BUYER BROKERAGE EXPLAINED

Starting in October 2008, Brokerages are encouraged to obtain written contracts with both a buyer and a seller. It is impossible for your agent to be completely objective without a Buyer Brokerage Agreement in Place. Here's why.

Many years ago there was a level playing field. Buyers, sellers and real estate professionals all knew the ground rules and worked together under equally applied rules of compensation. Everyone knew how much the agents compensation was and everyone was happy.

Eventually, the Competition Bureau took a very close look at the industry and decided that the practice of setting uniform rates of compensation was not in the best interest of the public and that the Canadian Real Estate Association must ensure their members negotiate their commissions on an individual basis.

The practitioners of the real estate business being fair minded and dutiful, tried their best and succeeded in educating the public in that regard. After a while, Associates who represented buyers quickly learned that their fate depended directly on the slash a pen by the listing agent.

While bound by a code of ethics to represent the best interests of the client at all times, it became practically impossible to ignore the substantial variables in commissions being offered on a list of otherwise similar properties. The agent's pay check rests entirely on the generosity or lack thereof of the seller and the listing agent. They were expected to be saint-like in their dealings with the public, with no regard for their own compensation. I have yet to meet even one agent who will concede that they might even consider putting their own financial interest ahead of those of their client, and I have brought the question up quite a bit in various industry forums. Irregardless, it is a well known fact that listings offering a lower rate of commissions get less showings. How is that possible? There is clearly a double standard here. Just about everywhere we turn today we are faced with some form of corruption at every level of society starting with our very own politicians and infecting every institution imaginable. Are members of organized real estate somehow impervious to the temptation of self interest? You be the judge!

Seller's agents learned that by reducing commission paid to the buyers agent, they and still realize the benefit of the MLS® system and in fact increase the possibility that they would sell the property themselves. In theory at least the seller could reduce the list price by the amount he would have had to pay the buyers agent in hopes of a faster sale. The reality was that in doing so, like it or not his property might be "blacklisted" by many Associates even in contravention of their obligations required under law. Given the variety and scope of available properties and declining resources under this new system, the possibility increased that struggling agents might overlook properties based on a commission offered, increased.

This created an unconscionable imbalance and a system whereby it was impossible for Associates to fairly represent the buyers. No matter how well intended. If the buyers Associates cannot put food on their table, it will be impossible to represent their clients impartially.

On a provincial level, the government, now having empowered the Real Estate Council of Alberta to oversee all things real estate related, and possibly realizing the error of their ways determined that unless you believe in the tooth fairy it really wasn't reasonable to expect the Associates to work for nothing. It was pretty much impossible for even the most saint-like of us all, to give the same fair and impartial advise on properties offering as little as a dollar commission, (Yes it happens) as those offering the prevailing rate of commission.

Introducing the Buyer Brokerage Agreement - It has been around for a long time in many parts of the world, but it is pretty new here in Alberta. On the outside, because it's new, the public has difficulty understanding the concept of the Buyer Brokerage, and like anything new, are somewhat resistant to it. They have yet to learn that it was implemented for their benefit.

If you want a GUARANTEE that you are getting completely objective advice you need the protection of a Buyer's Brokerage Agreement.

The need for a Buyer's Brokerage Agreement has very little to do with whether the agent wishes to lock you into a contract. It has more to do with protecting a buyer's agent against the business practices of a minority of industry members who take from our pockets to line their own. It also protects you, the buyer against any possible conflict of interest your agent may have with you, and ensure that you are getting the highest level of representation in spite of the commissions being offered. When working under a Buyer Brokerage, the entire transaction becomes transparent and your agent is paid the same, regardless of the commission being offered.

Change is not usually eagerly embraced. In time, it would be hard to imagine how anyone functioned without the benefit of a Buyer Brokerage Agreement. I do predict that without the protection that a Buyers' Brokerage Agreement offers to both the Buyer and their agent, compensation rates will continue to decline, as they have been for a while. This can only affect you, the buyer negatively. All Buyers should for that reason, insist on the protection and peace of mind that a Buyers Brokerage Agreement offers them.

I have often heard from members of the public that they might not deal with someone who insists on a written agreement and to them I would like to suggest this.

• Most often the reason the concept is not often brought up is because many agents do not understand them enough to be able to properly present them.
• Many agents feel that it is easier to keep their customers in the dark about their conflict of interest or pretend that they are above all that, than to risk losing a buyer who might otherwise have benefited from a written service agreement.
• Unfortunately for buyers, over time, I suggest that this slippery slope will only get steeper, as more seller's agents reduce commissions to their benefit. This all happens behind the scenes. Unfortunately without a comprehensive discussion of a written Buyer's Agency Agreement, the buyer will never know how this may have affected them, and will never have been given a choice in the matter.
• Conduct your real estate business only with real estate professionals who will agree to work under a Buyers Brokerage Agreement.

The Buyer Brokerage will become one of the cornerstones of organized real estate. Effective October 1, 2006 amendments to the Real Estate Act state that associates should have a written agreement in place with their customers. The agreement should outline the services which are being offered, the amount of compensation, and how it will be paid. In time, it will be difficult to find an agent of any worth who is willing to start a project without a Buyer Brokerage Agreement simply because without one, it places him/her in an untenable position they are placed. For the time being however, the Real Estate Council, who is legislated to protect the interests of the consumer seems to be taking a wait and see attitude with respect to making these agreements mandatory, probably out of fear of reprisal from industry members. Until such time as the Buyer's Brokerage Agreement becomes legislated, it will always be just another great idea which fell by the wayside due to lack of interest. As a member of the buying public, you need to make sure that you protect yourself against any conflicts of interest. You would be well advised to request a Buyers Brokerage Agreement