The Buyer Broker Compensation Agreement  Explained

Understanding Broker Compensation

When you work with a real estate broker, they provide various services to help you find and buy a property. The amount the broker gets paid isn’t set by law or real estate organizations. Here’s a simple breakdown of how they get paid.

Compensation for Brokerage Services

The brokerage fee may be handled through one of the following methods:

1. Broker-to-Broker Compensation. The listing broker (the agent selling the home) may pay the broker.

   The fee may be covered by the listing broker through a broker-to-broker compensation agreement. In this scenario, the listing broker pays a portion of their professional services fee to the broker representing the buyer.

2. Seller Payment. The seller might include the broker’s fee in the sale terms.

   The seller may agree to pay the brokerage fee as part of the terms specified in the purchase agreement. This can include seller concessions or adjustments, which is particularly relevant in transactions involving "For Sale by Owner" properties.

3. Buyer Responsibility. If the first two options are unavailable, the buyer may need to pay the broker.

   Alternatively, the buyer may be responsible for paying the brokerage fee directly at the closing of the transaction. This means the fee is included as part of the final closing costs associated with the property purchase.

Each of these methods ensures that the broker’s professional services are compensated in a way that aligns with the specific terms of the real estate transaction.

Changes to Compensation

• If there are any changes to how much or how the broker gets paid, these changes must be communicated and agreed upon in writing.
• Any adjustments need to be confirmed before you make an offer on a home or accept a counteroffer.

Understanding the Term and Brokerage Fee After Contract Expiration

1. Term of the Agreement:

   • The length of time this compensation agreement is valid is the same as the length of time specified in your main Buyer Broker Services Agreement. Essentially, it lasts as long as your main agreement is in effect.

2. Brokerage Fee After Contract Expiration:

   1. If you buy a property within 180 days after your agreement has ended, and that property was shown or discussed with you by your broker while the agreement was still active, you will still owe the broker a fee.
   2. This fee could be a set amount or a percentage of the property's purchase price. It applies if you buy a property that wasn’t listed by a traditional agent, such as a "For Sale by Owner" property.

Failure to Close: What It Means for You

• If the Seller Fails to Close: If the seller doesn't go through with the sale or lease of the property, and it's not your fault, you won’t have to pay the brokerage fee for that transaction. Essentially, if the deal falls through because of the seller’s actions or issues, you won’t be responsible for paying the broker.

• If the Buyer is at Fault: If the deal falls through because of something you did or didn’t do, then you will owe the broker the full fee right away. In other words, if you back out of the transaction or cause the deal to fall apart, you’ll need to pay the broker’s fee as agreed.

Broker Liability Limitation: What It Means

• Broker’s Responsibilities: The broker provides various services and support to help you buy a property, including assistance with negotiations, paperwork, and overall guidance.

• Limit on Broker’s Liability: If something goes wrong—whether it’s due to the broker’s mistakes, negligence, or other issues—the broker’s financial responsibility is limited. This means that, no matter what happens, the most the broker can be held liable for is the amount you’ve paid them in compensation. So, if there are claims or damages, the broker won't be responsible for more than what you’ve already paid them.

• Exceptions: This limitation doesn’t cover intentional wrongdoing or extreme negligence. If the broker or their team intentionally acts improperly or deliberately causes harm, they can be held accountable beyond the compensation you paid.

• Indemnification: If something goes wrong due to the actions of third parties—like inspectors or contractors recommended by the broker—you agree to protect the broker from any claims or legal issues that arise. This means if a contractor you hired makes a mistake and you sue them, you can’t hold the broker responsible for that contractor’s actions.

• Reason for Limitation: This limitation is designed to balance the risks and rewards in the real estate transaction. It ensures that the broker isn’t exposed to unlimited financial risk while also protecting you in case of serious misconduct.

Jury Waiver; Venue: What This Means

• Jury Waiver: By agreeing to this section, both you and the broker are giving up your right to have any disputes related to this agreement decided by a jury trial. Instead, if a disagreement arises, it will be resolved in court, but without a jury. This means you are choosing to handle disputes through a judge alone.

• Material Inducement: This waiver is a key reason why both parties are agreeing to the terms of the contract. It's a significant part of why the agreement is being entered into.

• Resolution of Disputes: Any legal disputes or claims that come up under this agreement must be resolved in state or federal courts located specifically in Baldwin County, Alabama. This means that if you have to go to court, it will only be in Baldwin County, and not in any other location.

• Consent to Jurisdiction and Venue: By agreeing to this, both parties are accepting that Baldwin County courts have the exclusive right to hear and decide any legal matters related to this agreement. Neither party can object to having disputes resolved in this specific location.

• Survival of the Agreement: Even if the agreement ends or is terminated, this clause will still apply. It remains in effect even after the agreement is no longer active.

Entire Agreement: What This Means

• Complete Agreement: This section states that the document you are looking at, along with any additional terms in other agreements related to your broker services (like the Exclusive Buyer Broker Services Agreement, Limited Consensual Dual Agreement, or Transaction Broker services agreement), represents the full and complete agreement between you (the Buyer) and the Broker.

• Supersedes Previous Agreements: This means that this document replaces any previous agreements, discussions, or negotiations you might have had with the Broker. If there were any prior verbal or written agreements or understandings, they are now considered outdated and replaced by this current document.

• Changes to the Agreement: If you or the Broker want to make any changes to this agreement in the future, those changes must be made in writing. Both you and the Broker must sign any written changes for them to be valid. This ensures that any modifications to the agreement are formally documented and agreed upon by both parties.

All Electronic Communication: This section means that any part of the agreement can be shared or signed electronically, such as through email or online platforms. Electronic signatures, initials, and changes to the document are considered as valid and legally binding as if they were handwritten on a physical copy.

Legal Advice and Copies: The agreement is legally binding, so if you have any questions or don't fully understand any part of it, the broker advises you to consult with a lawyer for independent legal advice. The buyer acknowledges receiving a copy of this agreement and the Real Estate Brokerage Services Disclosure (RECAD) form, and the broker keeps a copy for their records.

Disclaimer: The information provided in this explanation of the real estate agreement is believed to be accurate but is not guaranteed. It is intended for general informational purposes only and should not be considered legal advice. For specific legal concerns or questions about the agreement, we strongly recommend consulting with a qualified legal professional.

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