Possible Perils of Identifying Buyer on Single Party Agreement

November 26th, 2018 at 10:55 am

Question: I was the listing agent for Seller Sally. After my listing expired, a buyer’s agent who represented Buyer Bob asked me to help present Bob’s offer to Sally. Bob was not a prospective buyer under the safe harbor clause of my listing agreement. I contacted Sally who said she would think about selling. So before presenting Bob’s offer to Sally, I submitted a Single Party Compensation Agreement (SP) for Sally to sign to make sure that both the buyer’s agent and I would get paid if Bob bought the property. As it turned out, Sally refused to sign the SP. She not only immediately listed the property with another brokerage, but she also sold the property to Bob. I know I am not entitled to any compensation because I do not have a signed commission agreement, but how do I make sure this doesn’t happen to me again in the future?

Answer: This is a very unfortunate situation. As background, the SP usually works fine as an agreement obligating a seller to pay a broker commission if a specific buyer purchases the seller’s property. However, at times, completing the SP form can be tricky. You definitely want the seller to sign the SP before you present the buyer’s offer. Yet, under certain circumstances, you may not necessarily want to reveal the buyer’s identity in the SP. If, for example, the buyer identified in the SP is someone who the seller is acquainted with (like a friend, neighbor, or celebrity), or someone the seller can otherwise contact, the seller may decide not to sign your SP, and just sell directly to the buyer you identified without your involvement.

One suggestion is, instead of identifying the buyer’s name in the SP, insert a detailed description for “Buyer,” such as: “a buyer whose offer will be presented by Broker to Seller within 24 hours after Seller executes this Agreement.” Another possibility would be to insert as “Buyer” something like: “the buyer whose offer is in the yellow envelope marked ‘Sealed Offer for Sally’s Property.’”

-Thank you to Vahn Alexander (Brentwood 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 November 26, 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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