Buyer’s Guide to Buyer Broker Agreement
By: Barry Miller, Esq., of Barry L. Miller, P.A., Offices Orlando
With recent changes to rules that govern Realtors® and compensation to buyer’s brokers, the process just got more confusing and complicated for buyers. First, buyers will be required to have a contractual relationship with their agent. This agreement will set the terms of engagement between the buyer and the broker. This agreement is called the Buyer Broker Agreement (“BBA”)
Considerations for the agreement for buyers to consider are:
- Term: How long should the agreement be for? It is recommended that the agreement span 60 to 90 days.
- Compensation: How will the buyer’s broker be paid? There are various ways and some involve a combination of options:
- Seller will compensate the buyer’s broker. This is when the seller agrees in the listing agreement to offer compensation to the buyer’s broker.
- Concessions. This is where the seller will provide a credit at closing for the buyer to use for commissions and/or closing costs.
- Buyer to compensate the buyer’s broker. This is when the seller is not providing compensation and there are no concessions. The BBA will set forth what the buyer’s obligations will be to the buyer’s broker.
- Combination: A buyer could have the seller providing, for example, 1% of the purchase as buyer broker compensation and then the Buyer paying 1% for the total combination compensation to the buyer’s broker equal to 2% of the purchase price. Another scenario could be the seller providing 2% of the purchase price towards commissions and closing costs and the buyer electing to utilize ½ percent towards commissions and then pay the difference.
As you can see there are a number of methods to determine compensation. Buyer’s need to interview agents to find the right compensation package that will meet their financial needs.
Of course, we would recommend that a buyer engage the services of a real estate attorney to review the BBA and the other vital legal documents for a real estate purchase. Often, the buyer can hire a real estate attorney for a flat fee to work in concert with the Realtor®, to include: review of the BBA, draft the sales contract, draft addendums, review the title commitment, title objection letter, review the survey, review the closing documents and closing statements to protect the buyer’s intertest. After all, this is a major endeavor for a buyer and they should have legal representation.
Please note this article is for informational purposes only and should not be construed as legal advice. The facts and circumstances of each case, transaction, or matter can differ greatly. You should not use this information as a substitute for consulting with a licensed attorney. Barry L. Miller, P.A., and its attorneys, and staff, do not represent you unless you execute an engagement agreement with the Firm which confirms that representation.
Barry Miller Law is familiar with all aspects of real property law. If you, or someone you know, has legal questions concerning real estate, business or probate law, contact Barry Miller Law for assistance at 407-423-1700 or email us at info@BarryMillerLaw.com for a consultation.
