Unrepresented Buyer or Tenant

October 14th, 2019 at 11:45 am

Background: Last week’s Legal Tip addressed a listing agent’s compensation when the buyer or tenant is not represented by any agent. Let’s say, for example, a listing agent under a C.A.R. listing agreement is entitled to get a 6% commission to be split 50-50 with a buyer’s agent or tenant’s agent. However, as it turns out, the buyer or tenant does not have nor want any agent representation. In that situation, the listing agent would not be obligated to represent the buyer or tenant, and yet still be entitled to receive the entire 6% commission, because that is what the contract says. Here are some follow-up questions:

Question #1: Does it make a difference if the buyer or tenant is a real estate licensee? 

Answer #1: Possibly so, if the buyer or tenant is a real estate licensee and a member of the MLS or reciprocal MLS where the listing has been submitted. In that case, the agent’s broker may have a claim for compensation under the MLS’s procuring cause rules. Before proceeding with the transaction, however, the listing agent can ask the buyer or tenant to provide documentation (e.g. a C.A.R. Cooperating Broker Compensation Agreement) signed by that broker, stating that they will not claim any compensation because their agent is buying or leasing the property on their own.

Question #2: If the buyer or tenant is not a real estate agent, can the listing agent nevertheless pay a commission to the unlicensed person?

Answer #2: No. A real estate commission can only be paid to a real estate broker. However, let’s say that the buyer or tenant wants the 3% as a credit. That money belongs to the listing agent. Oftentimes, however, the seller or landlord will try to convince the listing agent to go ahead and give that money as a credit to the buyer or tenant to help put the deal together. That’s okay to do if that’s what the listing agent wants to do.

-Thank you to Clara Eisenman (Tustin Office Manager) for suggesting this week’s legal tip.

Copyright© 2019 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 October 14, 2019. 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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