This is the sixth episode in our new video series depicting the seismic shift in the representation of buyers in 2025, and is an excerpt from the firsttuesday Buyer Representation Bonus Training™.
The Bonus Training dramatizes:
- the origin of the “same-percentage, same-split” industry custom unwound January 1st, 2025 by legislation;
- the contents of the newly-mandated buyer representation agreement to earn a fee, also called a BRA;
- critical rules surrounding retainer periods, and how buyer representation is extended or modified; and
- your practical use of the buyer representation forms as depicted through various sample transactions and scenarios.
The Buyer Representation Bonus Training™ is available to current and future firsttuesday students without charge.
Why this episode matters: See the new negotiating power buyer brokers use to protect their fee – and mitigate business risk.
Power to protect the buyer broker fee
In this section, we demonstrate the math of the new negotiating power buyer brokers use to protect their fee, both in the representation agreement and in the purchase agreement offer the buyer-client signs.
The type of buyer-client — individual or entity — only affects the duration of the period of representation, not the type of purchase agreement form to be used. In contrast, the use of different forms of buyer representation agreements for individuals and entities avoids error in the expiration of representation. [See RPI Form 103.1 and 103.2]
Consider a buyer who meets a real estate agent. The buyer decides to hire the agent and their broker to locate, advise and negotiate the acquisition of property they want to own, whatever type it might be.
The buyer and buyer broker enter into a buyer representation agreement, also called a BRA, negotiated by the agent. A provision in the agreement authorizes the broker and their agents to represent the buyer to find properties, advise the buyer on the advantages and disadvantages of owning a property of interest, and write up and submit an offer when a suitable property is located. [See RPI Forms 103.1 and 103.2]
A suitable property is located with a market value of $1 million. The buyer is able and willing to make a $200,000 cash down payment on the purchase price. Mortgage financing funds the remaining $800,000 of the purchase price.
As called for in the representation agreement, the buyer broker earns a fee on a transaction calculated as a percentage of the purchase price, say, a fixed fee of 3%.
The buyer broker fee amount earned on the transaction is entered in the purchase agreement as paid by the seller. [See RPI Form 150 §8.1]
Here, escrow disburses the fee directly to the buyer broker from funds accruing to the seller on the buyer’s payment of the purchase price — $1 million.
With these representation and purchase agreement conditions, the buyer broker’s business risk from letting others control their fee no longer exists. The buyer and the buyer broker set the fee and how it is paid without outside influence, eliminating the present risk of misconduct by interference from other brokers, trade unions, MLSs or AORs. [People v. National Association of Realtors (1981) 120 CA3d 459]
Editor’s note – Stay tuned for the second episode covering the fee-math under a buyer representation agreement to release 03/03/2025.
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