The Buyer Representation Agreement
The Residential Buyer/Tenant Representation Agreement (TAR Form 1501) is used by real estate agents in Texas to form a contractual agent-client relationship. Sounds like a mouthful, huh? In the simplest of terms, this contract binds the buyer and agent together and provides an outline of legal duties for the parties. It prevents a lot of headaches and one should be obtained by your agent when you begin working with them. While they may seem a bit scary at first, they’re actually quite easy to understand and very useful. Let’s take a look shall we?
1. PARTIES This is the easy part – it defines the parties (agent and buyer) and gives basic contact info for both.
2. APPOINTMENT This sentence sets it all up: “Client grants Broker the exclusive right to act as Client’s real estate agent for the purpose of acquiring property in the market area.” In Texas, all buying and selling takes place at the broker-level, which means that you are actually signing a contract with the broker of the company your agent works for. The agent is acting as their representative.
3. DEFINITIONS This paragraph lays out the definitions of the following words used throughout the buyer representation agreement: acquire, closing, market area, and property.
4. TERM Definition of the time frame for which the representation agreement with be in effect. The term must have a start and end date.
5. BROKER’S OBLIGATIONS Defines the three basic broker obligations to the client: to assist their client in acquiring property, assist the client in negotiating the contract to purchase a property, and to comply with other parts of the representation agreement.
6. CLIENT’S OBLIGATIONS Similarly, this paragraph defines the basic obligation of the client: to work exclusively with the broker in acquiring and negotiating the purchase property, inform other brokers, agents, sellers, and landlords that they are represented by the broker and refer them to the broker, and of course, to comply with others parts of the buyer representation agreement. * One of the most often broken obligations of the agreement is that of the client working exclusively with the broker.
7. REPRESENTATIONS This section consists of several statements that both parties (agent and buyer) are in agreement one. A. That each party has the legal capacity and authority to enter into this agreement. B. That the client is not a party to another buyer representation agreement with another broker. C. Client represents that information given to broker is true and correct. D. Defines any employer or relocation company that will provide benefits to the client.
8. INTERMEDIARY Determines (via checkboxes) whether client wish to see broker’s listings. If client wants to see the broker’s listings the agreement then goes into the details of intermediary, which deserves it’s own post.
9. COMPETING CLIENTS Explains that the broker may represent other clients seeking to obtain the same properties as the client.
10. CONFIDENTIAL INFORMATION Probably one of the most important paragraphs in the buyer representation agreement, this section provides for confidentiality of the client’s information. In Texas, without a signed representation agreement, the agent technically represents the agent. Buyer’s agency is a relatively recent development in the real estate world and without it, we all worked for the sellers…often to the buyer’s detriment. This has changed and this confidentiality and agent-client relationship are the most important items set forth by signing a representation agreement. Why wouldn’t you want someone looking out for your best interests? Would you want to work with an agent (in a non-agent-client manner) where the agent was not held to the standard of confidentiality and would therefore be obligated to pass info onto the seller? No way!
11. BROKER’S FEES This section outlines the various aspects of your agent’s commission from working for you to purchase or rent a home. It covers the actual commission, the source of the commission, how it is earned and when it is payable, additional compensation, how agents are paid if you purchase one of the broker’s listings (intermediary again), the protection period, and authorization to open escrow. As money is involved, this section is quite lengthy and verbose, since money disputes are the most common litigation item between buyers and agents.
12. MEDIATION This paragraph sets forth the requirement that in the event of a dispute, the broker and client will choose to submit to mediation before they move to arbitration or litigation. This helps prevent both parties from being sue-happy and requires them to try and work it out before it gets to that point.
13. DEFAULT No one likes to break a contract, but it does happen. This paragraph explains who is at fault and what remedy they may seek.
14. ATTORNEY’S FEES When explaining the buyer representation agreement to clients, I often jokingly call this the “loser’s clause” – it basically states that if one party does default and the dispute heads to litigation, the party that loses the case can be liable for court costs and lawyer’s fees of the other party.
15. LIMITATION OF LIABILITY Keeps the broker safe from personal injury and property damage lawsuits brought on my the client. If you break your leg while viewing properties with us, you can’t sue us.
16. ADDENDA A checklist of additional addenda that may be attached and considered part of the agreement. “Information About Brokerage Services” is automatically checked off, as it is required by Texas law.
17. SPECIAL PROVISIONS This blank space allows for factual statements and business details to be added to the agreement. This space should be blank 99.99% of the time. Agents must be careful inserting language in this section to avoid the unlicensed practice of law.
18. ADDITIONAL NOTICES These items are printed on the agreement in bold for a reason…they’re important! A. Commissions (fees) are negotiable and are not set by brokers or the National Association of REALTORS®. B. Broker’s services are provided without regard to race, color, religion, national origin, sex, disability, or familial status. (This is the basis for national Fair Housings laws, but the REALOR® Code of Ethics also applies sexual orientation to this list.) C. Suggests that clients should contact qualified professionals for areas of expertise outside of real estate (ie, inspectors, surveyors, engineers, environmental assesors, and compliance inspectors). D. Recommends that client should have an abstract of title and a title policy issued on the property – this is important as it protects the client from claims to rightful ownership of and/or claims against the property should they arise. E. References residential service contracts (commonly known as home warranties). These are an optional purchase and buyer should review the different service contracts for scope of coverage, exclusions, and limitations. F. Broker can not give legal advice as they are not attorneys. This agreement is a legally binding contract and because of this, if the client has any legal questions, they should consult with an attorney before signing.
As with any conversation about legal items and contracts, we must advise you that Kimberly Howell Properties is not a legal firm and can not give legal advice. We would be happy to supply you with a list of real estate attorneys in San Antonio if you seek legal advice. We have done are best to summarize the Residential Buyer/Tenant Representation Agreement here, but this in no way should be considered a full explanation of all the details contained within.