Wednesday 25 April 2012

Buyer Agency; Know What You're Signing

Some Realtors are guilty of not properly explaining legal contracts they want people to sign
We certainly do not live in a paperless society.
In real estate, for example, there is more paperwork now then there was 13 years ago when I began my career with Royal LePage. The biggest change may have occured in what Realtors refer to as Agency. When you purchase a home, you are required to sign a Buyer Agency Agreement with the sales rep who is representing you -- a Realtor who is usually the co-operating broker employed by you to assist in the house finding process. This Buyer Agency Agreement has an expiry date on it just as a listing agreement would.
A story on-line from http://www.moneyville.ca/ (Toronto Star newspaper), talks about a Realtor who didn't explain this buyer relationship well enough to his (customer) client, but this couple wanting to purchase in Milton signed the document anyway.
In small claim courts the Realtor lost their judgement, attempting to receive commission for a house he did not sell them.
It's a good lesson for consumers, to know exactly what they are signing. Don't sign a Buyer Agency Agreement with a Realtor until you are prepared to be dedicated to that Realtor as you have entered into a contract. The only way out is to prove (in this case) to a court that you were not explained properly what you were signing.

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Court denies Realtor $11,000 commission
By Mark Weisleder | Fri April 20 2012
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 agents
Here’s an example. Though 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 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 he 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 times 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 and 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.

Mark Weisleder is a real estate lawyer. Email mark at mark@markweisleder.com

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