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Fill. Out. The. Forms. 

by Brougher, Desiree on

You provide a service that you expect to be paid for, correct?

Of course you do. Then why are there so many PAR Legal Hotline calls from buyer brokers who have put themselves in a position where they cannot collect a fee from their buyer clients? The answer is because the agent did not fill out their buyer agency form correctly (or at all).

State law requires all contracts that will require a consumer to pay a fee to be in writing. And although it is legal to perform real estate services prior to having a signed agreement, the licensee is not entitled to collect a fee from their client (see section (b)(1)) without one. PAR’s Buyer Agency Contract includes all of the legally-required language and allows for a buyer’s broker fee to be structured in several ways. It says that if the transaction is a purchase, “the fee is ____% of the purchase price OR $____, whichever is greater, AND $____.” There is a line for the broker to explain their fee in the event of a lease transaction. There is a line for the broker to create a non-refundable fee due immediately at signing. There is even a blank line for “other” should the broker negotiate an additional service for which a fee would be required. More information and examples of how to use this section are in the Guidelines for Preparation and Use (member login required).

Despite all of these options, PAR staff often hears of transactions where every single one of those lines are left blank because agents get hung up on one little sentence in the middle of that paragraph which states, “it is broker’s policy to accept compensation offered by the listing broker.” While it’s very common for the buyer’s broker to be paid cooperating compensation based on an offer made in the MLS by the listing broker, it is not the only way that a buyer’s broker can be paid. Put another way, there is no “usual” fee and it needs to be negotiated just like anything else in the transaction.

Further, Standard of Practice 12-1 of the Code of Ethics prohibits Realtors® from representing that their services are free or available at no cost to the client unless there will be no financial compensation from any source. A buyer agency contract with a blank broker’s fee provision does little to rebut a claim that an agent told the buyer that they would not have to pay you anything.

Imagine the scenario in which Agent A has worked with a buyer for months, and that buyer just takes off and purchases a property with a different agent. Agent A’s broker wants to enforce the fee provision of the buyer agency contract, but realizes that those lines are blank – which means that even if they could enforce the contract, they’d be collecting a fee of… zero. (Though there is a possibility of recovering a cooperating broker fee from the listing broker in arbitration, that is highly fact-specific and can be difficult to win at a hearing). How is that conversation between the agent and broker going to go?

Buyers’ brokers who want to protect their business interests should be intentional and thorough in educating their agents on the proper way to fill out the buyer agency contract and agents need to do a better job of filling in those blanks explaining all the terms to clients, and valuing their service accordingly.

Topics

PAR Legal Hotline Form BAC Buyer Agency Contract
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Hamberg, William

If you are in the business long enough (or short enough, in a lot of cases), this scenario will happen to you!

The quandary, if done correctly, is actually wanting/trying to enforce those BA terms. Can only imagine the dinner/holiday/BBQ conversations for the next 5-years about how their Agent sued them because all they care about is money!

Dominic Cardone

This is an excellent and timely reminder for our members.
Just recently, I and my firm successfully won a judgement in court to collect our Buyer Broker’s Fee from a Buyer. Needless to say, our Exclusive Buyer Agency Contract was filled out correctly by a well trained agent.