Must I contract with agent showing open house?

Commission disputes can erupt over who represented whom

Inman News®

Buyers often find the house they ultimately buy on their own at an open house. Do they have to use the agent that was showing the open house?

Buyers should work with the agent of their choice. However, complications can arise when there is confusion about who is working with a buyer. It helps to understand the rules of the game.

Some buyers enter into a written buyer representation agreement with a real estate agent. These agreements basically say that the buyers will pay the agent a commission when they buy a house through the agent. If the agreement is exclusive, the agent may be owed a commission even if the buyers purchase using a different agent.

For instance, you could find a new listing on the Internet and want to see it right away. You call your agent, with whom you have signed an exclusive agreement to represent you. But she's not available.

Then you call the listing office and make an appointment to see the house with the agent who is handling the in-coming calls. You love it and make an offer right away through the agent that showed you the house. The offer is accepted.

When the seller listed, he agreed to pay his agent a commission, part of which was to be paid to a buyer's agent. So, the agent who sold you the house received a buyer agent commission that was paid for by the seller. However, you might owe a commission to your exclusive agent even though she had nothing to do with the sale.

HOUSE HUNTING TIP: No matter how anxious you are to see a new listing, you should always make it clear to other agents that you are already working with an agent.

Buyers who haven't yet selected an agent to work with often canvas Sunday open houses to get familiar with neighborhoods. They could spend a long time with an agent who is holding a house open. The agent might answer questions and provide disclosure documents. This does not necessarily obligate the buyers to buy the house through that agent.

These buyers could decide to find an agent to represent them when they get serious about buying. They could return to the house at a later date and decide to buy it through the agent they selected to represent them.

The buyers in this situation shouldn't be obligated to buy through the open-house agent unless they signed an exclusive buyer representation agreement with that agent, particularly if they had no future contact with that agent after the open house. If an open-house agent continues to call you after you've selected another agent, you should let the agent know that you have arranged for representation through a different agent.

The rules aren't black and white regarding when a buyer's agent is owed a commission. Normally, if the agent is a Realtor -- a member of the National Association of Realtors, which is a trade association with a code of ethics -- commission disputes are handled through the local association of Realtors. However, not all real estate agents are Realtors.

When Realtors are involved, the clients are often insulated from commission disputes. But, a client could be called as a witness. To avoid being involved in any of these sorts of disputes, be candid with agents you meet about your agent relationship.

THE CLOSING: If you think you might have misled an agent into thinking he or she might be writing an offer for you, have your agent call the other agent as soon as possible to clear up any confusion before a problem arises.

Dian Hymer is a nationally syndicated real estate columnist and author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.

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Submitted by Lenn Harley on August 25, 2008 - 5:38am.

This article gives the impression that buyers pay their buyer's agent directly out of pocket.

A fairer picture would be to point out that most buyer's agents' fees are offset entirely by the co-op offered by the listing agents to buyers agents. This fee paid by the listing agent or seller does not change the buyer agency relationship or representation.

Lenn Harley
Broker
Homefinders.com
http://www.homefinders.com

 
Submitted by Stephen Graham on August 25, 2008 - 6:26am.

Unlike many agents, I agree that the home buyer pays for their buyer‘s agent; albeit, not out-of-pocket but indirectly out of the seller’s proceeds.

In the scenario given in this article, it seems to me that the seller’s agent failed to fully explain the full picture to the buyer about how agency & commissions work. When I took the Broker’s exam in Georgia, there was similar scenario presented. The right answer was for the listing agent to notify the buyer that they might owe a commission to their exclusive buyer’s agent in that situation.

 
Submitted by Maureen Houston on August 25, 2008 - 6:53am.

Stephen
If the listing agent bothered to ask if they were working with another agent!! which half the time they dont or dont know to or dont care to.

 
Submitted by Shirley Fisher on August 25, 2008 - 9:36pm.

Just wanted to call your attention to the fact that a "REALTOR(r)", as used in your article, should always be capitalized...per NAR!

 
Submitted by Jed Lane on August 26, 2008 - 10:29am.

It always astounds me to hear agents state that the buyer doesn't pay brokerage fees. It is especailly troublesome because it means that agents really don't understand where the money comes from. I'm assuming that the honest and ethical parts of agents behaviour is true, so it means that the agent really doesn't know!
Both parties participate in the fee. The buyer brings the money to the table and the seller pays it out of proceeds from the sale.
In Dian's scenario, with a buyer broker agreement in place and a buyer that doesn't understand they are under contract to that brokerage says to me that it wasn't explained fully. But this is very consistant with the poor understanding of agency and contract law that I encounter all to often from agents.
When I was a brand new agent my manager drummed the three steps of agency over and over. In California it is 1)disclose what agency is to the client, 2) the client then chooses who is the agent in the offer and 3)agency is confirmed in the offer. At any point in that process the client has the opportunity to understand the exact situation if explained correctly and honestly.
This article, if meant for public consumption, should also make clear that the brokerage is the agent. If a conflict exists for the fee it is worked out between brokerages not agents.

Jed Lane GRI
Broker, Sales Manager
Star Real Estate Brokerage
http://www.FogCityGuide.com
415.425.9810

 
Submitted by Steve Mattison ABR e-Pro on August 28, 2008 - 10:26am.

I really liked your post and believe this happens more than most think because the potential buyers have no way of knowing how agency works unless it is explained to them as soon as the meet their first ethical agent. Unfortuantely, not all agents or REALTORS® are ethical and I have missed out on several paychecks because of that. Keep on posting and do not let the critics discourage you!