BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Broker Risk Management (“BRM”) recently held its Fall risk management seminars. The following are questions and answers arising out of those webinars, which we thought would be of interest to our clients.
QUESTION 1: When I am a listing agent, I have a practice of asking the seller in the listing agreement for additional compensation if I am required to work with an unrepresented buyer, generally in the range of 6-7%, with 3% on the listing side and 3-4% for working with an unrepresented buyer. The reason is to discourage sellers from accepting offers from unrepresented buyers. If an offer is received from an unrepresented buyer and the seller requests that I represent that buyer, acting as a dual agent, for less compensation than that specified in the listing agreement for working with an unrepresented buyer, how do I proceed?
ANSWER: Assuming that you agree and before the offer is accepted, ask the seller to put in writing the seller’s request that you represent the buyer as a dual agent, and state the compensation the seller is offering you to represent both parties. Then proceed to discuss the matter with the buyer and inquire of the buyer as to whether the buyer is willing to allow you to represent the buyer at the seller’s expense. If both parties agree, prepare an amendment to the listing agreement that is specific to this transaction with this buyer, and which sets forth the commission for representing the buyer. Then prepare a buyer representation agreement, which can be limited to this transaction. Thereafter, prepare a counteroffer reflecting that you will be representing the buyer and the seller; and that the seller will be compensating you in accordance with the amendment to the listing agreement and to the buyer representation agreement.
QUESTION 2: Am I required to check the history in the Multiple Listing Service when representing a party selling or purchasing the property?
ANSWER: That issue has not been determined by the courts, but it is likely that your standard of care includes reviewing MLS history. It is generally expected by counsel and mediators that such review would take place. Discrepancies such as square footage, bedroom count, bathroom count, sewer versus septic, improvements, repairs, and disclosures, can be commonly discovered by reviewing MLS histories. If you are representing a buyer, advise the buyer of any discrepancy you discover and recommend that the buyer investigate the issue. If you are representing the seller, ensure the seller’s disclosures are consistent and that the discrepancy is disclosed. If the seller is not aware of the issue leading to the discrepancy, include it on the agent’s visual inspection disclosure.
QUESTION 3: When does the wooden balcony inspection statute go into effect?
ANSWER: Initially, it was effective January 1, 2025. However, that date has been postponed as to all relevant properties with the exception of condominiums to January 1, 2026. If the subject property is a condominium, that inspection deadline remains January 1, 2025.
QUESTION 4: I have a listing agreement with the price listed as “TBD.” The seller secretly sold the property to a neighbor. Do I have a right to a commission?
ANSWER: Likely not. An agreement to sell real estate with the expectation of a commission must have a listing price or the contract is illusory and likely unenforceable.
QUESTION 5: I had buyer representation agreement with a buyer. I just learned that the buyer secretly bought a property with another agent. What are my rights?
ANSWER: You should immediately talk to your manager about how to proceed. Similarly, to pursuing a commission under a listing agreement which the seller refuses to pay a commission, the broker needs to decide whether to pursue the claim against the buyer. There are a number of considerations for the broker, including but not limited to the following: attorneys’ fees; likelihood of success; risk of a complaint being filed with the Department of Real Estate; or counter-claim being filed. Depending on the amount of the commission, a cost benefit analysis will need to be done with the broker’s attorney to determine whether the projected attorneys’ fees justify pursuing the compensation. Also, the handling of the transaction will need to be reviewed by the broker’s attorney to determine whether there is any risk that the buyer could complain to the DRE and/or file a cross-complaint against you and your broker. If there were issues between the agent and buyers, or the buyers were dissatisfied with the agent, those issues could likely be the subject of complaints in the future.
PRACTICE TIPS:
- It is recommended that all agents check MLS history when representing a seller or a buyer in a transaction. This should be done as soon as practicable
- Do not use “TBD” in your listing agreement or buyer representation agreements as the agreements may not be enforceable.
- If a buyer or seller fails to pay a commission that an agent believes is owed, the agent must consult with their broker regarding further handling and whether and how to proceed. Remember, all clients, transactions, compensation and right to bring legal action belong to the broker, not the agent.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is an attorney-client privileged communication 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 LLP. 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.