Q: Our office has a listing with a Seller who is insisting that we not represent the Buyer in the transaction; we have no objection to only representing the Seller. A Buyer has contacted us and wants to make an offer. We have explained that, at the request of the Seller, we cannot represent the Buyer. The Buyer understands the situation and does not want to upset the Seller; the Buyer is therefore willing to go forward without the benefit of a real estate Agent. The contract was negotiated with the understanding that since the Seller would not have to pay commission to a cooperating broker, the purchase price was reduced. Seller and Buyer are both happy.
We need to send documents to this Buyer and interact with him, but we are worried that we may inadvertently create the impression that we are acting as the Buyer’s Agent. Is that a realistic concern? If it is, is there a way for us to meet all of our duties with the Seller and not create any agency relationship with the Buyer? If the Buyer later consults with an attorney or another real estate broker, will we be obligated to pay that person?
A: Whenever an Agent working exclusively with one Party to a transaction must communicate with another Party to the transaction who is unrepresented, then there will be the possibility that an unintended agency relationship could be created with the unrepresented Party. If that does occur, then it is arguable that the Agent is acting as an undisclosed dual agent. Undisclosed dual agency is a basis for either one of the Parties being able to rescind the transaction for a period of three years that commences once the Party learns of the undisclosed dual agency. Undisclosed dual agency is also a basis for license suspension or revocation. Thus, it is imperative that all real estate licensees avoid creating any unintended agency relationships.
CAR has created a form to aid Listing Agents when the Buyer or Tenant interested in buying or renting the Property is not represented by another Broker and it is not possible for the Listing Agent to serve as a dual agent. The Buyer (or Tenant) Non-Agency Agreement (“BNA”) is designed to document that the Listing Agent is not representing the Buyer/Tenant and that no agency relationship is created merely because the Listing Agent is transmitting documents and/or communicating with that Party while performing the duties and responsibilities of the Listing Agent.
The BNA form incudes two options in Paragraph 3, one of which needs to be checked to properly complete this form. The first check box is for when the Buyer/Tenant is represented by another Broker. Normally this form is not needed if the Buyer/Tenant is represented by another Broker, but that option is available if the Buyer/Tenant is represented by a limited services agent or, for any other reason, is in direct communication with the Listing Agent.
The second check box is for when the Buyer/Tenant is not represented by another Broker.
The BNA lays out the various functions that the Listing Agent will be performing on behalf of the Seller/Landlord; that by performing those functions, the Listing Agent will not have any Agency relationship with the Buyer/Tenant and that any information given to the Listing Agent may be transmitted to the Seller/Landlord. The BNA also recommends that if the Buyer/Tenant needs any advice that the Buyer/Tenant should retain the services of appropriate professionals including a real estate agent and an attorney.
Unfortunately, the BNA does not confirm that neither the Seller/Landlord nor the Listing Agent are obligated to compensate anyone whom the Buyer/Tenant consults when there is no Broker representing the Buyer/Tenant. Since there are no blank lines for additional terms on the BNA, the easiest way to document that no compensation will be paid to anyone whom the Buyer/Tenant consults with is to send the BNA with a cover letter (or in an email) that states:
Please note that it is recommended in Paragraph 6 of the attached Agreement that you obtain advice regarding real estate, legal, tax, and insurance from appropriate professionals. However, be aware that if you retain any professionals, including, but not limited to, your own real estate Broker or Agent, or attorney, you will be solely responsible for any fees or costs, including, but not limited to, real estate brokerage commissions, that you incur with your chosen professionals.
PRACTICE TIPS:
- Whenever the Buyer/Tenant is not represented by a real estate Broker, the Listing Agent should use the CAR BNA form (regardless of which standard contract forms are used):
(a) The Listing Agent should check the second box in Paragraph 3 that the Buyer/Tenant is not represented by another Broker;
(b) The BNA form should be provided to the Buyer/Tenant at the earliest possible opportunity, preferably before the Listing Agent transmits any other information or documents to the Buyer/Tenant;
(c) The Agency Confirmation paragraph in the Purchase Agreement, Lease or other contract forms should be completed to state that there is No Broker and No Agent in the blank lines for who is representing the Buyer/Tenant; and
(d) The Listing Agent should confirm in an email to the Buyer/Tenant that no compensation will be paid to anyone that the Buyer/Tenant consults for advice by using the language above.
- Whenever the Buyer/Tenant is represented by a limited services Broker or another Broker has advised the Listing Agent to communicate directly with the Buyer/Tenant and/or to send documents directly to the Buyer/Tenant, then the Listing Agent should use the BNA form and check the first box in Paragraph 3 that the Buyer/Tenant is represented by another Broker. The BNA form should be provided to the Buyer/Tenant at the earliest possible opportunity, preferably before the Listing Agent transmits any other information or documents to the Buyer/Tenant.
- FORMS: If an unrepresented Buyer or Tenant requests blank forms to which they do not have access, Listing Agents can do so, but be careful not to cross over the line to giving the Buyer/Tenant advice, by following these steps:
(a) Confirm in an email that you are providing the requested form(s) on behalf of the Seller, that you cannot give any advice on completing those forms, that Buyer/Tenant should return the signed BNA form confirming that you are not representing Buyer/Tenant in providing these forms.
(b) Do not state you are providing “required” forms as this could be construed to be giving advice.
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