Member Legal Services Tel (213) 739-8282 Fax (213) 480-7724 Oct. 30, 2007 (revised)
Q1. What is the "Buyer Broker Agreement -- Non-Exclusive/Not for Compensation" (Form BRNN) and what does it do?
A The Buyer Broker Agreement (Non-Exclusive/Not for Compensation) (Form BRNN) is an agreement between a potential buyer of real property and a real estate broker. The agreement has three key features. First, it defines the scope of the tasks and duties to be performed by buyer and broker. Second, it provides a written consent to a dual agency if one develops. Third, it places a limit on the time within which a legal action can be brought against the broker. This form is non-exclusive and may be revoked at any time by either buyer or broker.
Q 2.What is the "Buyer Broker Agreement -- Non-Exclusive Right to Represent" (Form BRNE) and what does it do?
A The Buyer Broker Agreement -- Non-Exclusive Right to Represent (Form BRNE) is an agreement between a potential buyer of real property and a real estate broker. It has all of the features of Form BRNN discussed in Question 1 except it provides for the broker to be compensated for services rendered on behalf of the buyer, and it is non-revocable.
Q3. What is the "Buyer Broker Agreement -- Exclusive Right to Represent" (Form BRE) and what does it do?
A The Buyer Broker Agreement -- Exclusive Right to Represent (Form BRE) is very similar to the other two agreements with a few important distinctions. Like the BRNE, it provides for compensation and is non-revocable. However, it is an exclusive agreement, meaning the buyer will be obligated to pay a commission, even if the buyer finds the property him or herself or uses another broker.
Q4.How will buyers benefit from using any of the above forms?
A Surveys have shown that one of the biggest sources of problems is lack of communication between the agent and his or her client. By putting the duties and obligations in writing, buyers will be more informed about the broker's responsibilities early in the transaction. The forms also identify tasks and services the broker will do as well as what type of services in a transaction may be performed by others. With this knowledge, buyers will be able to discuss or negotiate the terms of the relationship. Also, by having the opportunity to discuss and consent to potential dual agency early in the relationship, buyers can consider this question and avoid an awkward surprise about this issue later in the relationship. By bringing more clarity and certainty to the relationship between buyer and broker, neither becomes dependent upon the other's memory for establishing its terms.
Q5. Does signing any of the above forms commit the buyer to using only one broker?
A The BRNN does not commit the buyer to using only one broker because it is non-exclusive and revocable. The buyer may switch brokers at any time. While this form does not commit the buyer to one broker, using two different brokers on the same piece of property is very confusing to all parties and may not help the buyer at all in negotiating with the seller. A better practice by a buyer would be to revoke one agreement before entering into another with a different broker.
The BRNE does commit the buyer to paying the broker (irrevocable) in certain circumstances, but it is non-exclusive which means that the buyer may use more than one broker. The broker only gets paid if the broker introduces the specific property to the buyer or otherwise acts on the buyer's behalf. It would be permissible to use this contract with two different brokers on two different properties without paying both.
The BRE commits the buyer to a single broker for the transaction. It is exclusive and irrevocable. Even if a buyer enters into another agreement with another broker, or uses another broker without the benefit of an agreement, if the buyer acquires the property identified in the agreement the buyer may still owe the broker compensation.
Q6.Must a buyer sign one of these forms before working with a particular broker or real estate salesperson?
A While written agreements of this type are not required by law, in any professional relationship for services, it is good to have a written document so all parties have the same expectations. Some real estate offices may require one of these agreements, but that will be up to the brokerage firm. In the past, most brokers did not use these types of agreements because either the agreements were not available or those that were available did not meet the brokers and client's mutual needs.
Q7. Why do the forms have a two-year limitation on the time to bring legal action against the broker?
A Many agreements that individuals enter into have limitations of one sort or another. The drafters of these standard forms, the California Association of REALTORS®, believes that the two-year limitation is reasonable for a number of reasons. First, two years gives a buyer adequate time to make a decision about such important matters. Second, the California legislature has already statutorily recognized the two-year time frame as a reasonable period of time for a buyer to bring legal action against a real estate licensee. These contracts provide some consistency with that state law. Of course, the limitation would not apply to actual and intentional fraud.
Many terms are used to describe various relationships that may occur in a real estate transaction. The following questions and answers are designed to help clarify several of these terms.
Q8. What is agency?
A Agency is a legal relationship that is established between a principal (buyer or seller) and an agent (real estate broker) where the agent represents the principal in dealings with third parties. The relationship requires the mutual consent of both principal and agent.
Q9.What is the difference between single agency and dual agency?
A In single agency, the broker represents only one of the principals (buyer or seller). In dual agency, the broker represents both buyer and seller in the same transaction. In the real estate industry, even if one salesperson in an office is working with a buyer and another salesperson in the same office is working with the seller, the broker of the real estate firm is considered a dual agent.
Q10. What is an "exclusive buyer's agent"?
A The term, "exclusive buyer's agent," is often used in the real estate industry to describe a real estate licensee who never represents sellers. Real estate brokers who use this term typically do not take listings of property.
Q11.What is a "buyer's broker"?
A The term "buyer's broker" (also referred to as a "selling broker") is often used to describe a broker working with a buyer under a written contract.
Q12.Where can I obtain additional information?
A This legal article is just one of the many legal publications and services offered by C.A.R. to its members. For a complete listing of C.A.R.'s legal products and services, please visit car.org.
Readers who require specific advice should consult an attorney. C.A.R. members requiring legal assistance may contact C.A.R.'s Member Legal Hotline at (213) 739-8282, Monday through Friday, 9 a.m. to 6 p.m. and Saturday, 10 a.m. to 2 p.m. C.A.R. members who are broker-owners, office managers, or Designated REALTORS® may contact the Member Legal Hotline at (213) 739-8350 to receive expedited service. Members may also submit online requests to speak with an attorney on the Member Legal Hotline by going to http://www.car.org/legal/legal-hotline-access/. Written correspondence should be addressed to:
CALIFORNIA ASSOCIATION OF REALTORS® Member Legal Services 525 South Virgil Avenue Los Angeles, CA 90020
The information contained herein is believed accurate as of Oct. 30, 2007. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney.