A buyer\u2019s agent reached out to me recently with a situation that is happening in markets across the country \u2014 and most agents\u00a0don\u2019t\u00a0realize they have both the right and the obligation to push back.\u00a0<\/p>\n
Here\u2019s\u00a0the scenario: before our buyer\u2019s agent \u2014\u00a0we\u2019ll\u00a0call her Susan \u2014 could present her offer, the listing agent [we\u2019ll\u00a0call her Betty] informed Susan she\u00a0was required\u00a0to sign a specific compensation agreement, that Betty preferred to use, as a condition of cooperation. Then came\u00a0Betty\u2019s\u00a0second demand: \u201cProduce your buyer agency agreement.<\/a> Show me what you signed with your client.\u201d<\/p>\n When Susan declined, Betty chided Susan, saying she\u00a0hadn\u2019t\u00a0been\u00a0properly trained.<\/p>\n However, what Betty the listing agent did\u00a0isn\u2019t\u00a0just professionally overreaching, it may\u00a0constitute\u00a0a violation of federal antitrust law, the NAR Code of Ethics and in many states, state license law.\u00a0The truth\u00a0is, Betty is the one who\u00a0hadn\u2019t\u00a0been\u00a0properly trained.<\/p>\n Let\u2019s\u00a0take a look\u00a0at the details.<\/p>\n Listing agents do not have authority over the internal documentation practices of a cooperating brokerage<\/a>, period, end of story. This is not a policy preference,\u00a0it\u2019s\u00a0a legal boundary, enforced at the federal level.<\/p>\n Let\u2019s\u00a0start with\u00a0NAR\u2019s own settlement guidance<\/a>, which is explicit:\u00a0\u201cNAR will not create rules that mandate listing agents to set compensation for buyer brokers.\u201d<\/em> The settlement\u2019s two operative requirements are that a written buyer representation agreement must exist before touring homes, and that compensation cannot be advertised on the MLS. Neither provision gives a listing agent authority over which forms a cooperating brokerage uses internally. A listing agreement cannot fill that gap as it governs the seller\u2013listing broker relationship\u00a0only\u00a0and\u00a0cannot impose any kind of documentation obligations on a competing firm that is not a party to it.<\/p>\n But wait,\u00a0there\u2019s\u00a0more. The more serious dimension to our scenario is federal.\u00a015 U.S.C. \u00a7 1 of the Sherman Antitrust Act<\/a>\u00a0prohibits every contract or arrangement that would act in restraint of trade. A specific application of this is the\u00a0tying arrangement<\/a>\u00a0\u2014 conditioning access to one product or service on agreement to use a different, specific product or service. When a listing agent says, \u201cyou must sign my preferred form or you cannot work this transaction,\u201d she is conditioning access to that listing on a competing brokerage\u2019s compliance with her chosen documentation.\u00a0<\/p>\n The\u00a0FTC describes tying arrangements<\/a>\u00a0as among those most harmful to fair competition. Each real estate company has the legal right to conduct its own business independently. One brokerage cannot dictate the internal practices of another.\u00a0That\u00a0principle has federal\u00a0teeth\u00a0and, in our scenario, Betty would land in some\u00a0very hot\u00a0water with her attempts to impose her own forms on Susan.<\/p>\n Then, there is the direct harm to Betty\u2019s own seller. Every form barrier placed in front of a cooperating agent is a barrier between that seller and a qualified buyer. If\u00a0Betty\u2019s\u00a0seller understood that their agent was inventing requirements \u2014 with no basis in law or policy \u2014 that made their home harder to sell\u00a0to Susan\u2019s\u00a0buyers, they would rightly question whether Betty was honoring her duty of loyalty. The answer, under any reasonable reading of a listing agent\u2019s obligations, is an emphatic no.<\/p>\n When Betty demanded that a buyer\u2019s agent produce her buyer representation agreement, she is not asking for a routine transaction document. She is asking for a confidential fiduciary agreement between Susan, a licensed professional, and the person they\u00a0represent. That document is not for their eyes.<\/p>\n In every state, a buyer\u2019s agent\u00a0operates\u00a0in a fiduciary relationship with their client.\u00a0NAR\u2019s own framework<\/a>\u00a0identifies\u00a0confidentiality as a core fiduciary duty \u2014 the obligation to protect any information that could weaken the client\u2019s bargaining position. A buyer representation agreement<\/a>\u00a0contains\u00a0exactly that: the scope of representation, the compensation terms the buyer agreed to, and the fee structure governing the relationship. Handing Susan\u2019s agreement with her buyer to the opposing party\u2019s\u00a0agent without the buyer\u2019s knowledge and consent is a potential breach of fiduciary duty and, in many states, a violation of license law.<\/p>\n Consider the legal\u00a0parallel for\u00a0a minute. A plaintiff\u2019s attorney does not demand the defense attorney\u2019s engagement letter \u2014 the document defining the client relationship, scope of services, and fees. That document is confidential and protected. Demanding it would violate bar rules governing professional conduct, and no court would entertain the request in a million years.<\/p>\n The buyer\u2019s agency agreement is the functional equivalent of that engagement letter and Betty has no right to demand\u00a0it. If\u00a0Susan had produced it under pressure, she may be exposing herself to a license complaint for breaching her statutory duty of confidentiality to her own client. Betty created a trap: comply and violate your duty to your\u00a0buyer, or\u00a0refuse and face obstruction on the transaction. That is coercion dressed as policy.<\/p>\n Article 2\u00a0<\/strong>of the\u00a0NAR Code of Ethics<\/a>\u00a0requires Realtors to avoid misrepresentation of pertinent facts relating to the transaction. The terms governing cooperation \u2014 what forms are\u00a0required, what the settlement mandates, what a listing contract can\u00a0obligate\u00a0\u2014 are pertinent transaction facts. Stating to a cooperating agent that she must provide a specific form she is not\u00a0obligated\u00a0to provide is a potential Article 2 violation.<\/p>\n Article 12\u00a0<\/strong>requires honesty and truthfulness in all real estate communications. A listing agent who misrepresents\u00a0NAR settlement requirements<\/a>\u00a0to justify demands she has no authority to make is not presenting a true picture of the transaction. That is an Article 12 concern.<\/p>\n Article 3\u00a0<\/strong>requires cooperation with other brokers. Placing form-use conditions or document-production demands on that cooperation \u2014 with no basis in law or policy \u2014 runs contrary to Article 3\u2019s mandate. By making the listing harder for cooperating agents to access, she may also be breaching her duty of loyalty to her own seller client under Article 1.<\/p>\n What happened to this buyer\u2019s agent is not isolated. Post-settlement confusion has created an opening for some agents to assert authority they simply do not have \u2014 and agents who\u00a0don\u2019t\u00a0know their rights [or the laws] are the ones who pay the price. As\u00a0NAR has stated clearly<\/a>, \u201ccompensation continues to be negotiable and should always be negotiated between MLS Participants and the buyers with whom they work.\u201d No listing agent gets a veto over how that negotiation is documented.<\/p>\n A listing agent\u2019s authority runs from her seller to the market. It does not run sideways into another brokerage\u2019s office, dictate which forms a cooperating agent must use, or extend to demanding a confidential fiduciary agreement between another agent and their client.<\/p>\n Your buyer representation agreement belongs to you and your buyer. One company\u2019s preference does not supersede another company\u2019s legal right to run its own business. When a listing agent forgets\u00a0that,\u00a0she is not protecting her seller \u2014 she is exposing herself.<\/p>\n Darryl Davis, CSP, has spoken to, trained, and coached more than 600,000 real estate professionals around the globe. He is a bestselling author for McGraw-Hill Publishing, and his book,\u00a0How to Become a Power Agent in Real Estate<\/a>, tops Amazon\u2019s charts for most sold book to real estate agents.<\/em><\/p>\n This column does not necessarily reflect the opinion of HousingWire\u2019s editorial department and its owners.<\/em><\/p>\nOne brokerage cannot dictate forms to another and federal law agrees<\/h2>\n
Demanding the buyer agency agreement is a separate violation entirely<\/h2>\n
The Code of Ethics issues are serious<\/h2>\n
The larger issue<\/h2>\n