9-3: Buyer & Tenant Agency Agreements (24)

9-3: Buyer & Tenant Agency Agreements

If a buyer purchases a home directly from an FSBO seller during the term of an exclusive buyer agency agreement with a broker, to whom does the buyer owe a commission?

The broker

TRUE or FALSE: Buyer Jeremy enters into an exclusive agency buyer agency agreement with ABC Realty. Since the contract has a 30-day term, Jeremy must work with the same assigned agent for the entire duration.

False – An exclusive agency buyer agency agreement limits the buyer to representation by a single brokerage. Legally, the agreement is with the broker, not a specific associated licensee. If Jeremy does not get along with his designated agent, he should talk to the broker and ask to work with someone else.

TRUE or FALSE: In a nonexclusive buyer agency agreement, if the buyer finds and purchases a house without help from the broker, they do not owe the broker a commission.

True – Under an open or nonexclusive buyer agency agreement, only the broker who is the procuring cause of the sale earns a commission.

TRUE or FALSE: In an exclusive buyer agency agreement, if the buyer does not find a property within the time specified in the contract, the term can be extended using an automatic renewal clause.

False – Automatic renewal clause provisions are generally prohibited. Most states require buyer agency agreements to include the duration with a specific expiration date.

TRUE or FALSE: In an exclusive buyer agency agreement, if the buyer does not find a property within the time specified in the contract, the term may be extended if it includes a broker protection clause.

False – A broker protection clause requires the buyer to pay a commission to the broker if they purchase a property the broker showed them within a timeframe specified in the contract, which might be after the buyer agency agreement expires but within a specific after-contractual period, usually 30 days. It does not extend the actual term of the contract.

Licensee Fred’s employing broker has an exclusive buyer agency agreement with client Gail indicating she will pay 3% of the sales price if she finds the house of her dreams. Does Fred need to disclose this fact to the listing broker?

No – Fred has no legal or ethical obligation to disclose the terms of the agreement between his employing broker and client Gail to anyone, including the listing broker.

If the listing broker offers a commission split to a buyer’s agent, does Fred need to tell his client Gail?

Yes – If the listing broker offers to pay a buyer’s agent a portion of the commission, Fred is obligated to inform client Gail of that fact.

The listing broker offers to pay a buyer’s agent 2% of the 6% brokerage fee. Fred’s buyer agency agreement with Gail promises a 3% commission. If Gail buys a house, what, if anything, will she owe Fred’s employing broker?

1%

TRUE or FALSE: Now, let’s say that Gail pays the entire 3% commission, and Fred’s broker also receives 2% from the listing broker. Fred does not need to inform the listing broker.

True – Fred has no obligation to inform the listing broker of compensation he receives from his buyer client.

In a tenant representation agreement, the broker owes duties to:

the tenant only.

TRUE or FALSE: In an exclusive listing agreement, the property owner is free to engage with several brokerages to find a suitable tenant to lease their property.

False – An exclusive listing agreement gives the brokerage the exclusive right for a specified time to locate a tenant to rent the property. The owner may not list the property with any other brokerage for the duration of the agreement.

A provision in a buyer agency agreement that entitles the broker to a commission if the buyer purchases property introduced by the broker within a certain time after the agreement expires under certain circumstances.

Broker protection clause

An employment contract between a buyer and a broker that grants the broker the right to represent the buyer in the purchase of property and stipulates the terms under which the broker will be compensated.

Buyer agency agreement

An employment contract between a buyer and broker in which the broker earns a commission when the buyer purchases property unless the property was specifically exempted.

Exclusive agency buyer agency agreement

An employment contract between a buyer and a broker that grants only one broker the right to represent the buyer in the purchase of property and entitles the broker to the negotiated fee even if the buyer purchases property through another broker; depending on the language of the contract, the broker may also be entitled to compensation if the buyer finds the property and purchases it directly from the owner.

Exclusive buyer agency agreement

A contract between a property owner and a broker giving the brokerage exclusive rights for a specified period of time to locate a tenant to rent the property. If a tenant rents the property during this time, the broker receives a commission.

Exclusive listing agreement

An agreement between a buyer and any number of brokers where a broker earns a commission only if they introduce the buyer to the property they purchase.

Nonexclusive buyer agency agreement

An uninterrupted series of events leading to the creation of a contract; the party whose efforts result in the creation of a binding contract for sale; the broker whose efforts cause a contract to be executed by both parties is the procuring cause of the sale.

Procuring cause

A written agreement that creates an agency relationship between a broker and a tenant in which the broker promotes the tenant’s best interests by seeking the lease of a rental real estate unit at the price and terms acceptable to the tenant in exchange for a fee or other valuable consideration.

Tenant representation agreement

A buyer signs an exclusive buyer agency agreement but later purchases a property directly from a For Sale By Owner (FSBO). What is MOST accurate?

The buyer owes no commission because no broker was involved

The seller must pay the commission

Commission is only owed if the broker introduced the property

The buyer still owes the broker the negotiated commission

The buyer still owes the broker the negotiated commission

Which situation BEST describes an exclusive agency buyer agency agreement?

The broker earns commission regardless of who finds the property

The buyer can work with multiple brokers simultaneously

The broker earns commission only if they find the property the buyer purchases

The broker is guaranteed commission if the buyer signs a contract

The broker earns commission only if they find the property the buyer purchases

A buyer enters into multiple buyer agency agreements with different brokers. Under which agreement type is this allowed?

Exclusive buyer agency agreement

Nonexclusive (open) buyer agency agreement

Exclusive agency buyer agency agreement

Exclusive listing agreement

Nonexclusive (open) buyer agency agreement

Which statement about compensation is TRUE?

A licensee may receive commission directly from the buyer

Brokers are not required to disclose compensation to anyone

A licensee may only receive compensation from their employing broker

Commission must always be paid by the seller

A licensee may only receive compensation from their employing broker

A broker helps a tenant find a rental property under a tenant representation agreement. Who does the broker owe fiduciary duties to?

Both the tenant and property owner

The tenant only

The property owner only

The listing broker

The tenant only