BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Listing Agent Stole My Buyer
Q: I am a buyer agent working with a buyer showing him properties. Over the weekend my buyer was driving around and saw an open house sign and went in. He immediately liked the house and told the listing agent that he was working with me. The listing agent said that there were several interested prospective buyers and that, if he wanted the property, the buyer would have to write the offer with her. She told the buyer that she would “take care” of me. The contract was ratified, and my buyer felt bad but said that properties are moving fast and he didn’t want to lose out on this home. The listing agent sent me a bottle of wine. I guess she really took care of me all right.
Is there anything I can do?
A: Not much if you didn’t have a written exclusive agreement with your buyer.
A. CODE OF ETHICS
The Code of Ethics protects a buyer agent who has an “exclusive” agreement with their buyer client. If you did not have an exclusive written Buyer Representation Agreement, then the Code of Ethics rules likely will not protect you.
The Code of Ethics does not require a listing agent to ask if the buyer is represented by, or working with an agent. But, if the listing agent is planning to work with a prospective buyer, the listing agent should always ask if the buyer has an EXCLUSIVE agreement to work with a buyer agent in the form of a written agreement. If the buyer has such an agreement, then the listing agent should ask to see it to determine if working with that buyer would subject the buyer to an obligation to pay a commission to the other buyer agent per their written agreement.
See Weekly Practice Tip: “Buyer-Broker Agreement with Another Broker – What to Do”
Standard of Practice 16-9 states: “REALTORS®, prior to entering into a representation agreement, have an affirmative obligation to make reasonable efforts to determine whether the prospect is subject to a current, valid exclusive agreement to provide the same type of real estate service.”
And, Standard of Practice 16-13 states that, “before providing substantive services (such as writing a purchase offer or presenting a CMA) to prospects, REALTORS® shall ask prospects whether they are party to any exclusive representation agreement. REALTORS® shall not knowingly provide substantive services concerning a prospective transaction to prospects who are parties to an exclusive representation agreement, except with the consent of the prospects' exclusive representatives or at the direction of the prospect.”
But, if a buyer does not have an exclusive agency or contractual relationship with a buyer agent, then the listing agent can assist the buyer and even be a dual agent for purposes of the transaction.
A verbal or hand-shake agreement between the buyer and the agent will not protect the buyer agent from an aggressive listing agent. Clearly, if the buyer chooses to work with the listing agent, it will be difficult at best to claim an exclusive arrangement between the disappointed buyer agent and the buyer.
B. BUYER REPRESENTATION AGREEMENTS
The best way for a buyer agent to protect themselves is to have an exclusive Buyer Representation Agreement such as the CAR Buyer Representation Exclusive (form BRE on zipForms).
See Weekly Practice Tips: “Buyer Broker Agreements” and “Benefits of Buyer Broker Agreements”
If the buyer agent does have an exclusive written agreement with their buyer, then any attempt by another agent to induce the buyer to work with them will be unethical behavior. Article 16 of the Code of Ethics requires REALTORS® not to engage in any practice or take any action inconsistent with the agency or other exclusive relationship recognized by law that other REALTORS® have with clients.
For example, NAR’s Case Interpretations cite two types of conduct that would be considered to be unethical if an agent is talking to a buyer who is exclusively represented by another agent:
1. “I can't tell you what to do, but if it were me, I would make an offer today.”
2. “You can go back and discuss this with your broker if you like or I can help you write a purchase contract. It’s your choice.”
In addition, in that case, any actions or statements that would encourage a buyer to breach or terminate an exclusive agency relationship could also lead to a tort claim of interference with agency, contract or prospective economic advantage.
C. PROCURING CAUSE
The question often comes up in these situations whether the buyer agent who had been working with the buyer, but didn’t have a buyer broker agreement, can seek to get the buyer broker side of the commission in circumstances where another agent induced the buyer to work with them.
That question is ultimately going to be resolved by determining who the “Procuring Cause” of the sale was. For guidance on how a Professional Standards Panel would make that determination, review the CAR Procuring Cause Guidelines on the CAR website.
See Weekly Practice Tips: “Procuring Cause” and “Whose Buyer Is It?”
In the scenario above, it would be difficult to prove procuring cause if the complaining agent had not introduced the buyer to the property, did not have an exclusive agreement with the buyer, and if the buyer will not support the complaining agent’s claim.
PRACTICE TIPS:
1. Consider using exclusive buyer broker agreements with all of your buyers.
2. See the Weekly Practice Tip “Protecting Your Commission – Buyers” for tips on working safely with your buyer clients
3. As a listing agent, always ask prospective buyers whether they have an exclusive agreement to work with another agent, prior to working with them. If so, ask to see the agreement and discuss the situation with your manager prior to proceeding.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2013 4/05/13