Buyer-Brokerage Agreements: Dispelling Misconceptions
March 9, 2023
So, you are working with a buyer looking for a residential property. You and the buyer have signed an Exclusive Right to Represent Buyer Agreement (VAR Form 450) for a term of six months. This means that you—as the agent—will get paid a commission from the proceeds of any sale this buyer completes within the next six months, right?
Well, not exactly. If you are in this type of brokerage relationship and you are the procuring cause, meaning you created an uninterrupted chain of events that led to the completed transaction, then yes, you will receive a commission from the proceeds of the sale. However, if this same buyer works with another agent to complete a home purchase, and the other agent is the procuring cause for the sale, then you will not get paid a commission from the proceeds of the sale.
Let’s dive a little deeper into this second scenario.
If your client with whom you have an enforceable Exclusive Right to Represent Buyer Agreement closes a transaction with another agent, what happens?
First, if the other agent is the procuring cause, then that other agent will receive the commission from the sale. However, the other agent may have violated Article 16 of the Code of Ethics if the agent did not engage in reasonable steps to determine if the client was already under a brokerage agreement. Standard of Practice 16-9 states, “REALTORS®, prior to entering into a representation agreement, have an affirmative obligation to make reasonable efforts to determine whether the prospect is subject to a current, valid exclusive agreement to provide the same type of real estate service.” Therefore, if the client lied to the other agent about the existence of a pre-existing exclusive agreement, then there might not be a violation of Article 16. However, if the other agent failed to investigate or ask about the possibility of a pre-existing exclusive agreement, then there would likely be a violation of Article 16.
Second, you as the agent with the enforceable brokerage agreement can take steps to enforce the agreement against the client. This means the client would owe you the amount of the commission the procuring agent made from the sale that was completed. Agents and brokers may be hesitant to pursue such enforcement for various reasons, but the option still exists.
Exclusive brokerage agreements help ensure that agents representing buyers will receive a commission, but they do not automatically make the agent the procuring cause for a particular transaction.
Still have questions? We encourage you to submit your inquiry to the Virginia REALTORS® Legal Hotline.
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