No Written Agreement: No Intermediary Status

Every few years I feel compelled to write about buyer agency and intermediary status because I continue to get calls from irate buyers and sellers (primarily buyers) who feel they have been abused by a broker or agent attempting to serve as an intermediary in a transaction.

I do not like writing about this topic for the same reason I do not like speaking on the topic: I get a lot of angry letters, e-mails and telephone calls from brokers and agents who do not like the message I am delivering. To those of you who get angry, I remind you that I don’t make the rules; I just interpret them.

Let me get the bad news on the table quickly. If you do not have written authorization from both buyer and seller, you cannot qualify for the protection of intermediary status. Your listing agreement contains a provision which allowing you to serve as an intermediary, if the seller consents. To my knowledge, the only promulgated forms which contain permission from the buyer for you to serve as an intermediary are buyer representation forms. Consequently, if you do not get a buyer representation agreement signed, you do not have written permission from the buyer to serve as an intermediary.

If you do not have the proper documentation to allow the broker to serve as an intermediary, a broker cannot allow the company’s agents to show the company’s listings to prospective buyers without the risk of becoming a dual agent and subjecting agent and broker to liability for breach of fiduciary duties. Let me say that again a little louder “WITHOUT WRITTEN AUTHORIZATION FROM BOTH BUYER AND SELLER TO SERVE AS AN INTERMEDIARY, YOU CANNOT SHOW YOUR COMPANY’S LISTINGS WITHOUT SUBJECTING YOURSELF TO LIABILITY FOR BREACH OF FIDUCIARY DUTIES.”

I know from talking to many of you and speaking at seminars etc, that well over half of you are violating the intermediary rules established to provide protection for you when you are working with both the buyer and seller. Many of you are providing the required disclosure statement to the parties with the belief that by giving the disclosure, you are able to serve as an intermediary. That does not resolve the issue.

You must obtain written consent from both buyer and seller to serve as an intermediary. The reason I hear most often for not getting a buyer representation agreement signed is that they are too long. The agreement can be shortened: I’ve have made them as short as one letter sized page. The problem with the short agreements is they cannot cover all of the issues which need to be covered and leave a broker exposed in some areas. However, if the choice is using a one page agreement or no agreement, by all means use the short one.

If you absolutely refuse to use a buyer representation agreement, consider having your lawyer prepare a “consent to serve as intermediary” form. That will at least give you some protection when you are serving as intermediary. I do not believe there is a promulgated form for this, so you will have to have one prepared.

If you elect to have an intermediary consent form prepared it must list the responsibilities of an intermediary as specified in the statute. The agreement must also contain the right to appoint an agent to “communicate with and give advice to...” a party if the broker intends to allow an agent within the office to consult with and give advice to the buyer and another agent to provide the same service to the seller.

I know many of you do not like the rules in this area. However, I want you to realize that the parties who will be penalized for not getting the proper documentation is you and your broker; not the buyer and not the seller. Okay, enough preaching from me.