Could a buyer, independently represented by their own agent (via express agreement) who desires the explicit assurance that they will not be held liable for the service rendered by their buyers agent and therefore gives written instructions their buyers agent to insert a clause in the buyer’s offer, permitting the buyer to withhold the co-op fee offered by the listing broker from the balance of funds due on completion ?

If the listing broker is opposed to such an arrangement, should they ask themselves, if they are acting in the best interest of their principal?

Withholding the Fee doesn't mean that it stays with the Seller's Proceeds.

It just doesn't get dispensed by the Listing Agent to the Buyer's Agent

the buyer himself cannot withhold a co-op fee, as an unlicensed buyer cannot legally receive a commission. commissions are paid between brokers, and per MLS co-op agreements. the buyer's agent should refuse to include such a stipulation in the purchase offer, as it would be unlawful, and notify the buyer as such. the listing broker would be obligated to pay the co-op commission per any prior agreements. agreements between buyer and buyer's agent are separate from a purchase offer. the brokers/agents are NOT parties to the transaction itself.

If the listing broker is opposed to such an arrangement, should they ask themselves, if they are acting in the best interest of their principal?


yes, a broker should ALWAYS prioritize the best interests of the client, regardless of the broker's attitude.

If a buyer can hold-back funds for a variety of reasons, such as pending verification of a full tank of heating oil for one, then why couldn’t the buyer hold-back a percentage of the gross proceeds of a transaction on completion and payable directly to the buyers agent ?

the listing agent is obligated to pay the buyers agent through the mls rules on the completition of the transaction.

how could the listing agent be sure the buyers agent won't come back after the transaction looking for the commission offered in the mls?

because the buyer is unlicensed, and not legally able to negotiate commissions between brokers. further, the buyer is not the payer of the commission, the seller is. such a specification in the purchase offer would be invalid.

To the best of my knowledge a buyer is not prohibited in law or governed by any rule or regulation of organized real estate, and that it is perfectly legal for a buyer to request the insertion any lawful clause in their offer.

Q: Does the buyer’s agent have a legal duty to follow their principal’s lawful instructions, or not ?

Q: Do agents have a undisclosed conflict of interest between the dictates of their board and/or association and their fiduciary duty to their principal ?

In the event, the listing agent declines to accept or present the buyer’s offer, the buyers lawyer may contact the seller directly and present the buyers offer and most likely negotiate an acceptable agreement and the seller could decline to pay the listing broker for a breach of their fiduciary duty.

Q: Does the buyer’s agent have a legal duty to follow their principal’s lawful instructions, or not ?

of course. the question in this case is the legality or validity of the provision the buyer is seeking to include in the offer. it clearly conflicts with prior contractual agreements between the brokers, which the buyer has no standing to modify or challenge.



Q: Do agents have a undisclosed conflict of interest between the dictates of their board and/or association and their fiduciary duty to their principal ?

those conflicts sometimes do arise. the broker/agent's legal duty is to the principal, NOT an association such as NAR its state affiliates.

If there were some unfinished things (like the heating oil example) wouldn't this be withheld from the seller's funds and held in escrow awaiting proof of delivery?

A buyer "who desires the explicit assurance that they will not be held liable for the service rendered by their buyers agent and therefore gives written instructions their buyers agent to insert a clause in the buyer’s offer, permitting the buyer to withhold the co-op fee offered by the listing broker from the balance of funds due on completion ?". What explicit assurance do they want? What would a buyer do that would hold them liable in a real estate transaction (except refuse to close, which would not generate a commission anyway)?

I could see it happening with an Exclusive Buyer's Agent that is being paid directly by a buyer (don't see much of that anymore) but the funds of the transaction become the seller's once the docs are signed and then the closing agent pays out everything from the seller's funds.

In the event, the listing agent declines to accept or present the buyer’s offer, the buyers lawyer may contact the seller directly and present the buyers offer and most likely negotiate an acceptable agreement and the seller could decline to pay the listing broker for a breach of their fiduciary duty.


I think you're trying to combine several separate issues.

only the seller can accept or decline the offer. the listing broker generally does not have that authority under a listing, which is a (limited) agency agreement. the buyer may consult a lawyer, but in the jurisdictions I am familiar with, a lawyer may not act in a licensed broker/agent's full capacity, unless licensed as such. the buyer's agent is still involved and representing the buyer, so why did you put a lawyer in the buyer's agents place?

holy Jesus, Shana is "in the zone" and kickin a** this morning. don't mess with the big S.

Locally, there are no Escrow Companies and it’s the lawyers acting on behalf of their respective clients that process and finalize the transaction.

It’s the buyer’s lawyers who holds all funds in trust pending completion of the transaction, further the lawyers are compelled to follow all their principal’s lawful instructions.

The buyer’s lawyer does not disburse any funds without the express instructions of their principal.

The buyer’s lawyer with respect to a 24 or 48 hour Hold-back regarding heating oil, would not disburse funds until so instructed by their client.

Although a lot of lawyers do hold brokers licences, the majority do not, but locally they are involved with searching and conveying title and the preparation, review and/or amendments of all material and relevant documents and are not required to hold a real estate licence where it is incidental their retainer.

Hypothetically, what might have happen in the past was where the listing broker declines to present the buyers offer, and the buyer complains to their lawyer and then its the buyer’s lawyer who request the name of the seller’s lawyer in order that they may fax their clients offer to the sellers lawyer for review and discussion.

This is not to say that one size fits all, and it is recognized that different jurisdictions may have different rules and regulations to abide by.

IMPORTANT NOTICE: This information is provided as basic educational information by the author and is not a substitute for the advice of an expert and/or the advice of a Lawyer. There is NO representation as to legality, accuracy, correctness of the herein information and the reader is strongly urged to consult a lawyer in the relevant jurisdiction to ensure accuracy before acting on this information.

If you are saying by 'independently' represented by buyer's agent - I take it, in this context, that you mean HE is paying the buyer's agent a fee.

In VA, if buyer's agent is getting paid by buyer and seller, then both parties must be made aware of that fact in writing.

Regardless, in VA, any agent who has a client has fidicuary duties - regardless of any payment or NO payment.

If dude doesn't want to be held 'liable' for anything buyer's agent does, then don't use ANY representation.

This raises the question of......

Assuming, that the proper acknowledgments, authority, and directions were in place, what then would prohibit the listing broker from arranging for the buyer’s agent to be paid the agreed upon co-op fee, directly from the balance due on completion ?

I would have to check it out to be sure in saying this, but I think in VA, one of the commissions must be relinquished. If the buyer feels he'll only get real representation by paying for his own agent, then I believe his agent would have to relinquish the coop commission. Seller's agent will get to keep it all. (I want to be the Seller's agent in this scenario.)

But, the real question is, the buyer is saying they don't want to take on any liability that the buyer's agent may bring to him (how, in this (made-up?) scenario he thinks payment decides liability, I'll never know). I don't see this happening at all unless there's something that a r.e.board or court would say the agent "should have known" if the seller or whoever filed a legal complaint against the buyer. That "shown have known" is soo vague - that's what's dangerous to us in this profession.

For Clarification

Locally, our "Buyer Representation Agreement" in addition to the agreed compensation, it also contains the following:


Therefore, in a instance where a dispute may have arisen between the seller and the listing broker and the seller refuses to pay the listing broker and the listing broker's position is that the co-op fee is contingent upon them receiving payment and that in the event they do not get paid then there are no funds available to pay the co-op fee.

Therefore, pursuant to the Buyer's Representation Agreement, the buyer is liable for the Buyer's agents compensation, as agreed therein.

A knowledgable buyer would prefer to avoid that risk and therefore seeks to discharge this liability out of the balance of funds due on closing.

okay, that was an important clarification.

in this case, the question will be how the escrow holder will handle the seller's refusal to pay the commission to listing broker, if it were to get to that point, which is unlikely. the escrow holder may need to file an interpleader action with the court in order to resolve the dispute. the language of any commission and co-op agreements will determine if a breach has occured. listing broker should definitely advise his seller client to refuse such a stipulation by buyer, as this would presumably obligate the seller to erroneously pay a commission to buyer's broker inside the transaction, that only the buyer is liable for.

another question is whether the buyer's broker would accept that provision in a buyer's broker representation agreement, which is where it belongs. It is not a standard provision, as it would put the buyer's broker in a precarious position. this is a negotiation between buyer and buyer's broker, not buyer and seller. it cannot be negotiated in the buyer-seller transaction itself, as broker compensation is a separate issue, and brokers are NOT parties to the transaction.

If buyer's broker gets stiffed, he would need to seek damages against the buyer via the courts, outside of the transaction. escrow holders are NOT courts, and they cannot favor or advocate for either buyer or seller during the course of an escrow.

shana

Hopefully, I will be able to further clarify the issues you have skillfully raised, in relation to the hypothetical subject matter .

Escrow Holder - locally, it is primarily the buyer’s lawyer who holds the buyer’s funds in trust pending the completion of the transaction and pursuant to their clients (lawful) instructions.

Duty
It is the fiduciary duty of every agent working in the best interest of their principal, to endeavour to reduce and/or eliminate any potential risk to their principal and with litigation being one of those risks.

In the Event of Litigation -

1. Buyer’s agent could possibly sue their buyer for payment and breach of contract based of the Buyer Representation Agreement.

2. Buyer could possibly sue the seller and seller’s agent alleging among other things, misrepresentation and damages together with their legal costs.

3. Seller could possibly sue their agent alleging a breach of their fiduciary duty, together with the damages they have sustained as a result of the buyer's lawsuit.

Buyer’s Broker & Contractual Provision

The contractual term in relation to the buyer’s agent being “paid out of the balance of funds due on closing,” would not be in the Buyer Representation Agreement, but inserted in the buyer’s offer of Agreement of Purchase and Sale at the express and lawful request of the buyer.

Seller’s Viewpoint

From the seller’s point of view, there is no insurmountable problem, as their agent has offered, lets say 2.5 % on the MLS System to any selling broker or buyer’s agent, and therefore it would make little difference, if any, to the seller's net proceeds on closing.

Records would clearly indicate that the buyers agent had been paid and would only require the seller and listing broker to agree. Locally we now have a standard form, that covers such issues and which is signed by all parties, agents and principals.

IMPORTANT NOTICE: This information is provided as basic educational information by the author and is not a substitute for the advice of an expert and/or the advice of a Lawyer. There is NO representation as to legality, accuracy, correctness of the herein information and the reader is strongly urged to consult a lawyer in the relevant jurisdiction to ensure accuracy before acting on this information.