to work for free.
Traditional Real Estate Brokerages are paid for their services after a Buyer purchases a home. When you make an offer to purchase a home you will also have to provide a deposit. The deposit is used to show the Seller your qualification as a buyer, and your interest level in their property. A larger deposit may entice a Seller to work with you especially in a multiple-offer situation. But do you know what a deposit is used for after the sale?
When you and the Seller have agreed upon price and terms of the sale your deposit will be held in trust. On Completion Day (often your possession day) the agreement you signed instructs the Seller’s lawyer to use your deposit to pay your REALTOR’S® Brokerage the commission owed. If the deposit isn’t enough to cover the commission the amount owing comes from the proceeds of the sale. Did you know that it’s the Buyer who pays the REALTOR® for their work? If a property isn’t sold, the REALTOR® doesn’t get paid (in a traditional, full-service Brokerage) and the Seller owes the Brokerage nothing.
Be aware that there are some properties on the market that offer the Realtor $1 commission and even $.01. Since your agent isn’t likely going to work for that amount the commission will have to come from somewhere.
There are a few ways to deal with this:
- Ask your agent to only show you properties that pay an adequate commission. What is adequate? That is determined by the amount you agreed to pay your agent in the EBRA you signed. Your agent will want the commission amount covered in the EBRA and will ask for your permission to ask the Seller or Seller’s Brokerage for it. This is the most common scenerio. However, if you purchase a property that offers less commission than you agreed to in the EBRA, your agent will need to include it in negotiations with the Seller or Seller’s agent. If there is still a short fall, you will be required to make up the difference.
- Ask your agent to negotiate commission with Seller/Seller’s agent before you see the property. If there is a shortfall, you will be required to make up the difference if you purchase that property.
It is important to keep in mind that Buyers are essentially paying REALTORS® for their services. The EBRA is the best way to ensure that you know your needs are being met, that your agent is working for your best interest, and how your agent is being paid for their work.
Bottom line: Ask questions! Be informed! Buy Smart!
*** Real Estate Brokerage mentioned here is a traditional, full-service brokerage. Non-traditional brokerages operate on a pay-per-item schedule and often offer Realtors reduced commissions to sell their property (for example: $.01 or $1 or 1% of the purchase price). Make sure you are aware of the difference.
Download a copy of the EBRA (for information purposes only)