Navigating the TAR Buyer Representation Agreement

What is a TAR Buyer Representation Agreement?

The TAR Buyer Representation Agreement is an employment agreement between a real estate agent and a buyer to assist in the purchase of a property. It provides for the payment by the buyer of a commission to the real estate agent if a specific purchase is not made. In a nutshell, while the buyer is not obligated to buy a specific piece of property, the buyer is obligated to pay a commission to the real estate agent should that property be purchased with another agent.
Normally, the TAR Buyer Representation Agreement lasts for a period of six (6) months . After the expiration of the initial term, the Buyer Representation Agreement may be extended, either by mutual consent of the parties or by a provision for automatic extension set out in the contract.
After the expiration of the original term, the parties may agree to an extension that can last for a specific or open-ended future period. If there is a provision for automatic extension, the Buyer Representation Agreement will continue in full force and effect until terminated by written notice from either party.

Basics of the Transaction Agreement

The TAR Buyer Representation Agreement outlines the rights and responsibilities of the buyer and the broker. The agreement has several key elements, including:

1. Duration and Suspension of the Agreement

The TAR Buyer Representation Agreement is typically for a period of 6 months with the option to extend or shorten the timeline in the contract. The Buyer Representation Agreement becomes effective when signed by the parties, not upon acceptance of any offer by the seller.

2. Property Description

The TAR Buyer Representation Agreement does not need to be property specific. The property description can be broad and reference a general area that the buyer would like to search in.

3. Buyer’s Obligations

The buyer must perform the following duties, unless otherwise noted in the TAR Buyer Representation Agreement:

4. Broker’s Obligations

The broker must do the following while acting as the buyers’ representative, unless otherwise noted in the Buyer Representation Agreement:

5. License and Legal

The TAR Buyer Representation Agreement contains representations made by the buyer to the broker concerning the buyer’s legal right to purchase the subject property. It also contains authorizations to the broker allowing the broker to cooperate with and compensate other brokers.

6. Fees

The TAR Buyer Representation Agreement describes how the broker will seek a buyer representation fee and how the fee will be handled if it is required to be paid directly by the buyer. It also describes under what conditions the buyer would be required to pay the broker a fee, even if the buyer did not find a property through the services of the broker.

7. Termination

The parties may terminate the TAR Buyer Representation Agreement prior to the expiration date by mutual written agreement or if the buyer enters into a separate binding contract to purchase property other than the subject property.

Why a Buyer Representation Agreement?

The TAR Buyer Representation Agreement is a legally binding contract between you and your agent, giving your agent permission to:
By signing the TAR Buyer Representation Agreement, your agent will be working for you, not the seller. This adds another layer of protection for you, and you can rest assured that you will be getting the best deal possible on your new home.
The TAR Buyer Representation Agreement states that your agent has fiduciary responsibilities to you. They will always put your best interests first, and they have to keep many details confidential throughout the transaction. This means that your agent can’t tell the seller about your reservations on a house so that the seller can negotiate a higher price. This also means that your agent has to keep your pre-approval amount confidential as well, so the seller can’t use that information to their advantage.
If you don’t sign the Buyer Representation Agreement, your agent does not have any legally binding responsibilities to you. If you go into a house that you love and decide to make an offer on it, your agent has to pass along everything that you just told them about the house to the seller, and your agent will then be working for the seller on the transaction. You’ll be at a huge disadvantage when it comes to making an offer, which will cost you money.
When you sign the TAR Buyer Representation Agreement, you authorize your agent to represent you in all aspects of your transaction. You are now a client and your agent has responsibilities to you.

Common Myths

Common Misconceptions surround the "TAR Buyer Representation Agreement":
"Exclusivity" means you have to work with just that one agent. While the TAR Buyer Representation Agreement is a separate contract that absorbs the Broker Services and Compensation agreements discussed in my last Blog post, it does not mean that you as the buyer are now "contractually" exclusive to that one agent. Keep in mind, you can still go out looking at properties on your own or with different agents. The exclusivity is only if the agent identified in the Buyer Representation Agreement represents you in the transaction. It is fine to have multiple Buyer Representation Agreements. Often times people deal with more than one agent at a time, maybe because they are looking in multiple areas, or want to explore different property types. And this flexibility is exactly what the TAR Buyer Representation Agreement allows. But, the TAR Buyer Representation Agreement is the only Association of REALTORS® form that has the benefit of use of intermediary.
"I am obligated to just use ‘their’ mortgage lender and that’s it" This is a common misconception. The TAR Buyer Representation Agreement in fact includes a provision allowing you the freedom to select a mortgage lender as long as that lender is able to close your transaction by the close date set in the Transaction Paragraph of the Buyer Representation Agreement. That lender does not have to be the lender set forth in paragraph 9 of the TAR Buyer Representation Agreement. That lender also does not have to be the preferred or represented lender set forth on your agent’s website or business cards etc. But the lender you chose must still be able to close the transaction by the closing date set forth in the buyer representation agreement.
"If I happen to find and purchase a property on my own, then I owe double commission?" Although it might seem that the language of section 11 makes this point, it is important to clarify this for buyers because these situations happen more often than not. Under the TAR Buyer Representation Agreement, a Buyer agrees to pay commission to the agent identified in section 1, which is the acting agent as of the date of signing the Agreement. As part of their Agent’s fiduciary duty, the Agent will have exclusivity over the payment of commission. In other words, if the Agent expressly agrees to pay the earlier listed commission to a cooperating agent through a Buyer Seller Representative Capacity Disclosure issued by the agent to the Deal Registration System, then the Buyer will not have to pay the commission directly to the initial broker/agent. However, if the Agent refuses to pay twice, then the Buyer will be responsible for the initial remuneration.
The language does clarify that in the event the Buyer purchases a property directly (with no cooperation from Agent under sections 11 and 12), then the Buyer will be obligated to pay the commission due under the Buyer Representation Agreement. But keep in mind that the Buyer Representation Agreement ends automatically after 90 days (section 15), so it’s doubtful the Buyer will owe twice for an expired Buyer Representation Agreement.

Negotiation Points

Negotiating the terms of a TAR Buyer Representation Agreement is an important step in ensuring that buyers feel comfortable and confident in their decisions. One effective strategy is to be upfront about the key uncertainties that must be resolved before the buyer can be fully committed to executing the agreement. For instance, if the buyer is interested in terminating the deal if certain contingencies are not satisfied, it is important to have a discussion with the buyer’s counsel about what those contingencies should be and under what conditions a termination right would be feasible for the buyer.
In some situations, however, the buyer may not even address the issue of preserving a termination right. In those instances, the seller should always address the matter and suggest putting additional uncertainties in the TAR Buyer Representation Agreement — such as due diligence and financing contingencies — which would allow the buyer to terminate the deal without incurring the "waste of time" associated with negotiating a mutually acceptable termination agreement. More importantly , inserting a due diligence contingency will allow the buyer to conduct its due diligence investigations in order to be comfortable with the decision to proceed with the deal. And, by implementing a financing contingency, the buyer can focus on pulling together the required equity and financing in order to be confident about proceeding with the deal.
As noted above, a TAR Buyer Representation Agreement is a binding contract, which means the buyer is legally obligated to proceed with the transaction even after it executes the agreement, unless the buyer is able to obtain a mutually acceptable termination agreement or a waiver of the conditions required for closing. Therefore, it is critical to have all parties to the transaction on the same page about the process involved so that the buyer can feel comfortable about proceeding.

Legal Effect of the Agreement

There are some legal implications to entering into the TAR Buyer Representation Agreement, including:
Exclusivity Clause
The TAR Buyer Representation Agreement designates the broker as the Exclusive Listing Broker for the real estate buyer of the property, and thereby implies exclusivity for both parties under the agreement. On this basis, it is advisable that the buyer not enter into any other representation agreements with any other broker until the existing TAR Buyer Representation Agreement is terminated or expires under its own terms.
Persuading a Buyer to Enter into a Representation Agreement
Oftentimes, an unscrupulous agent will use high-pressure sales tactics to slam a buyer into signing a representation agreement. A buyer may be pressured to sign the standard TAR Buyer Representation Agreement, or a variation thereof, in several ways:
If a buyer is pressured to enter into a TAR Buyer Representation Agreement against his/her better judgment, he/she should not sign the document and instead, find another broker who is not so predatory in their dealings.
Essentially, the TAR Buyer Representation Agreement is a contract, and therefore, there can be no oral contracts. The buyer must comply with the terms of the representation agreement, and act in good faith, care and diligence. Similarly, the broker must also comply with the terms of the representation agreement.
A TAR Buyer Representation Agreement is a contract between the broker and buyer, and both parties are legally obligated to perform under the contract. A buyer may sue the broker for a breach of contract if the buyer can prove that the broker acted contrary to the terms of the agreement. Likewise, a broker can sue a buyer for a breach of contract if the buyer fails to comply with the terms of the representation agreement.
If either party can prove that the opposing party engaged in conduct constituting a fraud, that party may sue for fraud, which may include punitive damages. If a broker actively engages in dishonest conduct, the buyer may sue the broker for fraud. On the other hand, if the buyer knowingly lies about his/her financial situation, the broker may sue the buyer for fraud.

Conclusion: Making an Informed Choice

As with any contract, it is important that a buyer fully understand any agreement that he or she signs. Especially with the TAR Buyer Representation Agreement where a number of provisions contain important legal requirements , it may be prudent to seek the advice of legal counsel before signing. This is a legal document and contains many legal requirements. The last thing a buyer wants is to unintentionally limit his or her ability to pursue a potential case based on a property.