Can Your Agent Switch Sides and Act for the Buyer?
The quick answer is “no”.
The problem is that this “impression” was provided recently in a newspaper column.
I’m sure that there will soon be a published correction, retraction or clarification. But, sometimes you see the original article and miss the follow-up. So here it is.
The following question was posed:
“ I’m selling my home and my salesperson has offered to lower their commission if the buyer is also represented by them”.
Answer (in part)
“If one client does not provide written consent, the brokerage must release one of the clients. It’s up to the brokerage to decide which client to keep. If they decide to release you, they will often provide you with a referral to another brokerage.”
Open House Scenario
Let’s keep matters simple. Bob lists his house through Mary of ABC Brokerage. Mary decides to host an open house and Bill arrives and he expresses an interest in the house.
Mary likes Bill and offers to represent him in his search for a suitable house in the area. Naturally, this includes Bob’s house.
However, for the sake of this discussion, let’s keep focussed on Bob’s house. Mary says she will lower her commission from 5% to 4.5% if she were to act for Bill in the purchase.
Now, Bob gets to say “no”, I will not agree to multiple representation. I don’t want my agent acting for the buyer. Mary told me she was a great negotiator and that was her expertise. If I agree to permit Mary to act for Bill she will be treating him as her client. Even though there are restrictions on what Mary can and cannot do, now she’s a messenger or a mediator and now longer a “negotiator”, and that's what I bargained for when I signed the listing.
When a brokerage has two clients, for example a seller and a buyer, they have signed a Listing Agreement and a Buyer Representation Agreement respectively. This is “multiple representation” and both parties are principals and the brokerage is the agent. The laws of agency apply.
These laws go back thousands of years and were perhaps first recorded in history in the Code of Hammurabi in 1772 BC, but, at that time the rules had already been in place for years, perhaps even thousands of years.
There are some basic legal principles which apply. In an agency appointment such as this, there are certain fiduciary duties and obligations owed by the agent to the principal, namely:
Obedience, confidentiality and loyalty would preclude Mary from having any kind of choice here.
The impression given in the suggested answer is that Mary could choose Bill over Bob, and that she might refer Bob to another brokerage.
Sorry, that’s just not the case! That would constitute a breach of the fiduciary duties. The decision on this point rests with Bob the principal in this agency relationship and not Mary.
Now, if on the other hand, Mary seemed so close to Bill that Bob became rather nervous, this might actually give rise to Bob’s right to terminate the listing. However, that wasn’t the question under discussion.
If a property is listed with a brokerage, the brokerage cannot switch sides and suddenly start acting for the buyer.
Brian Madigan LL.B., Broker