What’s a Buyer Customer Service Agreement ?

Let’s say you’re a prospective buyer. You’ve been to an Open House, or maybe you’ve seen a listing you liked on Realtor.ca and contacted the listing agent to see it.  You talk to the listing agent about making an offer and he or she drafts up the paperwork; the offer is presented, the negotiations take place, and hey, you’ve bought yourself a new house!

Most people would assume that the agent representing you in this transaction is your agent and that you’re their client. And they’d be wrong.

We are, as realtors, statutorily required to have a contractual agreement with a buyer before we can present an offer. If we’re acting for them and them alone, that’s called a Buyer Representation Agreement. In that scenario, they are our clients and we owe them the highest fiduciary duties. (Fiduciary duties are the same duties held by doctors and lawyers: it’s a duty to put their interests ahead of our own, and act in their best interests.)

But once we have that relationship with a seller, we can’t have it with anyone else. So if you decide to work with an agent who is already representing a seller, ie. the listing agent, the contract that agent will sign with you is different. It’s called a Buyer Customer Service Agreement,  and that’s not remotely the same as a Buyer’s Representation Agreement.

In customer service, (and this is important): I do not have an obligation to get you the best possible deal on this property. I do not represent your interests in this transaction. I already have a client: the sellers.  My primary duties are to them. If you are my customer, I have to answer your questions honestly and I have to disclose material facts but by law, I can’t disclose their bottom lines to you or yours to them.

When lawyers act for both parties, it is considered a conflict of interest that requires express consent from both sides. Lawyers are required to disclose everything to both parties once they do. Both sides are their clients.

But in real estate, it’s different. Having a customer and a client is not considered a conflict of interest; it’s called “multiple representation,” or  “double-ending.” The conflict of interest is avoided because we do not have divided loyalties; our loyalties are to our clients and our clients only.

I had a friend who bought a house via an agent she met at an Open House. She found out later that she had paid $ 40,000 more than a previous buyer had offered, and that the sellers had accepted before the deal fell apart.

“How could this agent act for me and not tell me that they were willing to take $ 40,000 less than I paid?” she asked, and believe me, she was angry.

I had to explain that she was a customer, not a client, and that the agent was behaving properly. Remember, we are  statutorily required not to disclose a seller’s bottom lines in this kind of situation. Clearly my friend  had no idea when she signed the buyer’s customer service agreement that that’s what it meant: she thought the agent was her agent too.

Now, there’s nothing wrong with an agent double-ending, or with a buyer being a customer, as long as the buyer understands that they are not getting the same services as they would if they had their own agent. An agent who is acting for the sellers as well as the buyer will not be able to prepare a comparative market analysis for the buyer the way he or she probably did for the seller; they can’t really advise you on price.

If you think about it, that makes sense: every dollar you save is a dollar less to the seller, and remember: the agent’s primary duty is to the seller, not to you.

And when it comes to due diligence, you’re pretty much on your own.

I personally avoid double-ending. I  was a  lawyer for too long to be comfortable with all the possible conflicts of interest. But lots of realtors do it, and manage to stickhandle those conflicts ethically.

Oh, one other thing. Buyers often think that if they use the listing agent as “their” agent they can get a lower price because the agent will reduce their commission to get the deal done. Just remember that the contract between the listing agent and the seller as to what the listing agent will get paid  on commission is a contract between them, not you.  I’ve had listings where I’ve put too much time and money into staging, and photographs, and Open Houses, and hand-holding, to even consider reducing my commission, and  I don’t have to. My commission has nothing to do with you. Caveat Emptor.

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9 Responses to What’s a Buyer Customer Service Agreement ?

  1. Lilou says:

    What happens if I sign a buyer customer service agreement ” not wanting to pay commission as a buyer” and the property that I like is on sell by FSBO that also doesn’t want to pay commission!! How the Brokerage will get paid?

    • Peggy Blair says:

      The agent who takes you to the property should get the home seller to sign a commission agreement before submitting the offer. And the customer service agreement should spell out that you are on the hook for the commission if the seller won’t pay one. I wouldn’t take a buyer to see a property if they weren’t prepared to sign the standard terms re. payment of commission; if no one is prepared to pay for my services, they don’t get them.

      • Lilou says:

        Thank you Peggy for your reply! I agree with you 100% !!!

        But let s say that this Scenario happened “where the buyer signs th customer service agreement- in this case he doesn’t have to pay commission and the seller is FSBO that doesn’t want to pay commission “…. in this case I am assuming that the brokerage will not be paid!!!!! Is this correct! I just need a clarification for my course.

        Thank you

  2. nathan says:

    Hello, what if you attend an open house and like the property, the agent finds out you aren’t working with an agent, asks you to make an offer and has you sign the Buyer Rep. Agreement. The agreement date is only for 7 days but the holdover period is 120 days but there is no initial where there should be one if the agreement is over 6 months (is this agreement valid?). If the deal falls apart but the holdover period specifies an entire geographic area, are you obligated to give the first agent commission if after the agreement expires (holdover still applies) you buy a property in the area that the first agent hasn’t shown you? Also does that open house count as a showing in technical terms for the buyer representative agreement , could i go back and make another offer on that property with another agent because technically the first agent did not show me that property?

    • Peggy Blair says:

      I can only speak in generalities as I can’t comment on a specific situation where you are represented by an agent. If the term of the agreement is less than six months, there is no need to initial next to the six month clause because the agreement doesn’t exceed six months. During the holdover period, if a buyer enters into another Buyer’s Representation Agreement (BRA), the standard OREA form says that the buyer is on the hook to the initial agent for the difference between the commission agreed to in the first BRA and the commission agreed to in the second one, should they purchase within the holdover period: most often, however, the two commissions cancel each other out. Note that sometimes brokerages have their own BRAs and don’t use the OREB ones, so it is important for a buyer to check these provisions carefully before signing. A BRA is a contract, and the terms of it are binding, so it’s important to get legal advice when questions like this arise. A buyer is best served to work with one agent who is duty-bound to put their interests first, rather than enter into situations where the listing agent has a primary duty not to them, but to the seller. Finally, if there is a signed BRA still in effect, it doesn’t matter if the introduction was via an Open House or not, the contract applies.

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