Why this is important: The final episode of our new series dramatizes the representation dilemma created for the seller when the retainer period under a new representation agreement overlaps a safety clause period in an expired representation agreement with a prior broker.
The previous episode answers the question of what happens when a registered buyer purchases property during the safety period for less than the asking price sought under the expired representation.
Navigating a representation dilemma
Consider a seller of a property who entered into an exclusive representation agreement with a seller broker. [See RPI Form 102]
Despite the diligent efforts of the broker and their agent, the representation agreement expires without a sale of the property and without being renewed.
The broker registers the identity of prospective buyers the broker and their agent had direct or indirect contact with during the retainer period with the seller.
However, the seller still intends to sell their property.
Thus, the seller considers retaining a different broker and agent to market the property to locate a ready, willing and able buyer.
The seller contacts an agent employed by a different broker who had previously solicited the seller to employ their broker’s office to sell the property.
In their discussion about retaining the agent’s broker, the seller references the expired representation by the first broker and their registration of prospective buyers. [See RPI Form 122]
The agent asks for details about the safety clause situation in the prior representation agreement.
Editor’s note – An agent is charged with knowing about the seller’s prior representation by another broker. A property’s sales history is readily available via the MLS, and is reviewed in preparation for an interview with a seller to solicit employment.
The agent’s concern is the representation dilemma for the seller created by:
- the retainer period under a new representation agreement with the agent’s broker; which
- overlaps the safety clause period in an expired prior representation agreement with the first broker.
Broker referral fee agreement
Continuing our previous example, the agent confirms the seller understands they are exposed to multiple fees when a buyer registered by the original broker acquires an interest in the seller’s property. One of these buyers may be the best buyer for the property.
In anticipation of contact with these registered buyers, the agent, or their broker, needs to negotiate a fee-sharing agreement with the first broker regarding prospective buyers the broker registered. [See RPI Form 114]
This fee-sharing approach is one method of properly handling the payment of a fee when the seller works with multiple brokers.
However, it’s not likely the best option for these transaction participants.
The best way the seller avoids dual liability exposure is to renew the representation agreement with the first broker, rather than employing a different broker. [See RPI Form 103.1A]
Think of it this way: a renewal is an advantage held by the first broker and their agents on expiration of the representation agreement.
A broker’s renewal of a representation agreement preserves both their and their agents’ efforts spent advising and educating the seller-client, compiling information on the property and marketing the property.
Since the renewal of a representation agreement sets a new date for the retainer period to expire, the renewal resets the need to register prospective buyers until the new retainer period expires.
Further, since the property did not sell during the initial retainer period, the broker and agent ought to review alternative marketing plans or fee arrangements with the seller-client to barter for a renewal of the representation.
And of course, this time, find a ready, willing and able buyer.
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