August 6th, 2018 at 5:01 am

Question: I have a client who is considering the purchase of a brand-new home in a new development. If I register my buyer’s name, some builders will pay me as a buyer’s agent, whereas others will pay me as a referral agent. I was told that if I’m submitting an offer on a C.A.R. purchase agreement, then I am the buyer’s agent, but if the builder writes up the offer, then I am a referral agent. Is that correct? 

Answer: No. An agency relationship with a client is generally created by agreement, either expressed (verbal or written) or implied by the conduct of the parties. The most obvious way to create an agency relationship is, as you mentioned, using the Agency Confirmation in paragraph 2 of the C.A.R. purchase agreement. However, you can also create an agency relationship in other ways. For example, a client can simply ask you to be his or her agent, and you agree.

Many real estate agents don’t realize that they can create an agency relationship without anything in writing. It’s a common misunderstanding because the law requires commission agreements, although not agency agreements, to be in writing to be legally enforceable.

Because clients have a tendency to claim you are their agent when something bad happens and they want to hold you responsible as a fiduciary, you must be very careful in this type of situation. Regardless of whether the builder labels you as the “buyer’s agent” or “referral agent,” clarify directly with your client in writing what your role in the transaction will be, and conduct yourself accordingly.

-Thank you to Nancy Maranan (La Jolla Prospect Office) for suggesting this week’s legal tip.

Copyright© 2018 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of August 6, 2018. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.

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