The Buyer Brokerage Agreement -- Should You Sign One?

The Buyer Brokerage Agreement (or BBA), is a contract between a buyer and a real estate agent.  In it, the buyer agrees to work only with this particular real estate agent.  If the buyer goes with another agent, they may still owe a commission to the real estate agent with whom they have a contract.  The real estate agent agrees to work diligently to find a suitable home that meets the buyer's requirements.  As it's a four page document, there are a lot more specific things in there, as well.

As a buyer, should you sign one?

First off, there is no law that says a buyer must sign a BBA.  And many real estate agents will work with a buyer without the contract.  But both sides are vulnerable without one.

The real estate agent is vulnerable because an unscrupulous buyer may abuse an agent's time and gas money, demanding to be shown house after house, then going with a "friend in the business" rather than with the agent who worked so hard for them.  From a buyer's perspective, of course, there is no downside to doing this.  They don't have to pay the agent for any of this time.  They don't have to "bother" their friend-in-the-business with house-looking, but still get to send some money their friend's way.

So, why should a buyer sign a BBA?  What's the difference between a buyer who signs the contract and a buyer who does not?

It's simple.  The buyer who signs the BBA is a client; a buyer who does not is a customer.  There is a legal distinction between these two in the state of Georgia.  A client is someone with whom an agent has a contractual relationship.  A customer does not.

An agent owes a client several duties, including these:

• Loyalty -- the interests of the client come first.
• Obedience -- the agent must follow all the client's legal and ethical instructions.
• Inform Client of Material Facts -- the client has a right to know certain information which may affect the offer or the purchase of the home.
• Honesty -- the agent will deal honestly and ethically with the client.
• Fairness -- the agent will deal fairly with the client, including following all applicable laws and ethical rules.
• Secret-Keeping -- the agent will keep secret any information the client tells them, so long as that information is not a material fact that must be disclosed.

A customer, however, is owed only the duties of Honesty and Fairness, plus they have a right to know any material facts.  However, "material fact" is a phrase controlled by Georgia law.  If I saw the roof leaking during a rainstorm, should I tell my customer? -- yep!  A roof leak is a material fact.  (However, no real estate agent is obligated to discover any material fact -- but they must disclose material facts if they know them.)

But is it a material fact if I know the seller is on the verge of bankruptcy, is desperate to sell, and would take any reasonably fair offer? 

Hmmm........

Well, any buyer would say that's a material fact.  It's a fact that, if known, would affect the price the buyer is willing to offer.  But the law says it's not a material fact.  Therefore, it doesn't have to be disclosed.

And here is where the duty of loyalty comes into play, a duty that is owed only to the client.  Loyalty requires that we act in the interests of our client -- thus, if I know the seller is desperate to sell, I will tell my Buyer-Client of that, and allow them to make a lower offer. 

But I would never tell that to my customer.  But why not? -- why not tell the customer, and ensure a sale that would put a commission in my pocket?

Because in Georgia, real estate agents work for the client, the person who signed a contract.  In a real estate transaction where the buyer has not signed a BBA, the client is typically the seller, who has usually signed an Exclusive Listing Agreement with a real estate agent (even if that agent is not me).  Georgia laws establish this indirect relationship with the seller through various means which are too complicated to discuss here -- suffice it to say, the relationship exists, absent a BBA with the buyer. 

I would be breaking the duties owed the Seller-Client -- including the duty of loyalty, and the duty to keep secrets -- if I tell a Buyer-Customer about the seller's need to sell.  But if my buyer signs a BBA -- if my buyer is a client and not a customer -- then I would be breaking my duty of loyalty if I don't tell my Buyer-Client.

This works the other way, too.  What if I know that my buyer is willing to go higher? -- they really want this house, but they are starting off with a lower offer, just to see if the seller is willing to accept.  Should I tell the agent representing the seller this information?  

A seller would obviously consider that a material fact -- the law, however, does not.  Thus, whether or not to tell comes down to the contractual relationship between the agent and the buyer.  If the buyer is a client, I owe the duties of Loyalty and Secret-Keeping -- and I will not tell.  But if the buyer is merely a customer, I owe the duty of Loyalty to the seller -- and I should tell.

These are just a few examples of how the Buyer Brokerage Agreement can work for today's real estate buyer.  There's really no downside to signing a BBA, and many good reasons to do so.  A buyer should interview several real estate agents, find one he or she is comfortable with, then happily sign on the dotted line -- then, you can be absolutely certain that the agent is working for you, the client.

-- Jeannie Lugo
jeannie@ronborders.com