Blog by Andrew Peck

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"Can a seller refuse to pay the buyer’s bona fide agent?"

"Can a seller refuse to pay the buyer’s bona fide agent?"

"I've noticed now more local agents in Vancouver are using what many Fraser Valley agents are doing. They quote the commission payable to the selling agent as follows in the Realtors Remarks:

“Selling commission only payable upon physical introduction to the property otherwise $10”. Or “S.Comm. 3.22%-100/1.15% on balance upon physical introduction.” Or ”Commission paid to realtors who physically introduce the property, otherwise $1,000”. 

Can we do this? It will help stop agents who believe that they can send buyers without warning and letting the listing agent do all the work but then parachute in and try to get paid. This way we will be protected."

I have done some checking with the Real Estate Board about this practice. Here is their answer:

”The Board cannot be involved in the commission structure that is contractually entered into between the member and their client, other than to ensure that it is a global offering and any discount in commission is not targeted to a specific member or group of members. This “two-tiered commission” offering that has grown in popularity over the past several years is not endorsed by the Board in any way, as it is a clear attempt to reinstate threshold rights; the Board cannot interfere in a contract between the seller and the listing company. So as long as the commission offering is properly documented in the listing contract (on page 1 item 5C of the MLS® Listing Contract) and signed by the seller, and further disclosed to all members about the conditions of the commission by putting a notation in the REALTOR® Remarks section the Board will accept the listing. 

If there is any ambiguity in the offering which results in an Arbitration, the Arbitration Panel would have to rule on the ambiguity, using the Board’s Mediation/Arbitration Guidelines as a guideline. To date there have been no Arbitrations at REBGV arising from a “two-tiered” offering.

In the past some Realtors also put the commission available to the buyer’s agent as a nominal sum, and then mentioned in the Realtors remarks that the seller would pay a bonus of x% on the first $100,000 and y% on the balance for a Realtor who physically introduces the property to the buyer. 

So here is really the question you should ask – is it in the best interest of our client, the seller, to refuse to pay the buyer’s bona fide agent? We have a fiduciary duty to act in the best interests of our client at all times.  In this case we are creating limitation that may cause a buyer’s agent to try to steer a buyer away from purchasing a property when they discover they might not get paid. The courts have been clear that the buyer gets to choose to have an agent working in his or her best interest. They may refuse a dual agency situation or refuse to be unrepresented with no agency by dealing directly with the listing agent. So we could suggest the buyer will pay his own agent in this situation. While I believe we will eventually get to buyer’s paying their own agents, today this is simply unrealistic as agents are not demanding a signed buyer agency contract from buyers. Further, even where the buyer has agreed to pay his agent, he will tend to offer less to the seller to make up for the fact that they are paying their own agent.

If another agent is truly an intruding agent into your existing established relationship with a buyer, that is what arbitration is all about – making sure the right person gets paid.

So in summary, Royal Pacific will accept listings which create a limitation as stated in the examples above, however we will remain open to paying a full commission to a cooperating buyer’s agent where that agent is truly the representative of that buyer and not seen as an intruding agent. You always need to ask the question of the buyer, “Are you currently working with another agent or have you been looking with another agent in the past?” If the answer is yes, you should expect to respect that agency relationship if the buyer wishes.  We also require that listings offer to a cooperating broker a fair and reasonable compensation from the total commission – if you are collecting 7% and only offering 1% to other agents, we will not accept the listing as it is clearly not in the best interest of the seller.

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