Buyer representation Q&A

Answers about collecting fees, liability, and fair housing

by Ron Walker   I entered into a buyer representation agreement with a buyer. The buyer inserted a provision that stated he would have no liability to pay my fee. I agreed to look solely to the seller or listing agent for my fee. Later, the buyer used the services of another broker and bought a property listed by a third broker. Do I have any claim against the buyer, second buyer broker, or listing broker?

Not against the buyer. Generally, in order for a fee agreement to be enforceable it must be:

1. signed by the person to be charged with the fee;
2. contain a promise that a definite fee be paid or refer to a fee schedule;
3. state the name of the broker to whom the fee is to be paid; and
4. identify with reasonable certainty the property to be sold.

The last element (describing the property) does not need to be met under a buyer representation agreement. In this case, the agreement expressly provided that the buyer had no obligation to pay. (The TAR buyer representation agreement provides that the buyer will pay the broker’s fee if the seller or listing broker does not.)

Any claim against the other two brokers would depend on some additional unknown facts. For example, did either of the other brokers know that the buyer was bound under a buyer representation agreement with the first broker? Further, did the second broker make reasonable inquiry with the buyer to determine if the buyer was obligated under a prior agreement? Any claims of interference or unethical conduct by the second broker depend on the unknown facts, as does a claim for procuring cause against the listing broker.

I entered into a buyer representation agreement and showed several properties to the buyer. The market area in the agreement was defined as "the Dallas Area." I had no discussion with the buyer as to what "the Dallas Area" specifically meant. Through another broker, the buyer purchased a property in Mesquite that was listed by a third broker. Do I have a claim against the buyer or the other broker?

The answer depends on how an arbitration panel or court would apply the term Dallas Area. The buyer and other broker may argue that the term means the area within the Dallas city limits. The first broker may argue that it means the area within the Dallas county limits or that it means the area in and around the Dallas city limits or Dallas county limits. When multiple interpretations under a contract are reasonable, courts will typically try to ascertain the intent of the parties and apply the interpretation that reflects that intent. If the court cannot ascertain the intent, the court will typically construe provisions against the drafter of the contract. Any claim against the other brokers depends on facts not present in the question. For example, did the other broker know of the prior buyer representation agreement? Did the other broker advise the buyer as to the meaning of the term Dallas Area? The answers to these types of questions will determine whether there is an interference claim or breach of an ethical duty against the second broker. It is prudent for brokers to be specific when defining the market area.

I entered into a buyer representation agreement to represent a buyer. We negotiated the purchase of a property that was not listed with any broker. The buyer agreed to pay my fee directly. While the sale was pending, the buyer representation agreement expired. At closing, the buyer claimed that he did not have to pay my fee because the agreement expired. Do I have a claim against the buyer?

The answer is yes if the TAR buyer representation agreement was used. This agreement provides that the broker’s fee is payable either during the term of the agreement or after it ends (paragraph 11A(b)(2) of the Residential Buyer Representation Agreement).

I entered into a buyer representation agreement using the TAR form. The buyer purchased a lot with an old home on it. The deal closed, and I was paid a fee on the sale of the lot. While the deal was pending, the buyer asked me to start negotiating with custom builders to raze the old home and construct a new home. I orally negotiated terms with a particular builder. The buyer stated that I would be paid a fee for my services. After the closing of the sale of the lot, the builder and buyer signed a construction contract. Neither the builder nor buyer will pay me a fee. Do I have a claim?

The TAR form does not presently address fees for services for negotiating construction of homes. In May 2001, a task force recommended a proposed modification to the buyer representation agreement to address such services. If adopted, the modification will resolve this question. It is important to note that this is a service for which a real estate license is not required, and, therefore, the Statute of Frauds (§26.01, Business and Commerce Code or §20, Real Estate License Act) does not apply. There may be a number of common-law theories on which the broker may be able to assert a claim. The validity of the claim will depend on a thorough review of facts and the ability of proving up the agreement to compensate.

I represented a buyer under a written buyer representation agreement. At a showing, the buyer climbed into the attic and fell through the ceiling. The buyer claims I should have stopped him from going up into the attic and wants me to pay his medical bills. The seller wants me to pay for repairs. Am I liable?

There is no precedent offering a clear answer. Under a general negligence theory, the claimants would have to show that the broker owed a duty to the buyer or seller to stop the buyer from entering the attic. It is safe to say that the buyer was an invitee, since the seller invited prospective purchasers to look around the property. Further, it is likely that many, if not most, purchasers will look and enter into attic spaces. Clearly, contributory negligence would also weigh into a determination of responsibility. Contributory negligence is whether the claimant’s own negligence played a part in causing the injury. While difficult to answer precisely, the claim appears to be tenuous in light of customary practice.

I represented a buyer under a written buyer representation agreement. The buyer is of Asian descent and stated that he wants to live in a subdivision that is at least 60% Asian. Does this violate fair-housing laws?

Under these facts, the buyer, not the broker, is acting discriminatorily. However, the broker should proceed with caution. It is prudent for the broker to explain to the buyer that the broker does not provide services that show or tend to show a preference to a protected class and to ask the buyer to identify the subdivisions he wishes to view based on his own criteria. The broker may point the buyer to sources with demographic information, but it may be best for the broker not to review the demographic information for or with the buyer. Finally, it is prudent for the broker to enter notes on such discussions in the file or transaction log.

Ron Walker is director of legal affairs for TAR.

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