Having been a broker for going on 13 years now, I've been involved with many different commission disputes in the past. Nearly every single one of these disputes could have been avoided if the buyer's agent had simply had the buyer sign an exclusive buyer brokerage agreement.
I admit I've been guilty of not using a buyer brokerage agreement myself. And with some of my regular customers that buy from me all the time, I don't use an agreement simply because I don't feel I need one. But with regular retail home buyers especially ones that you don't know outside of your business, you are really being naive if you aren't getting them to sign a buyer brokerage agreement. If the buyer is reluctant to sign something, I might consider taking them out for 1 day of showings and see how it goes but I would never take them out on a second day. My time is simply too valuable to not have an understanding committed to writing.
I remember a few years ago on a listing that I had where a buyer's agent showed a property and then a few days later another agent showed the same property and made an offer that the seller accepted. Little did I know it was the same buyer getting both showings until about 2 days before closing. The first buyer's agent had been working with the buyer for weeks showing them properties, while the second buyer's agent was the buyer's cousin who lived 2 hours away in another town. 1 year later after a long arbitration dispute the first buyer's agent did prevail and collect their $4000 commission. I don't know if a buyer brokerage agreement would have avoided all this, but it would have put the second agent into an ethics violation situation and possibly made them go away altogether.
In fact Standards 16-3 through 16-9 of the NAR Realtor ® Code of Ethics, specifically addresses these sort of relationships. Buyers agents are required by the Code of Ethics to find out if a buyer is committed to another agent with a signed agreement.
I remember another incident that involved a similar scenario as above except that the commission being disputed was on a $5 million home and the commission disputed was $150,000. In this case I almost think the buyer's agent was S-T-U-P-I-D because who in their right mind would not have a signed buyer brokerage agreement (and probably their own attorney representing the buyer agent and brokerage) when a commission of that size is involved. And in this case, the buyer's agent spent over a year working on the sale and lost the entire commission - now that stinks!
This year is my first year on our local Realtor ® association's grievance committee and so far I have worked on 2 arbitration disputes and both of them involved buyer's agents and procuring cause. Neither instance involved an agent obtaining a buyer's brokerage agreement.
My suggestion to anyone considering representing buyers (which is truly a must in this current buyer's market) is to get your Accredited Buyer's Representative designation (ABR) from NAR. In the courses you will learn all about getting buyers to agree to reasonable terms in a written agreement. Arbitration disputes are no fun and waste a lot of your time.
It is a real temptation to run out and show a property as soon as a buyer calls wanting to see it. Even if they haven't been qualified for any sort of loan. Stop, think, and don't do it. Your time is too valuable.
Rob Arnold - Your full service and investor friendly Realtor ® in Orlando and Central Florida.
ABR, CPL, CRB, CSP, GRI, Managing real estate broker, Notary Public
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