October 21st, 2024 at 2:08 pm

Fact Pattern: You are a listing agent for a new listing. You are using our company’s standard-form Addendum to Residential Listing Agreement (ARLA) to get the seller’s authorization to pay 2.5% to the buyer’s broker. But instead of agreeing “to consider paying” 2.5%, as stated in the ARLA form, the seller wants it to just say that the seller “agrees to pay” 2.5%. You make that change on the ARLA form, and you advertise that the “seller will pay 2.5%,” as the seller instructed. You eventually receive an offer. The seller enters into sales contract with the buyer, but the seller only agrees to pay 2% to the buyer’s broker.

Question: Can the buyer or buyer’s agent come after you for the 0.5% difference, based on a claim of false or misleading advertising? Yes or no? 

Answer: Yes. Unfortunately, there isn’t too much we can do to stop someone from attempting to make this type of claim against us. After all, when our ad says something like the home is “great for backyard BBQs,” we know that the buyer may try to use that ad to claim that we supposedly promised that all the BBQ equipment would be included in the sale.

Of course, if such a claim is brought against you, you do have valid defenses, such as the seller’s authorization for you to advertise that “seller will pay 2.5%.” Yet, the wording in the ARLA form, for the seller “to consider paying,” was specifically designed to give the seller the ability to negotiate the compensation for the buyer’s broker, if desired.

As the listing agent, make sure that your seller fully understands the possible consequences before you change the ARLA wording from “seller to consider paying” to “seller to pay.” If the seller nevertheless insists that you advertise “seller to pay 2.5%,” the seller should just stick to paying that 2.5%, regardless of the price and terms proposed by a buyer.

-Thank You to Shannon Mahoney (La Jolla Office) for suggesting this week’s legal tip!

Copyright© 2024 Shared Success Center, LLC (serving HomeServices of America companies). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of October 21, 2024. 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. Written by Stella Ling, Esq.

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