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Make sure your documents match when you contract a listing... Agency designations matter.

Carolyn Tann-Starr 2010

Make sure your documents match when you contract a listing... Agency designations matter.

If NY agents contract a specific commission with a seller, advertise a split, not file as a dual agent when working for both the buyer and seller on the same transaction, there is a distinct possibility one may discover that they may not be entitled to the percentage of payment they believe they earned for wearing two hats working hard on one deal. Markets are local and state laws vary, so some of the issues presented here may not pertain to a lot of people outside of NY.

If you do two jobs and value your time/work you may have an expectation to be compensated for holding down both positions. Everything is negotiable, however one should be careful to ensure that what one negotiates is clearly reflected in the contracts and documents accurately. When an agent's advertisement of compensation does not match what was authorized in the contractual agreement bad things might happen if (a) there was not a meeting of the minds or (b) a misunderstandings occurs based upon an erroneous belief of entitlement.

Brokers have an obligation to cooperate, not compensate, so if a Listing Broker negotiates a 4% fee split but advertises 2%, imagine the surprise of all when the LB finds a buyer yet does not receive the 4% fee assumed. For example:

http://www.dos.state.ny.us/ooah/decisions/appeals/2008/28DOSAPP08Razik.htm

To get this you really need to read that entire case. This isn't a post about squabbling over commissions and splits it is a post about MLS truth in advertising on all points of the listing and the issue of being very clear about who is being represented by whom in a real estate transaction and the ensuing bi-directional obligations agency triggers.

Agency is very serious business... The buyer's agent is not automatically a sub-agent of the seller and listing broker. Customers and clients choose who they want to represent them and we as agents either accept or reject those business relationships.

New York State law "requires real estate licensees who are acting as agents of buyers and sellers of property to advise the potential buyers and sellers with whom they work of the nature of their agency relationship and the rights and obligations it creates." Dual Agecy is permissible in New York State so if you have a listing and find the buyer for that listing and intend to represent both parties to the transaction NY agents have to remember a very important little detail: "A real estate broker may represent both the buyer and seller if both the buyer and seller give their informed consent in writing. In such a dual agency situation, the agent will not be able to provide the full range of fiduciary duties to the buyer and seller." http://www.dos.state.ny.us/forms/licensing/1736-a.pdf

Had the agent in the case previously cited had written consent from both parties in writing (and matching documents) there is a distinct possibility the expense of litigation might have been avoided because the seller would have been made aware of the complexity of doing twice as much work in order to facilitate the closing of escrow on the transaction. Sometimes sellers and buyers make erroneous assumptions regarding what we are and are not supposed to do for them. If we do not take the time to carefully explain ourselves to our customers and clients how will they be able to distinguish the true value we bring to the negotiation table? 

 

Buyer's Agency is not a myth. It is an actual position recognized by the laws of agency governing real estate transactions. It is a separate and distinct form of representation which differs from the obligations of the Listing Agent. The Listing Agent has the best interests of the seller in mind and the Buyer's Agent has the best interest of the buyer in mind. The Dual Agent holds a complicated position as he or she concentrates on fair and honest dealings that balances the needs of both clients while efficiently and effectively facilitating a close of the transaction at hand.

Read page two of this PDF: http://www.dos.state.ny.us/forms/licensing/1736-a.pdf There are six hats for three categories of representation to choose from designated there. Each one is a distinct position that all agents should be aware of. If you do not understand what those positions entail as an agent, one would do well to have a consultation with their Broker-in-Charge and/or their MLS hot line attorney. You can pooh-pooh the thought if you want but if you deal with re-locations and referrals you may want to remember every member on the team may possibly suffer if the weakest link fails and litigation ensues because some people assumed instead of actually understanding and knowing the roles and obligations of agency relationships.

 

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Comment balloon 17 commentsC Tann-Starr • June 11 2010 06:32AM

Comments

Hi C, I always make sure everyone is clear on whom I work for. I even explain all the different types of agencies. I have everyone fully read the Agency Disclosure and of course they get the 2nd page of that disclosure.

Posted by Jackie Connelly-Fornuff, "Moving at The Speed of YOU!" (Douglas Elliman Real Estate in Babylon NY) over 8 years ago

Hi Carolyn,

Thanks for the excellent and very informative post. Have a great

Posted by Patrick White, Driven to bring New Yorkers home (Home Driven Realty, Inc) over 8 years ago

Jackie, sometimes I find I have to remind people because they forget or may make a comment that puts me on notice that they think I work for them when I don't. I found this case interesting because the listing broker got the buyer but dropped the ball with the paperwork. The devil is in the details, eh? Interesting points of order came to light as well...

Patrick, you are welcome. :-)

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) over 8 years ago

Hi C, I just finished reading the case. It seems to be that the agent, who brought in the buyer, didn't complete another Agency Disclosure that should have cited Dual Agency. Am I correct?

Posted by Jackie Connelly-Fornuff, "Moving at The Speed of YOU!" (Douglas Elliman Real Estate in Babylon NY) over 8 years ago

Jackie, sometimes people do not realize the power of a two page form. I had a lovely buyer who understood this form who I encouraged to get a buyer's rep because I was representing a seller in a pre-forclosure that was complicated by mounting arrears, co-op rules and restrictive by-laws. I did not want to be a dual agent regarding this transaction, especially since it was a race against time with the bank vs a restricted meeting schedule of the co-op board. The seller was my client but the buyer wanted to be my client and kept contacting me for everything. I found myself trying to find a broker for the buyer only to discover agents are suspicious if you hand them a client with no strings or referral fees attached (LOL). I'm thinking how hard can this be? Turned out to be impossible. They were too busy looking for the what is in it for me angle instead of realizing I simply wanted to avoid being a dual agent on a complicated matter. In the end the seller did not accept the offer because it wasn't full asking price. The buyer later saw something out of state that was reasonable and a nice commute into Manhattan, so my stressing over the matter was laid to rest. It was the first time I got an inklig people didn't understand the obligations of agency. I would have been happy with my share of something rather than 100% of nothing. If your instincts are screaming at you not to do something listen to them. :-)

Like you, I was looking for a reference to that form or something in writing about consent to dual agency. We have to stay on top  of our paperwork. If the nature of our agency relationship changes then a new form should be filled out, updated and documenting the change...

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) over 8 years ago

Jackie, another point: an agent can be a dual rep for one party yet still be filling out the form as the seller's rep with other prospects and customers attending an open house and/or placing a bid on the property. Agency has to be explained to each person we deal with. I have had people refuse to sign the form because they were not given the document by previous agents although they had been house hunting for a while.

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) over 8 years ago

That's what I thought. She missed out on another 2% because of this. I can see why you wrote this post. It's a great reminder. How can anyone forget this simple thing? Boggles the mind. And you are right, the devil is in the details.

It's amazing to hear how many agents were suspicious of you giving them a buyer with no strings attached. I would have done the same as you. I would not want Dual Agency in that case.

When I first started as a Realtor, I came across so many buyers who refused to sign it. It's states in big letters: THIS IS NOT A CONTRACT. They also will say no one else gives us this form to sign. I then tell them those agents are not doing their job. If the State was checking on them, those agents would be fined for not furnishing the Agency Disclosure. I figured out a way to overcome this: "Don't you want to know what your rights are?" It gets them to sign it every time.

My former brokerage had a refusal to sign form. Talk about feeling uncomfortable with that one!

Posted by Jackie Connelly-Fornuff, "Moving at The Speed of YOU!" (Douglas Elliman Real Estate in Babylon NY) over 8 years ago

"Don't you want to know what your rights are?" Jackie, that's a great question to ask. I am soooo quoting you on that one next time.

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) over 8 years ago

Hi C, it works every time! It makes them think :)

Posted by Jackie Connelly-Fornuff, "Moving at The Speed of YOU!" (Douglas Elliman Real Estate in Babylon NY) over 8 years ago

Great reminder to make sure our clients, (as well as ourselves), are fully informed about agency and who represents who.  How sad that it had to come to litigation!  Thanks for the post!

Posted by Brenda Mullen, Your San Antonio TX Real Estate Agent!! (RE/MAX Access) over 8 years ago

Jackie, very useful. :-)

Brenda, you are welcome and I am glad you found it useful. :-)

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) over 8 years ago

Wordy,

You're right this is very state spefic. But, "Everything is negotiable, however one should be careful to ensure that what one negotiates is clearly reflected in the contracts and documents accurately. When an agent's advertisement of compensation does not match what was authorized in the contractual agreement bad things might happen if (a) there was not a meeting of the minds or (b) a misunderstandings occurs based upon an erroneous belief of entitlement." is unerversly great advice!

Bill

Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) over 8 years ago

Great post as usual! Excellent information's every agent need to follow what the listing contract spell out! And do your due diligent! Otherwise you will end up in court!

Thanks for sharing,

Adam

Posted by Adam Malachi, QSC,CDPE,CIPS,CNE,CRB,CRS,GRI,MRE,SFR (A 2 Z Realty LLC) over 8 years ago

In Florida we currently have two approved contracts we can use as purchase agreements. One is the FAR-BAR which was done by the Florida Association of REALTORS (FAR) and Florida's BAR association. The other is the FAR-9 which was done by the FAR and its own attorneys. Personally, I like the Far-9 better since it is clear for many customers and seems to have a more logical form.

However, each one has its own separate sets of addenda that refer to clauses and paragraphs in the parent document. It amazes me how many agents will us the FAR-BAR and then add on FAR-9 (10) addenda to it.  Of course it makes no sense when a sentence says "This clause replaces such-and-such a paragraph on page 2 and drops all repair limits to $0. On the FAR-BAR there is nothing on page 2 that fits this.

You cannot mix and match contracts. Use the correct forms. Otherwise it would be like taking parts from a Ford and expecting them to fit a Porsche!

Posted by John Elwell (CENTURY 21 Bill Nye Realty, Inc.) over 8 years ago

Great tip... there can be so much mess that follows a small oversight.  Thank you for sharing this post.

Posted by Rob Lang, Local Expert in Lawrence Kansas Real Estate Homes (At Home Kansas / www.AskRobLang.com) over 8 years ago

Hello: Wee done information for your area; our area works quite differently than yours, but I am sure some commonalities exist in other areas.

Posted by Aaron Vaughn | Builder | Investor, If the deal makes sense, the cash will follow. (Conifer Homes) over 8 years ago

Hi guys! It is amazing how the tiny details can sometimes come back to harm one when least expected.

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) over 8 years ago

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