OREA Buyer Representation Agreement: A Complete Explanation of FORM 300

RECO new regulation on buyer representation agreement

RECO has a new guide, which is effective from December 1st, 2023.

Some new concepts are introduced such as the self-represented party, the designated representation, etc. 

Compared to the brokerage representation, Designated Representation reduces the probability of occurrences of Multiple Representation. The relevant part of the designated representation will be indicated in the buyer presentation agreement.

For details on the change and new regulation and practice, Please click and refer to RECO Information Guide

What is a buyer representation agreement?

A buyer representation agreement also called a buyer agency agreement or brokerage agreement is an exclusive contract between the homebuyer and real estate brokerage. The buyer agent is acting on behalf of the brokerage. OREA FORM 300 is used for this purpose in Toronto, Ontario. There are step-by-step instructions below explaining how to fill out this agreement. You can also access other OREA Forms here.

Pros and cons of signing a buyer representation agreement

After you sign the contract, the agent will provide fiduciary loyalty to you and protect your best interests. Since the buyer agent commission is commonly paid by the seller, you won't have to worry about it except under special situations such as commission deficiency or/and a holdover period.

At the same time, you are bound by the contract. For example, during the contract period, you are locked by this brokerage and may have to stick with their services. 

How to terminate a buyer rep agreement in Ontario?

It is a legally binding contract, therefore, you would be required to seek a mutual release for termination or cancellation and use Form 301. In practice, the brokerage may assign you a different realtor in case you are not satisfied with your current agent. If you persist in backing out of the contract, you may be obliged to fulfill the duties outlined in the contract or face a potential lawsuit.

Exclusive Buyer Representation Agreement

An exclusive Buyer Representation Agreement means that the buyer gives the exclusive authority to the buyer agent. The realtor represents the buyer to prospect and purchase the property.

Relationship between the buyer and brokerage

The agreement is between the buyer and the agent’s brokerage. The salesperson is acting on behalf of the brokerage. Please read brokerage vs realtor for additional information.

Detailed Explanation of Contract Terms

VALIDATION OF TIME

The agreement time validation is negotiable. If it exceeds 6 months, the buyer should be reminded of this and sign to confirm their understanding.

BUYER'S WARRANTY

The buyer acknowledges and warrants that he or she is not under agreement with any other agent/brokerage.

PROPERTY TYPE(USE) AND GEOGRAPHIC LOCATION

• These indicators are used to identify the kind of property and the location to which this agreement applies.
• Obviously, it is in the buyer's interest to limit the extension of the property type and location area. 
• If not satisfied, the buyer has the right to change the brokerage. Otherwise, the buyer would be locked in the contract.

DEFINITIONS AND INTERPRETATIONS:

"Buyer" is equivalent to "purchaser"

COMMISSION

• This is one area that can be easily overlooked. The commission in real estate is typically paid by the seller, including both the listing agent and the buyer agent commissions. 
• However, this clause clarifies in the case that the seller does not pay commission to the buyer’s agent or pays less than this agreed-upon commission, the buyer is obliged to pay the difference to the buyer agent.

There is also a holdover period time clause to further define the commission obligation of the buyers. It occurs when the home is shown by the buyer’s agent, but it is purchased either by the buyers themselves or through a realtor from a new brokerage. 

• Under this clause, the buyers owe the difference of commission to the previous buyer’s agent if the commission the new brokerage gets is less than the amount stipulated in the contract with the previous brokerage.
• If the buyers buy the property themselves with no brokerage involved, the buyers owe the full amount of commission stipulated in the contract.

REPRESENTATION

The relationship between the buyer and the brokerage is either by representation or customer service. Under the representation, the buyer’s agent, who is on behalf of the brokerage, is fiduciary and loyal to you. While under a customer service agreement, the buyer’s agent has no obligation to the buyer in many ways.

Multiple Representation

• In short, Multiple Representation happens when the agent has 2 or more clients in the same deal. To avoid the conflict of interest, RECO outlines and regulates it closely. There are a number of rules applied, which are listed in the agreement. 

INDEMNIFICATION

The buyer agrees to make no claims to the buyer agent or brokerage in the case of any home issues regarding the condition and improvements, etc.

FINDER’S FEE

The buyer agrees that the buyer agent may take other referral fees or rewards.

CONSUMER REPORTS

The buyer agrees to provide consumer reports which contain the personal information and credit report to the seller or other related parties.

USE AND DISTRIBUTION OF INFORMATION:

The buyer allows the buyer agent brokerage to use the buyer’s information during and after the home buying process. All details are listed in the pre-set terms.

CONFLICT OR DISCREPANCY

The added supervision to the agreement supersedes the pre-print clauses.

SUCCESSORS AND ASSIGNS

Successors and assigns are bound by the agreement if the buyer dies.

ELECTRONIC COMMUNICATION

Electronic Communication is applicable.

ELECTRONIC SIGNATURES  is applicable

SCHEDULE(S):

Additional clauses and terms are listed in the schedule attached to the agreement.

DECLARATION OF INSURANCE

The salesperson has insurance coverage required by RECO.

In summary

This guide helps you understand the terms commonly used in the agreement so that you completely understand what you’re agreeing to. To avoid feeling like you’re being rushed to sign something you don’t really understand, please read this guide in advance.

This guide was not drafted by a lawyer. It is only based on an agent’s interpretation and perspective. Please check and verify with your real estate lawyer for completeness and accuracy.