Chapter 26
Showing Another Listing
INTRODUCTION
This chapter presents general information and appropriate procedures for licensees to follow when showing another firm’s listed properties, either when a licensee wants to show a property listed by another firm, or when a licensee receives a request from a licensee of another firm to show a property that his or her firm has listed. Each of these situations can involve an agent‑subagent relationship, a buyer’s agency, or a transaction broker relationship.
A LISTING BROKER’S RIGHTS IN COOPERATING WITH OTHER BROKERS
The listing broker has the right to cooperate with other brokers by allowing licensees from other firms to assist in selling a listed property, by sharing commissions with buyers’ brokers or transaction brokers, or by appointing subagents. Conversely, the listing broker has the right to refuse to cooperate in sharing commissions or in appointing subagents. The seller can eliminate this right by specifically stating in the listing agreement that the listing broker must cooperate and use the services of other real estate firms. If the listing broker is a member of a trade organization, it may be a violation of that organization’s code of ethics if the broker refuses to cooperate where it is clearly in the best interest of the seller to do so. The Commission has no authority to require a broker to cooperate with another broker. However, a listing broker must present to the seller any offer on the property brought by a licensee from another firm.
PROCEDURES FOR A LICENSEE TO FOLLOW TO OBTAIN PERMISSION TO SHOW ANOTHER COMPANY’S LISTING
Before attempting to show a property listed by another firm, a licensee should contact the listing company. Brokers who are members of multiple listing services may think this contact is not necessary when selling a property listed with another company in the same service. Nevertheless, the initial contact has several purposes.
| (a) | First, it provides the opportunity for the broker to obtain authority to cooperate in the sale of the property, and to agree upon the selling broker’s legal status either as a subagent of the listing broker, a buyer’s agent, or a transaction broker. If the selling broker is acting as the buyer’s agent, this notice allows both licensees to act in their respective client’s best interest by keeping their bargaining positions confidential. However, the listing sales associate must inform all cooperating licensees about any hidden defects in the property that may affect its value. | |
| (b) | Second, the initial contact allows the agent to obtain a clear understanding of the total amount of commission the seller has agreed to pay and any arrangement for sharing the commission the listing broker is willing to consider. For instance, the buyer’s agreement with his or her agent might require the agent to negotiate to have the seller pay part or all of the buyer agent’s fee. On the other hand, the listing broker might be agreeable only to a split that gives a larger share to the listing firm because of special marketing expenses associated with the listed property. The initial contact allows for a resolution of these issues between the brokers before the buyer visits the property. | |
| (c) | Third, the initial contact allows the licensee to gather pertinent information about the listed property, information that can change from day to day. For example, a contract may be pending, the seller may be willing to provide financing, the seller may have a strong motivation to sell, or there may be special procedures for showing the property. | |
| (d) | Fourth, the initial contact allows a licensee to obtain special instructions regarding the property that even an MLS description of the property does not provide. Since the listing broker and his or her agents are the only parties with full knowledge of the seller’s instructions and the seller’s needs, it is imperative that the selling broker receive this information and follow the instructions of the listing broker always. |
When a listing broker (the agent of the seller) appoints a subagent, both of them represent the seller and must exert their best efforts in the seller’s behalf. Problems often arise from the erroneous belief that the listing broker represents the seller and the subagent represents the buyer. Without disclosing in writing his or her dual agency, the subagent may not represent the buyer and act as a subagent of the listing broker at the same time.
When a listing broker agrees to cooperate with another broker who is acting either as only the buyer’s agent or as a transaction broker, only the listing broker represents the seller. This is the case even if the listing broker agrees to share with the selling broker the commission paid by the seller. The sales associate for the listing broker (the listing broker’s agent) can avoid misunderstandings when working with another firm’s licensee by clearly explaining the listing company’s policies in handling cooperative sales.
PROCEDURES FOR THE LISTING AGENT TO FOLLOW WHEN A LICENSEE WITH ANOTHER FIRM ASKS TO SHOW A LISTED PROPERTY
The first order of business is a clear statement of the listing company’s policy regarding cooperative sales. Whether the company’s policy is to appoint subagents or to share commissions with buyers’ brokers and transaction brokers, the listing agent must carefully convey to the other sales associate the listing company’s policy regarding the following issues:
| (a) | the sharing of commissions; | |
| (b) | the holding of earnest money; | |
| (c) | drafting and presenting offers; and | |
| (d) | loan placement activity. |
If company policy is to share commissions with selling agents, the listing agent will describe clearly how to calculate the selling broker’s share when the selling broker is the procuring cause of a sale. If the selling broker is the buyer’s agent and the buyer wants the seller to pay the fees for all agents, the buyer’s agent should notify the listing agent of this up front, so that they may begin negotiations about what part of the total commission the listing firm will pay to the buyer’s agent. It is a violation of the Commission’s rules for a licensee to pay a commission to a licensee representing another party in a transaction except with full knowledge and written consent of all parties. If the buyer is paying the buyer’s agent, the buyer’s agent should notify the listing agent of this as well, even though in this case, there is no need for discussion of a commission split. The listing agent will also discuss any company policies requiring selling agents to register customers or clients when showing certain properties in order to establish their rights to a share of the commission. Since the listing company is the agent of the seller and since the buyer tenders earnest money as evidence to the seller of his or her good faith, many listing companies insist upon holding the earnest money. The listing agent should relay to the selling agent, during the initial conversation, this and any other information, such as whether the seller is insisting on a specific amount.
Some companies and some sellers have specific contract stipulations that they want included in all sales contracts; therefore, the listing company might require that all offers be on their contract forms. The listing agent will explain any such policy to the selling agent and discuss the company policy about selling agents participating in the presentation of offers to their sellers. Most sales contracts contain financing contingencies, and some sellers (particularly builders) have special arrangements with lenders when it comes to financing their sales. In any event, loan placement may be an issue of importance to the seller. The listing agent will explain any special arrangements regarding loan placement, offer his or her assistance, and remind the selling agent of the listing company’s need to be kept informed during the loan approval process. The listing and selling brokers must agree on any modifications of the listing broker’s policy regarding these issues prior to the selling agent’s showing the property.
PAYMENT OF COMMISSIONS UNDER AN AGENT‑SUBAGENT RELATIONSHIP
Commission splits are negotiated between the agent of the seller (the listing broker) and the subagent of the listing broker (the selling broker). Any subagency agreement must clearly state the commission split and the conditions underlying its payment. The subagency agreement should be entered into when the listing agent appoints the subagent and before the prospective buyer sees the property. Most such agreements require the listing broker to pay the subagent in the event the subagent is the procuring cause of sale, provided the parties consummate the sale and/or pay a commission to the listing broker. If a subagent assists in selling another company’s listing based only on verbal authority, and later states the terms of that subagency in the offer, something similar to the following clause may appear in the offer:
| (Insert the names of both firms) have acted as agents for the seller in this transaction and are to be paid a commission by (insert the name of the party paying the commission). Neither (insert the names of both firms) have acted as agent for the buyer in this transaction. |
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The wording of this and other contract provisions included in this manual are examples only. Different transactions demand different language. Sales associates must seek the approval of their brokers before using a stipulation from this manual in an actual contract. |
Serious problems concerning commission rights may arise if the subagent obtains an offer and later discovers that an agent with another company showed the property to the same buyer. Each company should have a clear policy for protecting subagents who are the procuring cause of sale.
PAYMENT OF COMMISSIONS UNDER A BUYER’S AGENT RELATIONSHIP
Whether the buyer agrees to pay the buyer broker’s commission, or the buyer wants the seller to pay all agents’ commissions, the listing agent and the buyer’s agent should reach a clear agreement on those conditions as soon as possible. The agents should put these conditions in writing. If the agents only agree verbally on the conditions when the buyer’s agent contacts the listing agent for permission to show the property, they must clearly state the terms of the agreement in writing before the buyer makes an offer. Whether the agents initially put the conditions in writing or agree verbally, the offer to purchase may include a clause similar to the following:
| (Insert name of the listing firm) has acted as agent for the seller in this transaction and is to be paid a commission by (insert name of party paying commission). (Insert name of selling firm) has acted as agent for the buyer in this transaction and is to be paid a commission by (insert name of party paying commission). |
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The wording of this and other contract provisions included in this manual are examples only. Different transactions demand different language. Sales associates must seek the approval of their brokers before using a stipulation from this manual in an actual contract. |
HANDLING EARNEST MONEY UNDER AN AGENT‑SUBAGENCY RELATIONSHIP AND BUYER’S AGENCY RELATIONSHIP
When a subagent or a buyer’s agent obtains an offer on another firm’s listing, he or she should have the prospective buyer make the earnest money check payable to the listing company. ANY VARIATION FROM THIS PROCEDURE REQUIRES WRITTEN DOCUMENTATION IN THE OFFER AND AGREEMENT BY ALL INTERESTED PARTIES such as the following:
| The parties hereto acknowledge that this sale is made by (selling agent’s company), as a subagent of (listing company), and the buyer’s earnest money deposit shall be deposited to the Trust Account of (selling agent’s company). |
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The wording of this and other contract provisions included in this manual are examples only. Different transactions demand different language. Sales associates must seek the approval of their brokers before using a stipulation from this manual in an actual contract. |
When handling earnest money, the same procedures apply for buyers’ agents as for subagents in an agent‑subagent relationship. Just because the buyer’s agent represents the buyer does not mean that the buyer brokerage company should necessarily hold the earnest money. If it does so, the offer and acceptance must provide written authority as in the following example:
| The parties hereto acknowledge that the (buyer brokerage company) is acting as the agent of the buyer, and the buyer’s earnest money deposit shall be deposited into the trust account of the (buyer brokerage company). |
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The wording of this and other contract provisions included in this manual are examples only. Different transactions demand different language. Sales associates must seek the approval of their brokers before using a stipulation from this manual in an actual contract. |
DRAFTING OFFERS UNDER AN AGENT‑SUBAGENCY RELATIONSHIP AND A BUYER’S AGENCY RELATIONSHIP
Some listing brokers require their subagents to use their purchase offer forms on properties they are listing and offering for cooperative sales. If the listing broker follows this practice, the sales associate should let all potential selling agents know about it when they call for permission to show the property. When necessary and if possible, the sale associate, as listing broker’s agent, should help draft the buyer’s offer on the listing company’s form. If the buyer makes an offer on another form, the listing agent may simply have the seller make a counteroffer on the appropriate purchase offer form. This practice may be necessary when:
| (a) | a listing broker represents a seller, perhaps a builder or developer, who has special requirements that other brokers’ standard form contracts do not address; | |
| (b) | the listing broker has fully explained his or her purchase offer form to the seller and the seller now expects to receive offers on that specific form since they are easier for the seller to understand; and | |
| (c) | the listing broker spends considerable time training his or her agents in the proper procedures of presenting an offer to the seller by using the company purchase offer form, which is easier for the agent to explain to the seller. |
As agent for the seller, the listing broker (or its sales associate) has the right and duty to present all signed offers to the seller. When a subagent secures an offer on the property, the subagent should turn the offer over to the listing broker and not present it directly to the seller. A listing agent can ask the subagent to attend the presentation of the offer to supply information on the buyer’s position. However, the subagent should only provide specific information that the listing agent asks him or her to provide. If the seller and listing agent ask for privacy during the presentation, the subagent must give them that privacy.
The same standards for drafting offers that apply in the agent and subagent relationship apply when a buyer’s agent works with a listing agent. A buyer’s agent must be especially careful that he or she does not attempt to deal directly with the seller unless the listing agent specifically authorizes him or her to do so. Similarly, a listing agent must be especially careful to avoid dealing directly with the prospective buyer unless the buyer’s agent specifically authorizes him or her to do so. A buyer’s agent may ask the listing agent to be present at the presentation of a counteroffer to the buyer to supply information on the property or the seller’s position. However, the listing agent does no more in this situation than the buyer’s agent asks him or her to do. If the buyer and the buyer’s agent ask for privacy, the listing agent must grant them that privacy.
LOAN PLACEMENT UNDER AN AGENT‑SUBAGENT RELATIONSHIP AND A BUYER’S AGENCY RELATIONSHIP
Both the buyer and the seller may have an interest in which lending institution provides the loan on the property. However, the Real Estate Settlement Procedures Act (RESPA) requires that a buyer be permitted to obtain a loan any place he or she wants. This statement is true even if it conflicts with the wants or needs of the seller. There are numerous reasons a seller may want the loan placed with a specific lender, including:
| (a) | the seller will pay mortgage discount points, and he or she wants to do business with a specific lender with the lowest points; | |
| (b) | the seller (usually a builder or developer) may have a contractual obligation to secure permanent financing from a specific lender, perhaps the one who provided the construction loan; or | |
| (c) | the seller may have a prepayment penalty on his or her existing loan that the lender will release or waive only if the buyer finances the purchase through the company with which the seller has the original loan. |
Certainly the subagent may assist the buyer in obtaining the loan, under the direction of the listing company, but always only in strict compliance with RESPA. If a buyer has a personal need or desire to use a particular lending institution, the subagent should make this fact known to the listing company prior to showing the property. However, any attempt by the subagent to impose his or her recommendations or desires upon the buyer, regarding a particular lending institution, would be improper and could create an accidental agency with the buyer and a resulting dual agency. Likewise, any attempt by the listing company or seller to impose any restrictions upon the buyer or requirements to use a particular lending institution would be improper under RESPA.
As in the agent‑subagent relationship, the listing agent should make the buyer’s agent aware of any special needs of the seller at the time the buyer’s agent seeks permission to show the property. Both agents should advise their clients appropriately, in accordance with the law and the needs of the particular transaction.
For more information about the Real Estate Settlement Procedures Act (RESPA) click here.