Unit 5 Flashcards
Can a buyer’s broker participate in the MLS and receive a share of the listing broker’s commission?
Yes, the MLS rules in most areas specifically allow the splitting of fees with a buyer’s broker provided all parties expressly consent. The buyer’s broker, however, must make his or her true position clearly known to all interested parties in advance.
Why would a listing broker reduce a portion of the sales commission so the seller could credit that portion to the buyer for payment of the buyer’s broker’s commission?
This method of compensation to a buyer’s agent would most often occur at the request of a buyer’s agent who wishes to clearly delineate the fact that he or she represents only the buyer. A more common arrangement is for a listing broker to simply split the fee in the same way a fee would be split with a subagent.
How might a buyer’s broker handle conflicts of interest involving in-house sales?
Some buyer’s brokers use the LIFO approach and withdraw from the last agency, but only to the particular transaction in which the conflict exists. Some brokers insist upon one of the principals obtaining separate representation. Other brokers obtain intermediary consents (not single practitioners, however). Still others show their prospective buyers all appropriate in-house listings before establishing a client relationship. There is no perfect answer to this concern except to be aware of the problem and to recognize it.
Name at least four important elements of a well-drafted buyer’s broker’s representation agreement.
Exclusive; clarification of fees, termination date; fee; conflicts of interest; nature of the assignment.
Name at least five important points for a buyer’s broker to cover in a purchase contract.
Earnest money deposit; contingencies; commissions to the selling broker; property condition; title; seller financing
Learning Objective: Describe the rights and obligations of each party in a sample buyer representation agreement.
Answer:
The broker is obligated to provide services such as assisting in property searches, conducting market analysis, structuring offers, and negotiating on behalf of the buyer. The buyer is obligated to work exclusively with the broker, refer all inquiries about properties to their broker, and adhere to the terms specified in the agreement. These clear roles prevent misunderstandings and ensure compliance with the agreement.
Learning Objective: Describe the benefits of the buyer-agency relationship to the buyer/tenant and the agent.
Answer:
For buyers, benefits include tailored representation, access to a wider property market, stronger negotiation strategies, and fiduciary advocacy. Agents benefit from increased client loyalty, a defined compensation structure, and reduced conflicts of interest, enhancing the overall transaction experience.
Learning Objective: Describe the factors to consider in representing a buyer and how the relationship is created.
Answer:
Factors include assessing the buyer’s financial capability, motivation, and goals, as well as potential conflicts of interest with other clients. The relationship can be created through written agreements, oral agreements, or by implication. Written agreements are preferred for clarity and legal enforceability.
Learning Objective: Describe the importance of written compensation agreements and identify the various fee arrangements involved in buyer agency.
Answer:
Written compensation agreements are crucial for enforcing payment terms and avoiding disputes. Common fee arrangements include retainer fees, seller-paid fees, commission splits, buyer-paid fees, hourly rates, and flat fees. These agreements outline obligations clearly, aligning with TRELA regulations.
Learning Objective: List the disclosure obligations of a buyer’s broker.
Answer:
Disclosure obligations include providing the Information About Brokerage Services (IABS) notice, explaining the agency relationship, disclosing any potential conflicts of interest, compensation arrangements, and ensuring all relevant property conditions and details are communicated transparently.
Key Point Question: Why is the decision to represent a buyer significant for a real estate license holder?
Answer:
Whether to represent a buyer is an important decision because the agent then owes the full range of fiduciary responsibilities. The license holder may want to be selective and not represent every buyer who walks in the front door.
Key Point Question: Does buyer brokerage mean that a broker exclusively represents buyers?
Answer:
Buyer brokerage does not mean that the broker is in the business of representing buyers only. Most buyers’ agents regard buyer agency as one of the options available to them in single-agency or nonexclusive-agency practices.
Key Point Question: Why might some buyers choose not to have representation?
Answer:
Not every buyer wants or needs representation. Some prefer to represent themselves, especially those not wanting to risk a missed opportunity in a fast-moving seller’s market.
Key Point Question: Why are written buyer representation agreements preferred over oral ones?
Answer:
Written buyer representation agreements are preferable to oral ones because they provide clarity, enforceability, and legal protection for both parties.
Key Point Question: What precautions should brokers take when showing in-house listings to buyers?
Answer:
Brokers must take care to avoid unintentional and unauthorized representation of more than one party. If such representation is to be authorized, the broker must make full disclosure of the potential conflicts of interest to both buyer and seller.
