Does referring buyer to builder and accepting fee establish agency?

Question: Is a broker who refers a buyer to a builder and paid a referral fee considered the buyer’s agent?

Answer: If the broker in your scenario receives a referral fee for the one service of introducing the buyer to the builder, he is not considered a fiduciary of the buyer or the builder. However, in transactions of this nature, it is rarely so cut and dried. The law errs on the side of caution, i.e., if there were any other negotiations, counseling or other dealings which even slightly resemble agency duties, the broker will be presumed to owe a fiduciary duty to the buyer.

Consider that if it were simply a referral of the buyer to a builder, the buyer is negotiating the purchase of a property without the benefit of a knowledgeable real estate professional. It may be more beneficial for all if the broker simply offered to represent the buyer and collect fees for his performing as an agent of the buyer.

For a more in-depth review of this topic, stay tuned for our future article on the duties (or non-duties) of a referring broker.