Legal FAQs for REALTORS®
My client wants to make an offer on a for-sale-by-owner property. What is the best way to approach the seller with the offer and make sure I receive my fee from the seller? (updated June 16, 2014)
Follow this order of signing documents so you have the seller’s written agreement to pay your fee before the parties sign a contract:
1. It is recommended to have your buyer sign a buyer’s representation agreement. If she signs the Residential Buyer/Tenant Representation Agreement (TAR 1501), you may want to remind her that under Paragraph 11B, she may be obligated to pay you if the seller refuses or fails to pay your fee.
2. Provide the seller with the Information About Brokerage Services form (TAR 2501, TREC OP-K) and discuss the agency relationships involved in this purchase.
3. Complete the Registration Agreement Between Broker and Owner (TAR 2401) and check the box in the broker’s representation section that indicates you are representing the prospect only. Have the seller sign this document.
4. Give the seller the Seller’s Disclosure Notice (TAR 1406) to complete and sign.
5. Present your buyer’s offer for the seller’s consideration and signature.
Remember, even though your client is the buyer, you have an obligation to treat the seller fairly and honestly. Avoid actions that might be construed as pressuring the seller to sell the property to your client.
I understand that it's important to have a written representation agreement when representing a buyer and that it's required that a broker have a written agreement signed by the person agreeing to pay a commission to enforce this right against a client. But why should I be concerned about this fee issue, since in my market the seller's agent almost always pays the cooperating broker's fee under the MLS residential listings? (updated Jan. 25, 2006)
The TAR Buyer/Tenant Representation Agreement does contain language that states that the broker will seek to obtain payment of the broker's fees from the seller, landlord, or their agents, but provides that if the buyer agent does not receive all or any of the specified commission from those sources, then the buyer/tenant is obligated to pay that commission (or the difference in the amount specified in the agreement and the amount paid by the seller, landlord, or their agent). This provision can also establish a legal claim to a fee from a buyer who has purchased a home during the term of the agreement using some other agent to complete the purchase contrary to the buyer's agreement to use the broker named in the buyer representation agreement. Brokers should clearly explain the buyer's potential fee obligations under this paragraph of the agreement when they first present the representation agreement to the buyer for signing. Clarity of the parties' rights and obligations in the broker/client relationship is one of the main reasons for having a written brokerage agreement.
I'm changing brokers and I have several buyer clients who've signed buyer-representation agreements. Can I take these buyers with me to my new broker? (updated Oct. 14, 2010)
No. A buyer-representation agreement is a contract between a buyer and a broker, not a salesperson. As such, your buyers would still be represented by your previous broker. However, your buyers can ask to be released from the buyer-representation agreements with your previous broker.
Does the law require a broker to have a written representation agreement to act as someone’s agent? (updated June 17, 2014)
No. A relationship between a broker and a client can legally exist without a written document. However, there are four good reasons why a broker-client relationship should be in writing, whether it’s with a buyer, seller, landlord, or tenant:
1. A broker cannot sue for a commission unless there is a written agreement signed by the party agreeing to pay that commission.
2. If office policy permits a broker to act as an intermediary (the broker has a broker-client relationship with both the seller and the buyer in the same transaction), then the broker must obtain the written consent of each party and it must state who will pay the broker. The Texas Association of REALTORS® buyer's representation agreements and listing agreements include the necessary written consents and other statutory requirements for a broker to act as an intermediary.
3. Written agreements between a broker and his client help ensure that all parties have mutually agreed on the terms of representation.
4. Article 9 of the Code of Ethics requires that REALTORS®, for the protection of all parties, assure whenever possible that all agreements related to real estate transactions are in writing.
Our firm's Web site contains the Information About Brokerage Services form (TAR 2501), which can be read and downloaded by anyone visiting the site. If we meet with a prospective buyer at one of our listed homes, and the buyer says that he found the home on our Web site and read the form while on the site, are we still required to give him a copy of the form when we meet him for the first time at the listed home? (updated Nov. 1, 2003)
While it is proactive for you to provide the form on your Web site, Section 1101.558(c) of the Real Estate License Act requires that a licensee furnish the written statement contained in the form to a party to a real estate transaction at the time of the first substantive dialogue with the party. The Real Estate License Act defines "substantive dialogue" to mean a meeting or written communication that involves a substantive discussion relating to specific real property. The term does not include a meeting at an open house or a meeting or written communication that occurs after the parties to a transaction have signed a contract or lease. In the situation you describe, the Real Estate License Act would require you to provide the form to the prospective buyer when you first meet him at the listed home. Note: A licensee is not required to provide the written statement (the form) if the proposed transaction is for a residential lease for not more than one year and no sale is being considered, or the licensee meets a party who is represented by another licensee.
I represent a buyer who is interested in several properties and wants me to find out what the owners paid to purchase these properties. I represented one of the owners when he bought his property, but the sales-price information is in the MLS. Can I tell my new client the price that my former client paid for the property? (updated Nov. 1, 2003)
Standard of Practice 1-9 requires that REALTORS® preserve confidential information provided by clients in the course of the agency relationship after the termination of the relationship. But it seems clear that sales data provided to the MLS upon the sale of the property would not be considered confidential information protected under this obligation. Publication of the sold data in the MLS would remove any possible confidentiality protection that might be given to that information under agency law. A more difficult issue might be presented if the former sale was conducted outside of an MLS and no sales data was made available to parties outside the transaction. Under those circumstances, an argument could be made that the sales price might be entitled to confidentiality treatment by the buyer's agent, and he should obtain the consent of the former client to release that information to the potential buyer. Absent some confidentiality agreement between the buyer and seller and their agents in the former transaction, the sales data probably would not be considered to be protected confidential information since it was known to the seller and his agent. Furthermore, Section 1101.804 of the Real Estate License Act specifically provides that a licensee shall not be liable to any other person for providing sales prices or terms of sale information for the purpose of facilitating the sale of real property unless the disclosure of that information is otherwise specifically prohibited by statute.
I was the listing agent for a property that didn't sell but was listed by another broker after the expiration of my agreement. I now have a buyer client who wants to see that same property. Must the new broker, or my broker, designate me as an appointed licensee, or how may I otherwise act? (updated Nov. 1, 2003)
Assuming an agreement with the listing broker as regards cooperation and compensation, you may represent the buyer as an exclusive agent. You cannot be appointed by the intermediary because you are not an associate of the listing broker, and from the facts as you describe them, no intermediary status is going to arise. Confidential information obtained from the seller when you were acting as the seller's agent, of course, could not be disclosed to your new client, the buyer.
Must the respective appointed licensees each provide an opinion of value to the respective buyer prospect and seller prospect? (updated Nov. 1, 2003)
At the time a property is listed, the licensee is obligated to advise the owner as to the licensee's opinion of the market value of the property. Once appointments have been made, the appointed associates are permitted, but not required, to provide the party to whom they have been appointed with opinions and advice during negotiations.
A buyer asked me to show him a property that’s listed for sale in the MLS, but we didn’t sign a representation agreement. If I show him the property without a signed representation agreement, would I be considered a subagent of the seller? (Updated March 27, 2015)
It depends. If you have created an agency relationship in which you’re representing the buyer—even if you haven’t signed a representation agreement—then you have a fiduciary duty to the buyer and you are not a subagent of the seller.
A subagency relationship is not as common as it used to be, but it usually arises when a buyer who is not represented uses the services of a broker to view a property. That broker then owes a fiduciary duty to the listing broker and the seller—not the buyer—and the buyer is treated as customer of the broker. It is important that a broker in this situation obtain permission from the listing broker, and explain his or her role to the buyer to avoid any confusion.
Legal Disclaimer: The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.
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