Obligation to Ask About Agency

Q: A couple walked into my office a few weeks ago and said they’d been going back and forth about making an offer on a FSBO and had finally decided to go for it. They  asked me if I would represent them as a buyer’s agent and write an offer for them. Everything happened so quickly. I gave them that agency brochure, they signed a buyer’s  agency agreement with me, we went and looked at the house and I wrote an offer for them that very day. We’re supposed to close in a week and out of the clear blue sky, I  get a call from another agent who says she represents the buyers under an exclusive buyer agency agreement that they signed before they came to me. This other agent  keeps saying I had an ethical obligation to ask the buyers if they were working with any other agents before I signed them up and wrote an offer for them. I say that these  people came to me and never gave me any reason to believe that they had been working with anyone else. I mean, it’s a free country; why should I question them like that?

A: Because you are a REALTOR®. The Code of Ethics has long required REALTORS®, before entering into an exclusive agency agreement with a client, to make  “reasonable efforts” to determine whether the client is subject to a current, valid exclusive agreement to provide the same type of real estate service. Now, Standard of Practice 16-13 makes it clear that before providing substantive services (such as writing a purchase offer) to prospective purchasers, REALTORS® have an ethical obligation  to ask prospects whether they are parties to exclusive representation agreements. So, if you had asked and they had said yes, could you still have worked with them? The  general rule is that REALTORS® may not knowingly provide substantive services concerning transactions to prospects who are parties to exclusive representation  agreements. There are almost always exceptions. One exception is where the client initiates the dealings and such services are provided at the direction of the client. While it certainly is significant that the buyers came to you and asked you to write an offer for them, everyone might not see it that way. Tread very carefully and understand that you  and your buyer, who might be obligated by contract to compensate the other buyer agent, are taking on risk in going forward.

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