Risky Interference

Soliciting others' clients violates the Code.

September 1, 2003

Q. I had an exclusive buyer agency agreement with some buyers and had twice shown them a property owned by a real estate professional. One day the buyers ran into the owner at the local hardware store. The owner struck up a conversation with the buyers who told him that they had an exclusive buyer’s agreement with another practitioner (myself).

Even so, the owner said something along the lines of, “Forget your salesperson. I can give you a better deal on the house than he could. Just give your salesperson $2,000, and I’m sure he’ll be happy.”

The owner even invited the buyers to meet with him at his office. Is this unethical?

A. Article 16 of the Code of Ethics states that REALTORS® must not take any action inconsistent with the agency relationship other REALTORS® have with their clients. Standard of Practice 16-13 specifies this obligation: “All dealings concerning property exclusively listed or with buyer/tenants who are subject to an exclusive agreement shall be carried on with the client’s agent or broker, and not with the client, except with the consent of the client’s agent or broker or except where such dealings are initiated by the client.”

By trying to convince the buyers to work with him, the practitioner who owned the property violated Article 16 as interpreted by the Standard of Practice.

A key fact is whether the buyers initiated the dealings. If that were the case, the situation might fit into the exception stated in Standard of Practice 16-13: “REALTORS® shall not knowingly provide substantive services . . . to prospects who are parties to exclusive representation agreements, except with the consent of the prospects’ exclusive representatives or at the direction of prospects.”

From your question, however, it doesn’t seem as if the buyers initiated contact. Therefore, it’s pretty clear that the owner-practitioner was in the wrong.

Q.I brought a buyer to a property being offered “by owner.” The owner signed a one-party commission agreement with me to negotiate with this buyer for three-months. The buyer wrote three offers but was unable to come to a satisfactory agreement with the seller.

Recently, I learned that six months after the commission agreement expired, the buyer purchased the property. It appears that the seller and buyer may have worked out a deal to save the commission on this $600,000 house. I didn’t have the buyer sign a buyer representation contract.

Am I still entitled to the commission considering that I was the procuring cause?

A. Based on the information in your letter, there isn’t a high probability of collecting a commission. Unless the owner were willing to voluntarily submit to arbitration through your local or state association (depending on the arbitration administration procedure in your area), this situation would be governed by contract law and judicial precedent.

One contract that may govern this situation is the one-party commission agreement that the owner signed with you. You might be able to recover your commission if the contract provides for payment after the agreement expires if you procured a buyer during the term of the agreement. If this protection period doesn’t exist or has expired, a second contract that might have offered you a way to recover payment is the buyer agency agreement. However, no such agreement exists.

Courts may also award compensation based on the value of the broker’s services (quantum meruit). That is, courts consider the service provided in the particular instance and equate it to a real estate commission in a typical real estate transaction. Some courts might also consider the concept of procuring cause in this type of lawsuit.

Although there may not be a legal obligation to pay, fair play would suggest that you’re entitled to compensation for your part in the transaction.

Bruce Aydt

Attorney Bruce Aydt, ABR, CRB, SRS, is a national real estate educator, a Missouri real estate broker, and past chair of the National Association of REALTORS® Professional Standards Committee.

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