To Represent or Refer—That is the Question

QUESTION: I am a member of an association of REALTORS® in the Piedmont area of the State. A client of mine is interested in purchasing a vacation home in a particular area of the North Carolina coast. Can I represent my client as a buyer’s agent since I don’t participate in the MLS in which properties he would be interested in buying would most likely be listed?

ANSWER: Yes, you may. Legally, there is nothing that prevents you from engaging in the real estate brokerage business anywhere in this State. However, as a practical matter, there are reasons why you should consider referring your client to a local REALTOR®.

First of all, there is the issue of competence. In order for you to provide valuable guidance to your client, you should have a thorough knowledge of the local market where he is intending to buy a home. If you don’t have that knowledge, you would not be providing the standard of competence that your client would reasonably expect.

Secondly, since you don’t participate in the local MLS, the agents with listings in that MLS have not made any offer of compensation to you. As a cooperating broker, you cannot assume that you will receive the same compensation that has been offered to MLS participants in the event that you are the procuring cause of a sale. Under Standard of Practice 3-1 of the REALTOR® Code of Ethics, the terms of compensation must be ascertained by cooperating brokers before they begin efforts to accept the listing agent’s offer of cooperation. That means that before you show your client properties listed in that MLS, you would need to confirm with the listing agent for each property whether he or she will pay you compensation as a cooperating broker. They mayor may not agree to compensate you. If not, unless you are willing to work for free, you would need to discuss with your buyer client whether he is willing to pay you himself if he purchases the subject property.

For these reasons, you should consider referring your client to an experienced REALTOR® who participates in the local MLS. You may certainly request a referral fee. If you enter into a referral fee agreement, remember to disclose the arrangement to your client, including the amount of fee that you would receive.