Buyer Agency Does NOT Guarantee Commission

Buyer Agency Does NOT Guarantee Commission

Relax, I'm not on a rant. 

However, many other agents are ranting big time about this and they want me to say something . . . . .

If you fit into a situation similar to the following example, you need to read this whole article and rethink how you're doing business:

Scenario: You meet a buyer and they sign a Buyer Agency Agreement.  You show them a few houses and a week later you call them and leave a message that you know of more good listings for them to see. They don't return your call. You figure they're just busy with the kids' soccer games. You call again after several days and they say they've been visiting the Happy Haven new homes community and they found something they really like.

You panic!!!! What were they doing there without you?????? Maybe they didn't understand the importance of the BA agreement, or maybe you didn't explain it well enough. (Usually the latter, so go read my blog titled Postpone Perilous Proceedings).

Now you call the agent at Happy Haven and tell them these are "your buyers" and you intend to write a contract for them. But the agent says you're not entitled to the commission.  What's up with that?!

The buyers never mentioned your name even though the onsite agent asked them if they were working with anyone.  (New Homes agents are careful about this so they can avoid the situation appearing in this article.)

So what happened here? The buyers have been to the sales office at Happy Haven 3 times and spent a couple of hours each time.  On the third trip they brought their parents, too, and spent 3 hours then went to lunch and came back for another hour. The onsite agent feels he spent waaaaaaaaay too much time with them to consider you the selling agent. He said he would have been happy to spend a little time with them and let you be paid as the sellling agent, but the situation has gone too far.

Your response is, "But I have a Buyer Agency Agreement! The buyers have a right to representation!" Yes, indeed, buyers have a right to representation. However, you have no absolute right to the commission. KCRAR's BA agreement says if you don't receive your appropriate commission from the transaction, as the agreement calls for, then the buyer is responsible for paying you.

What can you do? Well, your broker could request to arbitrate the situation at KCRAR. Read more about Arbitration and Mediation. and try to get a favorable ruling for getting paid by the listing broker.

Note: A Buyer Agency agreement is not a guarantee of commission.  Sorry you misunderstood this! It is not a document between you and a listing broker that states a listing broker is required to pay you anything... remember it is a document between you and the buyer. 

The listing company's listing entry in HMLS shows what percentage they promise to pay the selling agent. However, as in this case, the listing broker doesn't consider you to be the selling agent.

The moral to the story?

First, sit down (early) and talk with your Broker when a situation might head south.

Fully explain things to your buyers UP FRONT.  Make sure they understand not to go without you to FSBO's, New Homes Communities, Open Houses. Make sure they know not to call listing agents' names on yard signs or ads. You can make sure they know if they buy from someone else that you will be expecting them to pay you what you should have made per the BA agreement stipulations.  (or be content to do without the commission.) If they're good buyers, live with them until they buy!  Educate them and don't let them out of your sight!

Equally important is don't expect for another agent to do all the work and sit quietly while you collect the commission.  It just doesn't make sense, does it?  I know it's very disappointing to lose, but you have to understand the big picture, too.

BTW: If you're not familiar with new homes you should team up with an agent who is experienced at this and have them help you.  It's not the same as resale and there are a lot of things you must know to protect your buyer-client.  You shouldn't expect the Seller's Agent to do it all and they certainly can't advise you about how to help your buyer.

Happy sales to you until we meet again,


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7 comments (Add your own)

1. Diane Ruggiero wrote:
Jan - Love your blog! I'm impressed ... didn't know you were such a techie! We sometimes see arbitrations just like the scenario you described, and you are absolutely correct: buyer agency doesn't necessarily equal procuring cause. If the agent who has the buyer agency agreement isn't the procuring cause of the sale, and doesn't prevail in the arbitration hearing they still have recourse. But, their recourse is against the buyer; not the listing or selling agent. Not that I would recommend it, but the agent can always take the buyer to court and seek payment under their buyer agency agreement.

Tue, March 31, 2009 @ 8:54 AM

2. Jan Pringle wrote:
To "Nameless in Kansas" who sent a comment on this blog
You had some good points and some I'd like to re-comment about, too... but I can't post your response without identifying you. Please let us know who you are.

Tue, April 21, 2009 @ 11:15 AM

3. Debbie Strange wrote:
Great job Jan!! Diane is correct this is how disputes get started and as you stated it is important that the Buyer Agent knows that having an signed and dated buyer agency agreement does not guarantee you will are the procuring cause and will win an arbitration request. The whole transaction is looked at from start to finish.

Again, great job Jan!!

Mon, June 1, 2009 @ 10:39 AM

4. Darrel Stiles wrote:

I want to echo Diane Ruggiero's comments about your blog...very clear and helpfull. I plan on sharing with my office...thanks again.

Thu, February 11, 2010 @ 12:10 PM

5. Anderson wrote:
Are you working for a berokr? I seem to remember, you have to do an apprenticeship with a legitimate Broker before you can go out on your own and sell houses! There's a lot of paperwork and legal stuff to execute the sale of a house! Just having passed the test, doesn't give you the right to go sell houses on your own. You better do some checking before you go against the Real Estate Laws. You could get into trouble and have your license taken away from you permanently!!

Wed, July 25, 2012 @ 9:42 PM

6. Allen Grant wrote:
This blog really helped me to know the proceedings can be affected. I will certainly follow the precautions further.


Wed, September 12, 2012 @ 4:00 AM

7. Allen Grant wrote:
This blog really helped me to know the proceedings can be affected. I will certainly follow the precautions further.


Wed, September 12, 2012 @ 4:02 AM

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