Buyer Representation–3 Traps

In this “electronic” age, it is more and more important that you understand and read what you are signing. Lets face it, when you receive an electronic document for signature, which is often quite small, it’s mighty easy to simply click on those yellow boxes. Well, each one of those clicks is committing you to a binding legal agreement.

A Realtor® may send you documents for signing without explanation. The onus is on you! If you don’t read the document or understand it, but proceed to sign you will have no recourse if things go wrong. As they often do.

For example, my close, out of town friends, entered into a Buyer Representation with a Realtor® in their area, without reading, understanding or asking their Realtor® friend (me) for help. Six months after they purchased their perfect home, privately, the Realtor® who they signed the agreement with sued them in court for commission...and won!

I’ll explain all parts of a Buyer Representation Agreement in different articles. This Blog will focus on the 3 main points that will trip you up if you are careless like my friends. All three of the points are intertwined and that’s what will trick you.

Property Type and Geographic Location:
This sets out a coverage area that a Realtor® and you are agreeing on. If a Realtor® enters “property” as Property Type and “Ontario" as Geographic Location, you are committed to them for all of Ontario. Think about it, do you want this Realtor® working with you in an area 300 miles away from where they are located…or do you want the option of working with a local agent who may know more about that specific location? Do you want to be obligated for every "property", home, lot, farm, etc that you may be interested, now and in the future (duration of the agreement--to be discussed below) and not just what you want to buy now? 

Once you sign and agree to "Ontario" as the Geographic Location, you MUST work with that Realtor® in “all of Ontario”. Our governing body (RECO—I’ll break down many of the Code of Ethics in future Blogs), discourages Realtor's from working with clients if they don’t have the knowledge, skill, judgment or competence to do so. If a Realtor is working with you in an area that they do not know or understand then they are breaking many RECO Code of Ethic rules and not doing you any justice.

Once a Realtor® signs this document, as well, they MUST provide certain services to you and owe you certain duties. I’ll go into these in other Blogs. This Blog is about you!

Many people incorrectly think that a Buyer does not have to pay commission. Think again! Oh, yes you do.

This is where most Buyer’s get tripped up. Because they don’t read the fine print.

Realtor®'s are paid commission and are entitled to be paid commission because that is, generally, how Structured Real Estate works. Realtor®'s make no money until a deal is closed. So, EVERY agreement between Buyer’s and Seller’s and a Realtor® has a commission clause.

In the Buyer Representation Agreement, the Commission clause states that the Realtor® is entitled to be paid commission and there’s a place to indicate how much the commission rate shall be.

A Realtor® may enter into the agreement the equivalent of what they expect to be paid by the selling brokerage. The key is what they EXPECT to be paid. So, for instance, they may enter 2.5%. That’s what they are saying they are entitled to be paid. Fair enough, right? But what if a selling brokerage is only offering 1%. Well, because your Realtor® said they are entitled to 2.5% you are on the hook to pay them 1.5% (on a Million dollars, that's $15,000). WHAT??? That’s right, you signed a document saying that you will pay any deficiency. That’s the clause that follows the commission rate that you just agreed to…which almost no one reads and the Realtor® may not have explained it to you. It goes like this:

The Buyer agrees to pay directly to the Brokerage any deficiency between this amount and the amount, if any, to be paid to the Brokerage by a listing brokerage or by the seller. The Buyer understands that if the Brokerage is not to be paid any commission by a listing brokerage or by the seller, the Buyer will pay the Brokerage the full amount of commission indicated above.

- Page 2 of Buyer Representation

Remember earlier when I said these clauses are all intertwined, well, just before the commission clause with the amount, you will find the following:

If, during the currency of this Agreement, the Buyer enters into an agreement to purchase any property of the general description indicated above (page 1), the Buyer agrees that the brokerage is entitled to be paid a commission of…

- Page 2 of Buyer Representation

That means, if you purchase something privately (not on MLS), or through another Realtor®, for the duration (during the currency) of the agreement, you are paying the full commission (on a Million dollars, that's $25,000).

On the first page of the Agreement you are agreeing on a time limit for the course of the Agreement.

A Realtor® might tie you down for a substantial amount of time, because they don’t want you going to another Realtor®, because they may want to sell you more properties, or they simply want a long term commitment from you in order to work with you. They may enter as much as a full year here.

But it doesn’t end there. Let’s go back to the commission section. There’s a clause there that says if you purchase a property within so many days past the expiry of this agreement, then you will still pay any commission deficiency. This is called a holdover clause.

A Realtor® might enter 365 days in this section, thereby, actually tying you down for a very long time (in this case, one year up to expiry and 365 days holdover—for a total of 2 years). You need to consider these two dates carefully and how they can affect you in your future plans?

Here’s how that clause reads:

The Buyer agrees to pay the Brokerage such commission if the Buyer enters into an agreement within .......... days after the expiration of this Agreement (Holdover Period) to purchase or lease any real property shown or introduced to the Buyer from any source whatsoever during the term of this Agreement.

- Top of Page 2 of Buyer Representation

The holdover clause does not apply if you sign a Buyer Representation with a new Realtor after expiry of your initial agreement (that’s for another Blog topic).

Once again, all of these are intertwined, you may be locked in with a Realtor for a long time, to purchase any property in a large area and be on the hook to pay commission.

Believe it or not these agreements were designed to protect you, the general public, from unscrupulous behaviour on the part of a Realtor® . However, the onus is on you to protect yourself.  BUYER BEWARE!

Read, understand and have input into anything that is added to these agreements. If you don’t understand something, ask for clarification. If you don’t like something, such as dates, type of property, geographic area and commission then have those changed.  You are as much a part of this agreement as the Realtor®, you have as much say into what goes into that agreement.

I personally do not ask anyone to sign without going over all of the main points of the agreement with them, asking that they read the document in it’s entirety and to ask any questions for clarification. Realtor®'s are only expected to disclose in writing—they do not have to explain it. You need to ask for explanations and you absolutely need to have input into any agreement. Remember this is something you are AGREEING to. If you don’t AGREE, don’t sign.

The above points are only a small, but integral part of the Agreement…I’ll explain more points in future Blogs.

Insist on having input on any document you are signing.  READ, READ, READ, and ask for clarification on anything you don’t understand.

- Kathy Dimaline



Limit the Geographic area to a small area (and only MLS listed properties), or better yet, limit to just the property(s) you want to see with this particular Realtor®. You can always sign another agreement if you need to see more properties.


Agree that a Realtor is entitled to be paid commission, but don’t allow them to enter an amount, have them state “as paid by the seller or the listing brokerage”.  That way, you are not obligated to pay any deficiency.


Limit the time of the agreement…it can be a couple of weeks, a month, two months, whatever, (or based on when you expect to close a deal) but you take control. Also limit the holdover clause to a short period…a month or two.


If in doubt…ask for clarification and/or seek legal advise.

Kathy Dimaline is a Real Estate Broker for RE/MAX Grey Bruce Realty Inc. The comments on this Blog are the opinions, only, of Kathy Dimaline and do not constitute any legal advice or legal opinion and does not represent the interests or opinions of RE/MAX Grey Bruce Realty Inc., brokerage.