Release Date: 01/10/2017
QUESTION: An agent in my firm has sold one of the firm’s listings. I have reviewed the Exclusive Buyer Agency Agreement (form 201) he entered into with the buyer and I am concerned about the way he filled out the compensation part. In paragraph 4(b), he inserted the percentage fee we customarily expect to receive for services in representing a buyer. However, in paragraph 14(f), he put a zero in blank for the dual agency compensation. Shouldn’t he have put the percentage fee we expect to receive from the seller in the blank? Does his mistake mean that the firm will only be entitled to receive a fee for the buyer side of the transaction if it closes?
ANSWER: The answer to your first question is yes. Your agent apparently does not understand the purpose of paragraph 14(f). The Real Estate Commission’s compensation disclosure rule (Rule 58A.0109) provides in relevant part that a broker in a real estate sales transaction shall not receive compensation from any other person unless the broker provides full and timely disclosure of the compensation to the broker’s principal. The Real Estate Commission has interpreted this language to require a firm acting as a dual agent to disclose to the buyer client the compensation the firm expects to receive from the seller client. Paragraph 14(f) was added to the Exclusive Buyer Agency Agreement to aid a firm in complying with this disclosure obligation.
Regarding your second question, we don’t believe your agent’s mistake should affect the firm’s right to receive the total fee due from the seller under the listing agreement if the transaction closes. The terms of the listing agreement can only be modified by the firm and the seller, and the Buyer Agency Agreement is between the firm and the buyer. However, the buyer agent should promptly disclose to the buyer in writing the fee the firm expects to receive from the seller. We recommend that this be accomplished by amending paragraph 14(f) of the Buyer Agency Agreement and having the parties initial and date the change.
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