“Loose” Buyer and Agent’s Entitlement to Compensation

QUESTION: I read with interest your Q&A posted on July 31, 2012. It involved a situation where a buyer went to an open house on her own while her buyer’s agent was out of town for the weekend. The listing agent assisted the buyer in preparing an offer on the property with the knowledge that the buyer was represented by another agent. The buyer agent’s question and your answer focused on whether the listing agent’s assistance in preparing the offer was a violation of the REALTOR® Code of Ethics. I am interested in your thoughts on whether a buyer agent in a situation like that has a claim to the commission offered by the listing firm.

ANSWER: Assuming that the property was listed in MLS, the buyer agent’s entitlement to the listing firm’s offer of compensation would be determined by whether the buyer’s agent was the procuring cause of a transaction that closes. Quoting from the Code of Ethics and Arbitration Manual, “procuring cause in broker to broker disputes can be readily understood as the uninterrupted series of causal events which results in the successful transaction. Or, in other words, what ‘caused’ the successful transaction to come about.” The Manual makes it clear that the existence of a buyer agency relationship, without more, would not entitle the buyer agent to compensation from the listing firm. Although a procuring cause determination always comes down to an analysis of all the facts, the buyer agent in this situation most likely would have a weak procuring cause claim, given what we assume was a complete lack of involvement in introducing the property to the buyer. On the other hand, assuming the buyer and the buyer agent signed the Exclusive Buyer Agency Agreement (form 201), and depending on how the compensation section was filled out, the buyer agent may have a strong claim to the agreed-upon compensation from the buyer herself. Of course, the buyer agent’s firm may be reluctant to pursue the buyer for a commission even if it has a contractual right to do so.

Situations seem to come up all too often where an agent’s buyer client gets “loose.” Agents should strive to educate buyers about the importance of working only with their agents when looking at properties. In this regard, we recommend that buyer agents make a point of highlighting and discussing with their clients the “NOTE” appearing at the end of paragraph 16 of the Buyer Agency Agreement, which reads: “Buyer should consult with Firm before visiting any resale or new homes or contacting any other real estate firm representing sellers, to avoid the possibility of confusion over the brokerage relationship and misunderstandings about liability for compensation.”