Buyer Representation and Broker Compensation Agreement (BRBC)

Jacqueline A. Oliver
Attorney/Broker/Member of the Risk Management Committee
 

Knowledge and understanding of the BUYER REPRESENTATION AND BROKER COMPENSATION AGREEMENT (“BRBC”) is key to avoiding disputes about Broker compensation; however, a signed BRBC is only part of equation. Consistent standards of practice by the agent help reduce the chance of administrative actions as well as civil disputes. This Article examines the mechanics of the BRBC and best practices in using the BRBC.
 

Why is the BRBC a useful tool? The BRBC is the best way to comply with both the NAR Settlement Buyer Compensation rules and with CA AB 2992. The NAR Settlement requires agents to obtain a written compensation agreement between a Broker and a Buyer before showing any properties or writing any offers. CA AB2992 requires agents to obtain a written representation agreement between a Broker and a Buyer “as soon as practicable,”* with a deadline no later than when a buyer submits an offer. (* Look for the DRE to redefine this language to align with the NAR settlement more closely.)
 

Both the NAR settlement and AB2992 require the representation agreement to include the following terms:

• Written authorization for the Broker/agent to act on the Buyer’s behalf

• Clearly defined compensation

• A list of services provided by the Broker/Agent

• A termination date not to exceed 90 days

Additionally, the BRBC can be Exclusive or Nonexclusive. This distinction is addressed later in this Article.

Is there another written agreement for the same purpose? The law does not require the Broker to utilize the CAR BRBC. Some brokers may choose to write their own compensation agreements, but the BRBC includes protective terms vetted by CAR attorneys.

While there is no guarantee that a client will recall the same “facts” as the Broker/agent, there are ways by which an agent can significantly reduce their risks when obtaining signatures on a BRBC. Multiple signed BRBCs, by the same Buyer with different Buyer agents, invite conflicts between Buyers, Sellers, Listing Agents and/or Buyer agents. Before showing property or writing an offer, the Agents should confirm in writing that the Buyer has not previously signed a BRBC with another agent. If the Buyer signed a BRBC, the Agent should inquire whether the prior BRBC was Exclusive or Nonexclusive.

As mentioned earlier, an Agent should first ask whether the Buyer is “working” with another agent before asking the Buyer to sign any forms. Next, the Agent should ask whether the Buyer signed a BRBC agreement with the other Agent. In some cases, a Buyer says they have seen other properties with various agents, and they do not know what they signed since there were so many forms.
 

EXCLUSIVE BRBC, NON-EXCLUSIVE BRBC & THE BCA TO ADVISE THE PARTIES

The BRBC representation can either be Exclusive or Nonexclusive. Nonexclusive representation is the default on the BRBC unless the Exclusive representation box is both checked and initialed. The Buyer might ask and often does ask “what does Exclusive or Nonexclusive mean?”

The Exclusive BRBC is an agreement that the Buyer will pay the Broker compensation during the term of the BRBC (not to exceed 90 days or any extension) if the Buyer closes on a property that fits the Buyer’s parameters set out in the BRBC regardless of whether the Broker represents the Buyer in the transaction. Parameters include the type of property (single family residence, condominium, townhouse, vacant land, etc.), the location of the property and any Buyer’s priorities (for example, with or without a pool, stairs or no stairs, lot size, age, style.)

The Non-Exclusive BRBC allows Buyers to view properties with various Brokers and if the Buyer closes on a property that fits the criteria set out in the BRBC and the Broker was “involved” in the transaction, the Buyer owes compensation to the Broker. Broker involvement is more than simply providing a list of properties to a Buyer. Broker involvement is established by the Broker’s specific acts in assisting the Buyer in the purchasing process such as finding property, showing property and writing offers.

In either case (Exclusive v. Non-Exclusive), the Buyer may owe compensation to more than one Broker based on the BRBC. Whether the failure to pay compensation becomes a dispute depends on the Broker. Some Brokers will negotiate lower compensation to settle a dispute and to resolve the matter. Other Brokers might continue to battle in a “he said she said” fashion.

Confirming client communications in writing can reduce the risk of litigation and possible administrative claims. Buyers often claim ignorance so, for risk management purposes, Brokers/Agents should retain emails, letters, or texts as proof of advice and counsel to the Buyer. To memorialize the Broker’s advice about the BRBC, the agent can send an email or text such as “This confirms our conversation today about the Buyer Representation Broker Compensation Agreement (“BRBC”). You told me you did (or did not) sign an Exclusive BRBC with another Broker/Agent. You understand that if your BRBC is Exclusive, and you choose to work with another Broker/Agent, you may be obligated to pay compensation to multiple brokers. I also advised you to consult an attorney if you need a legal opinion.”

The Broker Compensation Advisory (BCA) offers a convenient way to confirm the impact of the BRBC. It all boils down to who pays the compensation. Everyone knows that “compensation is negotiable” so Agents should do their best to explain, confirm and negotiate well.

Finally, when showing a property at an Open House or when a Buyer wants the Listing Agent to show a property, the Listing Agent can avoid representation of the Buyer by using a Buyer Non-Agency Agreement (CAR form “BNA”). A good practice would be for an agent to not only explain the BNA but also explain the BRBC so that the Buyer can make an informed decision on which form to sign. It is crucial to confirm the Buyer understands both forms and makes an informed and independent decision on which form to sign.

Disclaimer: This article is designed to provide accurate and authoritative information regarding the subject matter covered. It is offered with the understanding that the author and publisher are not engaged in rendering professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.  Articles which appear in this publication are an informational service to members.  Their contents are the opinions of the authors alone and do not necessarily represent those of SDAR.