Your opinion appreciated

[photopress:blog.jpg,thumb,alignright]I’d like your opinions on this one.  Still scratching my head over this scenario.  Five brokers got together after it closed and had FIVE DIFFERENT opinions!  That’s the day I realized that NONE of us seem to agree on “THE RULES” anymore and hence the day that I started supporting alternative business models.  When five real estate brokers can’t agree on the rules, then it’s a free for all and anyone can play it any way they want, is how I saw it at the end of this scenario.  What do you think?

Brand new agent is working with a buyer friend/client who lives in her building.  They see each other most every day, though they first met at an Open House in the same building where they both live.  Agent wrote an offer for this buyer on the property where they first met, but that buyer didn’t get it.  So they continued to look at property together for weeks, maybe months.

Since the agent was new, never sold a house, the broker and associate broker of the company often accompanied the new agent and buyer when viewing property and always when the buyer was interested in the property and ready to write an offer.  So the buyer was well served and well covered on all fronts and had even been to the home of the broker and the home of the agent.

One day the associate broker suggested to the buyer and the buyer’s agent, that the buyer sign a Buyer Broker Agreement so that the agent could solicit For Sale By Owner and unlisted sellers on behalf of the buyer.  This way the seller would know the agent was not representing them, but the buyer, when asking if they might be interested in moving and selling.  Since the buyer knew pretty much exactly where she wanted to live, the associate broker felt a little “door knocking” was in order and a Buyer Broker Agreement needed since the door knocking was in the building where both the agent and the buyer lived.  Both agreed and the buyer signed a buyer agency agreement.

One day the Broker received a call from an agent regarding a property that had been on market a very long time.  Three brand new townhomes that no one seemed to want to buy for many months in a hot market.  The agent wanted the broker to come and see that one with her and the buyer, but the broker had already seen it and felt the agent could “handle” showing it on her own, which she did.  While the agent was showing, the associate broker contacted the listing agent regarding the availability of the townhomes and to ask some other questions.  The listing agent replied saying “Please bring your clients!”

The buyer that same day decided to make an offer on a different property, and she got beat out by a cash buyer.  The day the buyer found out she was beaten by a cash buyer, she called the listing agent to see if the other new construction property was still available.  She could pretty much see the sign from her window and just picked up the phone and called from the sign before bothering the broker (agent having gone on vacation). 

OK – here’s where you have to start paying close attention.

Buyer calls listing agent to see if it is available.

Listing agent says “Yes, but you better HURRY and get your agent to write that offer.” (8 months on market and 3 of them for sale)

Buyer says, “I just wanted to know if it was available, I can’t afford it anyway”.

Listing Agents says, “What can you afford?”.

Buyer says “$90,000 less than the asking price.”

Listing Agent says “I can’t let it go for that, but I can do it at $60,000 less than asking price.”

Buyer almost falls on the floor and says…OK…

Listing Agent again says “hurry”.

Buyer starts to say, thinking to herself, “My agent went on vacation…” before she gets to “I’ll need to call the broker…”

Listing Agent jumps in and says…”No problem, I’ll write up, I’ll even come to your house and do it.”

Listing Agent gets to buyer’s house

Buyer starts backpeddling, “I really can’t afford more than $90,000 less than asking price…”

Listing Agent says, “I can’t let it go for less than $60,000 under asking BUT the seller can pay 2% of the sale price toward your closing costs,IF we only pay your agent 1% of the 3% commission.”

Buyer says, “Can you do that?” 

Agent’s says, “Sure, it’s called a ‘referral fee’ and I do it all the time.

Listing Agent writes into the contract…”Selling Office Commission of 3% to be divided as follows: 1% to Buyer’s Agent and 2% to Buyer to pay closing costs.”

Basically…listing agent “pulled a Redfin” our of her hat.

In doing so, the listing agent sold all three of the townhomes for the seller, as everyone was waiting for someone to buy one.  Once he had a contract on one, he was able to get all three in contract within 48 hours.

So Listing Agent did a GREAT job for his seller client, by getting all three that had been on market for 8 months SOLD in 48 hours by twisting the arm of someone else’s client.  Some say that was his job and a good thing.

Buyer was left totally unrepresented and didn’t realize that “a referral fee” did not give her representation AND she didn’t notice that the contract she signed with the Listing Agent to buy the house said “NO ONE is to REPRESENT the buyer and ONLY the seller is represented”.  It didn’t state it that clearly.  Two little blocks were checked where it said SELLER, leaving the buyer unrepresented.  But the buyer chose to live with that in the end, after it was explained to her by the associate broker of the buyer’s agent a week later, in exchange for 2% of the buyer agent fee.

Your thoughts? A lot of agents know who the Listing Agent is, because the agent does this a lot.  Please do not use the agent’s name in your comment.  I will have to delete it if you do.  Let’s keep this “generic”.

56 thoughts on “Your opinion appreciated

  1. Ardell,

    I’m my wife’s marketing agent here in Hendersonville, TN. She has been with Re/Max Choice Properties here for three years and I can’t tell you the number of times that I have seen her break down in tears after experiencing similar events.

    I am just the husband of a Realtor (copyright) but your’s and my wife’s industry does not seem to enforce the underhanded dealings of what appears to be a few real estate agents.

    My wife’s experience with the “Buyer’s Agency Agreement” is that it seems to lack teeth, or maybe your Brokers lack the courage to enforce it, because occasionally they need some “slack” cut.

    If I’m Judge Judy, then my judgment is for the Buyer’s Agent.

    Adrell, I want to caution you as well. I don’t know this person, but the best thing you could do for your industry is expose him. Also you do him a favor as well. You help him know that your industry seeks higher standards and seeks a “why” for actions that harm others.

    With that said, my hats off to you, as well, for creating this space for me to say to that buyer’s agent….please call my wife. She is so far out of your area that everything you say to each other will be held in confidence. From an outsider looking in, honest agents need a support group!

  2. Hi Maury,

    We are the owners, so we did file a complaint on behalf of our agent . I didn’t want to give the “what happened next” part until others gave their two cents on what they thought about it.

    As I said in the beginning, five brokers all saw it differently. The mediator, two brokers from the listing office and Kim and I. Even Kim and I didn’t see it exactly the same way.

    Honestly my biggest concernt was that we really DID STILL represent the buyer, as the Purchase and Sale did not negate our duty to represent her under the separate Buyer Agency Agreement. I was more worried about the buyer than the agent.

    When I continued to represent the buyer, on behalf of the agent who couldn’t stop being angry AT the buyer, the Listing Agent threatened to cancel the deal when I was looking for builder warranties. I couldn’t jeopardize the client’s contract with the seller, so the buyer agreed to negate our agency contract and I continued to do what I could to help her get to the end of closing, without the listing agent knowing about it.

    I talked to the Department of Licensing about the position the buyer was left in, with No Representation. Seems more should have been done to make that clear to the consumer, than a stupid little checked box. They were very nice and interested in the very interesting story, but they weren’t sure how the consumer could be better protected against their agency being stripped away either.

    So five brokers, the DOL and no clear answers. We have gotten so “Agent-Centric” that no one had the answers I wanted for the buyer consumer’s problem, They all just kept talking about the money. In the end I made sure the buyer was covered all the way to closing. I actually fired the agent for not being able to let go of her anger at her client, unprofessional. You can’t be angry at your client and proceed in a transaction with that kind of greed based anger. So I had to fire her.

    It was messy. Maybe inconveiencing the owner brokers of the agent’s company made some impression. They had to hire an attorney, come to mediation, etc…(the agent never showed up). I haven’t heard anything bad abut this agent for the many months since this happened, so I think it helped.

    We didn’t pursue the money at the very end. I wated it to be clear it was NOT about the MONEY! It was about putting a consumer in a very awkward and unrepresented position. I think that made the MOST impression on all involved. It was NOT about US or the MONEY, it was about the Buyer Client being tricked into not being represented.

  3. Do you folks have an agency disclosure up that way, or did she use it and just skip past the particulars?

    The listing agent basically pulled every sleazy trick that causes the rest of us to be covered with blanket accusations. Thoroughly unethical.

  4. These are always tough calls. Even when these situations are explained in such a thorough way, there are almost always more questions than answers.

    Is the listing agent aware that a “buyer agency agreement” is in place? If so, in my area, the Real Estate Act sees that as “interfering with a contract” and he’s likely to end up with a big fine. If he knows this agency relationship exists he shouldn’t even be talking to the buyer. Upon receiving her call, he would be required to ask her to direct questions through her agent.

    It also sounds like there was virtually no discussion about agency. Clearly, the buyer doesn’t understand that she is not represented. Whether the listing agent likes it or not, he has probably created some kind of a “dual agency” relationship through lack of disclosure and the “informed consent” of the buyer.

    I would say that the buyer is likely liable for the commissions to her agent, at least that’s what my “buyer brokerage agreement” says. The agreement has teeth where I work. If the buyer’s brokerage can establish that they were diligent they would win. However, suing clients presents a whole host of other issues.

    If the buyer can establish that the seller’s agent knew of the bb agreement, and the ramifications of her proceeding without her agent, and that she did not receive an adequate agency disclosure, and was therefore also her agent, perhaps she can sue him for getting her into this mess. ???

  5. Ardell,

    I just read a quote day before yesterday. “People will forget what you said and what you did, but they will not forget how you made them feel”. Protecting the feelings of the buyer is a good thing.

    One more thing to consider related to the selling agent and your comment that he/she has done similar things in the past: An artist always signs their painting. People will like it or they won’t. It is what it is.

    Sounds like this sellers agent is an artist of sorts….why don’t you publish his/her name. He’s/she’s proud of the work, let’s honor it with a name attached to it.

    I know, Maury, pay the $100 get the counseling.

  6. Norm,

    You had me at “these are tough calls”.

    Honestly, I think we would have won “at panel” as the mediator was clear and very “old school” and my evidence was impeccable, including the email from the listing agent begging us to show it! That was ballsy. Beg us to show it and then go around us.

    That is what I realized when five brokers all saw it slightly differently and one of the broker-owners of the listing company thought what the agent did was GREAT…for the seller…which it was. VERY, VERY great for the seller.

    But I decided it is just time to get Consumer-Centric about all this and drop a lot of the Agent-Centric stuff. Consumers were both happy, so let it go. If Consumer was not happy…then I’d fight tooth and nail or if the agent had conducted herself properly and represented the buyer through to the end, instead of being mad at the client, I’d have taken it to the end.

    But honestly. The buyer handled herself better than either agent and deserved her 2% LOL so I let her keep it.

  7. Maury,

    Everyone here knows this agent and the agent’s practices. On his third company in five years, having been fired twice. No need to “spread the word”…it was spread long before this issue.

    Actually, I may have done EXACTLY the same thing for the seller, but I would have written it as a courtesy TO the buyer’s agent and paid them the 3%. Seller sold all three, buyer is happily in her new home and stays in touch with me. Agent left the business as far as I can tell. Disappeared off the planet.

  8. Jonathan,

    We have one of these “agency disclosures” that is a seven or eight page booklet…too long for anyone to read.

    I liked an old FL one that has since been changed. I was one line. It said “I DO NOT REPRESENT YOU UNTIL AND UNLESS YOU HIRE ME TO DO SO.” Not that’s something a consumer can understand!

    Here in WA it would say “I REPRESENT YOU UNLESS I REPRESENT THE SELLER”. Every agent here represent the buyer, unless they represent the seller or are the seller, pretty much.

    Seems to me that when someone is changing a consumer’s representation from being represented to not being represented…there should be a little fanfare and extra warning signal.

  9. I can see why everyone else focused on the money. If the system does not respect the contractual rights of the professional participants, then the whole system will break down. Who would want to make a living in an industry where other participants don’t have to respect contractual rights? Besides, while the buyer ended up without (or with impaired) representation, it does not appear that she suffered any sort of injury. Absent injury, it’s hard to justify investing the time and energy in any sort of remedial action (the mediation required the time of agents, brokers, their attorneys, the mediator, etc.).

    Also, doesn’t the buyer share a large degree of culpability? She got a “Laws of Agency” pamphlet from her agent, so she should have had an understanding of the issue. She worked with her agent over a long period of time. She should have understood that her agent worked for her and protected her interests, based on the laws that she should have read (the pamphlet) and her lengthy experience with agent. When the agent for the seller suddenly offered to write the contract and unilaterally cut the commission that would otherwise be due the selling agent, shouldn’t the buyer have seen the obvious red flags? Did she ask the listing agent whether he was now representing her? Did she make any inquiry at all? Isn’t it reasonable to hold the buyer to the terms of the Buyer Agency Agreement, where she agreed her agent would be compensated (I assume at 3%)?

    On that final point, the selling agent probably has a good claim against the buyer, unless the buyer honored the terms of the Agency Agreement and paid the agent out of the buyer’s pocket. If not, the buyer breached the terms of that agreement, which also contains an attorney’s fees clause. The selling agent is entitled to the other 2/3 of the commission and, if she sues and prevails, is also entitled to her attorney fees and costs. If the selling agent sued the buyer, the buyer would have a claim against the listing agent, as he was the cause of the buyer’s liability to the selling agent. In that case, she could then sue the listing agent. In this fashion, the listing agent (and his broker) would get a much better lesson in the benefits of ethical (and legal) conduct than what was taught by the MLS mediation (per MLS rules, the selling agent could not sue the listing agent for tortious interference with a contract, but rather had to utilize MLS procedures for resolving the dispute).

    Finally, the story also illustrates the benefit of having an attorney, who can explain the concept of agency and provide advice when necessary, as well as write the offer.

  10. A quick addendum: Ardell, as the broker, has the claim against the buyer. Given her sentiments above, I’ll wager she is not interested in seeking compensation — even though she (and the agent per a separate agreement with Ardell) had a contractual right to compensation.

  11. Craig,

    I think it would have been clearer to the buyer, regarding being unrepresented, if the buyer agent commission was left out entirely and not reduced from 3% to 1%. Paying the buyer agent less, did not equal NO buyer agent, in the buyer’s mind. I had to agree with her there.

    I did not bring a procuring cause claim, which confused the attorney for the listing company. I brought one on the rule that a listing office cannot modify the SOC without the selling office’s express consent.

    Here’s the part that really confused the attorney. There clearly was no express consent prior to the contract between the buyer and the seller. At the point where the listing agent was going to “have the seller negate the contract with the buyer”, we backed off. I was taught that you never fight commission issues during escrow. Never interfere with the buyer and seller’s contract. You wait for it to close, make sure the consumers are whole, and then you fight your battles mano a mano or agent to agent AFTER it closes.

    The attorney kept harping on “why did we wait until after it closed” to raise the issue…and yet by agent ethics that is the ONLY way to go, as I understand it.

    As to the buyer, think of it this way. She knew the buyer agent’s broker was ready to write it for the buyer agent, given the buyer agent went on vacation. So when someone else offered to write it…she thought it was the same…someone doing the on vacation agent a favor. Just someone different than the one the agent told her to call.

    Honestly I think the buyer was the one who handled herself as best she could, under the circumstances. No way I’d sue her. English was not her first language, by the way. So checking two little boxes that say Listing Office AND Selling office BOTH represent the seller is pretty lame in that case.

    When the listing company showed up twice at the bottom of the first page of the contract, the buyer did question that and ask, “Where’s my agent” and the listing agent pointed to 22D 10. that had the buyer agent’s name and the 1% and said “oh, your agent is over here”.

    All the way around, the buyer I think was justified in her thinking and did ask the right questions. She just didn’t know as much as we, nor should she be expected to, when the answers SEEMED to be correct. The buyer had no idea there was a problem until the agent returned from vacation and totally freaked out at her. I fired her for that after first interviewing with her for three hours days later and giving her a chance to cool off and try to see it from the buyer’s side. She would only see the money…and that is not acceptable.

  12. I don’t understand your addendum comment. There was “no separate agreement with Ardell”. The agreement was between the company and the buyer designating the buyer agent in the space provided. I as merely present as “office manager” and not in any contracts. Oh, I see…no I am not the broker. Kim Harris is the broker. But yes, you are correct that the claim was brought by the broker on behalf of the agent and only the broker could have sued the buyer…which the broker clearly would not do. In fact, she’s invited to our New Year’s party 🙂

    We make it very clear that we do not fault the buyer. Actions do not equal fault in my book. It is all about intent and not result.

  13. In Texas we have a form that we MUST show to someone when first talking about a specific property. It is the Information About Brokerage Services. It clearly spells out representation for buyers and sellers. If this is the same where you are and the IBS form was not shown and signed, the listing agent would be toast if a complaint to the Board was made. Either way, anyone with half an ounce of ethics should have made sure the buyer understood representation. Even a little comment like “I know your agent is out of town, but you might want to see who is handling her business while she is out” would have helped.

    Another point that was already made is that the buyer should have had a clue that she had representation. She could have called the managing broker of her agent and asked for help. Also, in the Buyer’s Rep Agreement we use in Texas there is a place that clearly addresses where the commission comes to the Buyer’s Agent from. If it isn’t from the seller, it is from the buyer. Didn’t she read that part?

    Having said that I still think the listing agent is one of the too many agents that place us in the eyes of the general public barely above used car salesmen on the food chain of untrustworthy professions.

  14. Sam,

    The buyer was very clear as to what to do, call the broker. But when the listing agent said…no problem I’ll do it, she didn’t understand that a favor from this person offering to “do it” and from the other person she was supposed to call to “do it” made any difference. Someone offering to “do it”. She didn’t equate that to losing representation, and I don’t blame her.

  15. The point in suing the buyer would be for the buyer to then sue the listing agent. Selling broker has claim (one that can be brought outside of MLS) against seller for breach of the agency agreement (assuming buyer did not pay other 2% out of pocket). With that potential liability, buyer can sue listing agent for putting her in that position and subjecting her to that liability (the “ABC rule” of equitable indemnification), as well as possibly the CPA claim. And who wins in all of this? Why, the lawyers, of course. Obviously, this suggested course of action would be inappropriate given the amount of $ at issue and the costs associated with litigation — unless everyone was desperate to get after the listing agent.

  16. Wow, many agents’ commercials say that buying or selling a house is too complicated to so without an agent. After this post I’m wondering if it’s too complicated to do with an agent. Craig actually recommends an attorney to help the buyer understand the agency (not even the home selling process itself). And as for thinking the buyer should have known that there was a problem, I’m wondering how a ESL non-agent could have made a decision when, as Ardell said, 5 brokers couldn’t even get two consentual opinions. I think many agents do a great job, however I agree with most of the comments, situations like this make people nervous about agents.

  17. Deanna,

    That’s why I ask all agents to shake out their heads and make things simpler than the way “it has always been”. “Our way” is immensely complex…moreso than it needs to be. I say we scrap it all and do what makes sense to and for the consumers this time around 🙂

  18. Craig,

    I think it is clear that an agent is ultimately liable to their broker. So, once their broker and the other owner thought the listing agent did a good job for the seller…I was done with it. I can’t hold an agent accountable, when their broker was in agreement with their actions.

    That how I CHOSE to see it. And yes, I got several calls from area agents who wanted this pursued to beat the listing agent over the head. But I felt that was simply mean-spirited talk, and not a good reason to take away someone’s license.

  19. Deanna — an attorney is helpful throughout the process, from creating an agency agreement to protecting your interests through closing, and if you find one willing to work for a reasonable flat fee it can be a good investment. Of course, I’m biased on the topic…

  20. Craig,
    You’re absolutely right. I agree that an attorney is so important in a process like this. I apologize for making your opinion look skewed. It’s just odd that agents are supposed to deal with all the “complex home selling” issues, but you need an attorney explain all the “complex agency” rules. I just wonder why some agents make the process of making your life easier so complicated.

  21. I am jumping into this topic late because of focusing on Holiday preprations, so I only have read the topic today….

    In Washington, “The Law of Real Estate Agency” states in “Section 3, Duties Of A Licensee Generally. (1) Regardless of whether the licensee is an agent, a licensee owes to all parties to whom the licensee renders real estate brokerage services the following duties, which may not be waived:….
    (b) To deal honestly and in good faith;….”

    I do not see how that listing agent acted honestly towards the buyer, in fact that agent was purposely acting DISHONESTLY towards the buyer when informing the buyer that she should “hurry” and act now. When the buyer said her agent was on vacation, he said he would come over and write up the offer, how was that acting in “Good Faith” towards the buyer to deprive her of properly being represented? He knew that rushing the buyer into a contract without her agent, and she said she had one, that she would be unreprensented and that he was acting unethically.

    Ardell, I did not see where in the story that the listing agent gave the buyer the Pamphlet on “The Law of Real Estate Agency”, which should have been provided to the buyer before the listing agent wrote up the contract. It is very unethical for any agent to not help either the buyer or seller to understand what agency means and how it either protects a client when represented by an agent, or does not protect a client if they do not have an agent. The fact that english was a second (or 3rd, or 4th) language would have made an ethical agent take extra care helping the client to understand the benefits from being represented, and the potential downfalls of not having representation. Again the listing agent did not “deal honestly and in good faith”.

    A very sad story, although since the buyer ultimately is happy with the outcome having purchased the townhome then it is a happy ending. Although, what if down the road the buyer finds that the higher morgage payments are being met only with difficulty, and enventually cannot be met? How happy of an ending would that be? The listing agent only cared that he sold his sellers’ property, not about the townhomes affordability to the buyer. If the agent is not reported and suffers no consequences, then what is to prevent him from continuing his unethical practices? How will that effect the outcome of future transactions, what will be the cost to other unsuspecting buyers/sellers?

    Agents who act unethically need to be reported, it diminishes all agents when agents are allowed to continue their unethical actions, and MORE IMPORTANTLY, IT COSTS THE CONSUMER to be the victim of unethical agents. Agents who are found to act in such a manner, willfullly and continually need to be removed from the business by revoking their license, and MLS privilges.

    Okay, keeping with the holiday….I hope Santa leaves a lump of coal in that listing agents’ stocking!

  22. Merry Christmas Deborah!

    The pamphlet was, of course, given her by her first agent. Not sure a second copy was needed there. Clearly the part that totally past the buyer was the checkmark on the contract next to “seller” that eliminated the buyer’s representation.

    Maybe little checkmarks are not enough for this important issue of agency representation.

    Agent was reported, and we took it out for months, long enough for them to need an attorney, come to mediation meetings (the broker and owners) and certainly long enough to be “of record” at the mls.

    But clearly some see the agent as the hero of the seller, and a part of me sees it that way too. So eliminating people from the business that are weasels is not necessarily a good thing. Sometimes someone needs a “good” weasel” 🙂 Now have a Wassail for me!

  23. Merry Christmas Ardell, and to Kim too!

    I am glad that you and the listing agent, et al, got to “duke it” out over the table. Hopefully the time, effort, and attorney fees the agent, broker and owners had to pay will cause the agent to make an effort to make better ethical choices in the future, so that other consumers are not taken advantage of.

    You know the story of the blind men and the elephant, that would be why there are such differing opinions on the actions of the listing agent, everyone will tend to “see” from their prospective. Yes, I would have to also agree that the listing agent did represent his sellers very well, but he did not act “Honestly and in Good Faith” towards the buyer as he is directed to do in “The Laws of Real Estate Agency” and that is the issue, at least from my point of view of the “elephant”.

    Mandating that agents act ethically helps to protect the consumer on both the sellers and buyers sides. If consumers wanted a “consumer beware” atmosphere of no trusted representation in real estate transactions then agents would not be needed. Our ethics in our actions towards the consumer are part of our value, that is the trust that the public has that they will have a knowledgeable advocate to look after their “best interests”. It is that betrayal of trust that makes the consumer rate real estate agents slightly above “used car salesmen”. I think the “weasels” do need to be “outed” and have negative consequences attached to their actions.

    Thanks for the Wassail Ardell! Have an eggnog and rum with fresh grated nutmeg for me! : )

  24. Thanks for the comment Steve. Don’t agree with written agreements though, as this was the ONLY time this year we used one, and the only time we had a problem in 16 years. Don’t think it would have been right to hold the buyer’s feet to the fire here when the agents, both of them really, were the ones in the wrong.

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