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Legal IssuesExclusive: Agency vs. right to sell
If you have an “exclusive right to sell,” are you an “exclusive agent?”
According to RELRA, an agency relationship is one in which “the broker or licensees in the employ of the broker act as fiduciaries for a consumer of real estate services by the express authority of the consumer or real estate services.” In other words, the seller hires the broker to list the property for sale or lease.
The exclusivity of the relationship is defined by the agreement between seller and broker. In fact, RELRA requires the broker and consumer to reduce their agreement to writing when the consumer is committed to paying the broker a fee.Â
The State Real Estate Commission (SREC) has established rules and regulations that further define both brokers’ and agents’ responsibilities. According to the SREC, an exclusive listing agreement may be either an exclusive agency relationship between the seller and the broker or it may be an exclusive right-to-sell/right-to-lease relationship. When a broker enters an exclusive right-to-sell/lease agreement with a seller, the contract must contain a statement in bold-face type that the broker earns a commission regardless of who sells/leases the property. Under this type of relationship, the seller commits to pay the broker a commission even if the seller finds the buyer/tenant without any help at all from the broker. (The PAR Exclusive Right to Rent Real Property form and the PAR Exclusive Right to Sell Real Estate form both meet this requirement with paragraph 7, Payment of Broker’s Fee.)
An exclusive agency relationship is different. As an exclusive agent for the seller, the broker is obligated to be loyal to the seller by acting consistently with the seller’s best interests and to make a continuous good faith effort to find a buyer/tenant for the property. In turn, when the broker succeeds by finding a buyer or tenant alone or in cooperation with a selling agent, the broker gets paid. As an exclusive agent, the broker is the only real estate broker who can list the property for sale – hence the term “exclusive.” The broker is not going to get paid, however, if the seller finds his own buyer or his own tenant.
Given a choice, most sellers would prefer an exclusive agency relationship that gives them the opportunity to avoid a commission by selling the property themselves. For obvious reasons, you may be hesitant to enter into such a relationship. Your expenses mount the moment you take that listing and if the seller can avoid a commission altogether, you will be out your advertising and marketing fees, MLS charges and your time. If the seller has interested buyers, it may be that you are willing to make exceptions to the Exclusive Right to Sell Agreement that will provide for a very limited fee in the event one of the seller’s prospects buys the property within a limited time. Perhaps the fee will increase as time passes to the point where no break is given the seller when one of his prospects buys after a substantial time has passed from the date of listing. These are fair arrangements that enable you to recoup the expenses you incur in marketing the seller’s property.
What type of relationship do you want to have with a seller? It may be different from time to time, so unless you understand the distinction you can’t tailor your services to the consumer’s needs. PAR standard forms can be very helpful but they are not always the right tool for the job. As always, when drafting contracts it is best practice to consult with an experienced real estate attorney.
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Brett Woodburn, Esq. is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline. |
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When I list homes for builders, a lot of times I will do the exclusive right to sell but will offer a discount if the builder finds the buyer as long as they use our brokerage for the representation of the buyer as well.