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Is it an ethics violation for a real estate agent to represent a buyer without charging a commission?
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Hello. I am a real estate agent and need help with a possible violation.
I understand that dealing with a possible violation can be stressful. Can you please describe the nature of the violation you are concerned about?
When writing the purchase agreement for my buyer, I put myself as the buyer's agent and stated that I was representing him. (I did get advice from an agent at the brokerage.) I am also not collecting a commission on this from either the buyer or the seller, so that could possibly be an issue.
Have you already taken any steps to address this issue, or is this your first time encountering it?
My broker reached out and wants me to sign a hold harmless agreement between me, my buyer, and the broker. It states that I was a facilitator in the transaction and only did the paperwork. All paperwork had already been turned in to both the closing company and my broker.
Is there anything else the Real Estate Lawyer should know before I connect you? Rest assured they'll be able to help with your possible violation.
There won't be any proof over text, but originally I was going to be only a facilitator and not a buyer's agent in the transaction. My broker wants to charge me $1,200 now and said if I don't pay, he will sue for the full commission. Also, what liability is on his end for the transaction if I don't take a commission?
Hello and welcome to the site! I am a licensed attorney and here to help with your situation. I know your question is important, but there may be a short delay in my responses as I type out an answer or reply, as I am typically working with several customers at once on the website. I have read your post, and I am sorry to hear you are having to deal with this situation, as I realize it can be frustrating and confusing. Could you tell me more about the specific issue you're facing with your broker and the hold harmless agreement?
And why is your broker attempting to charge you $1,200 if you are not charging either party a commission on the deal?
Give me a few minutes to type this out. Thanks.
No worries. Also, could you clarify if there was any written agreement or contract between you, your buyer, and the broker regarding your role in the transaction? This will help me understand the legal standing of the broker's claims.
I originally put in the purchase agreement that I am a buyer's agent. The seller is a private party, so I stated that they are representing themselves and I am representing the buyer. I do have a signed right to represent the buyer, and it listed that they would pay me $0 in commissions or fees. The purchase agreement also listed that the seller would be paying 0% as well. I also turned in the buyer's compensation disclosure, which is also 0. Then I got a call from my broker, who was furious that I violated ethics. Now he doesn't want his brokerage to be liable for this transaction (a $450k property), and he wants me and the buyer to sign a hold harmless agreement stating that I am only a facilitator in the agreement and not representing the buyer, and that the brokerage is held harmless from any legal proceedings on the purchase of the property. He is charging me $1,200 for that.
Also, what possible proceedings and penalties could come from the transaction?
"Then I get a call from my broker who was furious that I violated ethics." That is nonsense. He didn't get his cut for the sale, so he is angry about that. There is no ethical violation if an agent doesn't charge a commission on a deal. But that should be discussed with the broker first, before the agreement is made, to ensure the broker is OK with that.
With that said, there is some potential liability for the brokerage in being tied to the deal, because if there was some type of fraud, mortgage fraud, or any other improper behavior, and it ended up in court for whatever reason, the brokerage could get dragged into the litigation as a party because they are the principal and you are the agent.
Right, and that's where the problem lies. I talked to his second-in-command, who is his trusted number two. She said he is okay with no commission as long as he gets his BAC fee of $495, which he will. I should've just called him.
How should I go about this? Pay the $1,200 and sign off?
Whether the broker could actually charge you anything depends on what your agreement with the broker is. If it says they get X% commission on any deal you do, you owe them. If it says they get X% of any commission you earn, they get nothing, because you charged nothing.
Right. Is it worth the headache of him trying to sue for the full commission of 2.7% ($12k)? He was very clear he would sue me for that if I didn't sign and pay the $1,200.
I can't tell you what to do here, as I don't represent you as your attorney. But a broker can "fire" an agent at any time and return their license to the real estate board if they want to. So you would have to decide if it was worth the bad feelings that would arise over the additional $700. And he has zero grounds to sue you if you didn't take a commission, but that doesn't mean he couldn't fire you as his agent.
OK. In that case, I will most likely sign and pay. But just to make sure, I didn't do anything wrong by representing the buyer? It's just that now, if some sort of legal proceedings happen, I will be dragged into it? And does not discussing commission on a sale break any law or ethics rule?
As a real estate agent, you have a fiduciary duty to your client, which means you must act in their best interest. This includes full disclosure of any potential conflicts of interest and ensuring that all parties understand your role in the transaction. Typically, commission agreements are outlined in the contract between the agent and the client. If you have a written agreement stating that you will not receive a commission, this should protect you from claims that you owe a commission unless there are other overriding agreements with your broker. Brokers can be held liable for the actions of their agents, which is why your broker may be concerned about potential liability. The hold harmless agreement is likely an attempt to mitigate this risk. Real estate agents are bound by ethical standards set by their licensing board and professional associations, such as the National Association of REALTORS® Code of Ethics and Standards of Practice. These standards often require transparency and honesty in all dealings, including commission arrangements. But based on your comments, I don't see any ethical violations here.
OK. This was good. Thank you.
You are very welcome. Glad I could help. It was my pleasure to work with you and help with your question. Have a great afternoon and be safe!
If I can still ask, do I need to update the closing company that I am a facilitator now instead of a buyer's agent?
Also, essentially, would the brokerage even be liable if I had put that I was a facilitator in the first place?
If you are changing your role from a buyer's agent to a facilitator, it's important to update the closing company to reflect this change. This ensures that all parties involved are aware of your role in the transaction. Regarding the brokerage's liability, if you were initially listed as a facilitator, the brokerage might have less liability, since you are not acting as an agent representing the buyer. But backing down and trying to "un-agent" yourself now likely wouldn't get the broker off the liability hook, because everything has pretty much been done. However, it's always best to have clear documentation and agreements to protect all parties involved.
OK. Even if the broker advised not to let the closing agent know? If so, is a simple email stating the change enough to send to the closing agent?
If your broker advised against notifying the closing agent, it's crucial to weigh the potential risks and benefits. However, transparency is generally the best policy to avoid any misunderstandings or legal issues later on. If you decide to inform the closing agent, a simple email should suffice. Clearly state the change in your role and ensure that all relevant parties are copied on the email. This way, you have a written record of the communication. And if you have anything in writing from the broker, keep that safe as potential evidence. That is kind of shady for your broker to be advising at this point.
OK. Thanks.
Glad to help when I can.
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