Enforcing the Buyer’s Representation Agreement when the Buyer Buys Direct from the Builder

Should I Sign a Buyer Representation Agreement? | The A-Team

This situation seems simple enough.

The standard Form OREA Buyer Representation Agreement actually covers this. It’s included. The reason why it’s included, is that it’s “not excluded”. That’s how you figure it out.

The technical wording would require payment of a commission should the Buyer suddenly decide to purchase a new home from a new home Builder. But, naturally, that doesn’t necessarily make any sense:

  • The Buyer went to the Agent only after they considered that they couldn’t afford what they wanted in a new home.
  • The Builder doesn’t pay Agents a commission at all.
  • The Builder doesn’t pay a referral fee to real estate agents.
  • The Builder doesn’t co-operate or send deals to real estate agents.
  • The Builder doesn’t even want real estate agents to be “onsite” with their clients.

So, what value does the real estate agent bring to the table? Basically, little or nothing when it comes to new homes with respect to this particular builder.!

Now, of course, there are exceptions. Some Builders love agents. They encourage them to bring their clients and pay full commissions. We are not really talking about those particular Builders. For our discussion about the Buyer Representation Agreement, we are talking about the other ones.

What we are talking about is the BIG SURPRISE. The Buyer decides to buy a new house from a Builder after a long and unsuccessful search with an agent. Yes, there was a standard Form up to date OREA BRA in place. It was signed. No one mentioned “new homes”, or “new home builders” or anything remotely like that.

The Buyer buys and the Agent suddenly says “you owe me a commission”, namely, “2.5 % on the purchase price of your new home plus all the extras you ordered from the Builder plus the HST on top of everything.” That’s over $25,000.00 for starters on a million dollar home.

Brian Madigan LL.B., Broker


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