Losing a Commission

Gather the facts before you complain, arbitrate.

March 1, 2004

Q. I was working with a buyer for several months who made offers on more than one property over that period of time. I thought I had the person’s loyalty, though we didn’t have an exclusive buyer agency agreement. I was acting as a transaction broker (non-agent) without a written agreement. While we were in the process of negotiating an offer, the buyer suddenly withdrew it and told me he wasn’t interested in continuing to look for property. He provided no explanation. According to MLS records, the property went under agreement three weeks after our negotiation, and a different brokerage company was listed as the selling company. I feel I lost a $16,650 commission because another broker interfered. Has the selling company’s agent acted unethically by not working with me? Can I recoup my lost commission?

A. What’s important in your case is proof rather than speculation and bad feelings. Often, we believe unethical interference occurred in these types of circumstances. We think we—not the person who was paid—are entitled to the commission. The key is to investigate and decide whether there’s an ethics complaint or arbitration request to pursue.

In your case, you first need to provide more facts. You don’t say whether the ultimate buyer of the property was the same person with whom you worked. Assuming that’s the case, you don’t mention what occurred that caused the buyer to stop working with you.

Second, you need to separate ethics from arbitration issues. If you had established an exclusive agreement with the buyer, you may have had an ethics complaint. But since you didn’t, there’s no violation of Article 16 of the Code of Ethics, which states that “REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with clients.” As far as arbitration, it’s unlikely that you have sufficient facts to prove you were the procuring cause.

For information on similar cases, go to the Law and Policy section of REALTOR.org and read the Arbitration Guidelines in the Code of Ethics and Arbitration Manual (Appendix II to Part 10), which include analyses of 12 situations. Also check out the Procuring Cause/Arbitration Worksheet, recently developed by the National Association of REALTORS®’ Professional Standards Committee.

Q. Because multiple offers are common in my market, many practitioners are concerned about how much information a listing agent can disclose about a contract to other potential buyers. Practitioners here have read Standard of Practice 1-15, which allows listing agents to disclose the existence of another offer with the sellers’ permission and in response to buyer or cooperating broker inquiries. But they ask: How much information can you disclose to competing buyers, or their agent, about the price, terms, or conditions of other offers?

A. You’ve asked a great question. Presenting and Negotiating Multiple Offers, in Appendix IX to Part Four of the Code of Ethics and Arbitration Manual, is a good resource. It may not be in the sellers’ best interest to disclose terms of competing offers, because that may cause the competing buyers to withdraw their offers. Or if sellers direct a listing agent to disclose the terms, competing buyers may create an auction-like bidding frenzy. Weigh the consequences of the decision.

If the listing company executes the sellers’ instructions to disclose terms to competing buyers, be sure to get that instruction in writing, preferably from your company’s attorney. Such documentation offers protection from sellers’ later claiming that the listing broker took action that wasn’t in their best interest and which they didn’t authorize. You want proof of what you advised.

Bruce Aydt
columnist

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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