Duty to respect buyer agency relationships clarified
by Peg Ritenour

Imagine you are holding the first open house for a very hot listing. A couple comes through, loves the house, but senses that several other people do too. Not wanting to loose out on this property, the buyers want you to write an offer right then. Your dream has come true, right?

But wait a minute, the buyers then mention that they have been "working" with another agent. What should you do from an ethical standpoint? What are you required to do under the license law?

Of course this has been a scenario REALTORS have had to deal with for years. But dramatic increases in buyer agency have prompted recent changes in both the NAR Code of Ethics and the Ohio license law that may change how you handle this situation. These changes have been made to assure that exclusive buyer agency relationships are afforded the same protection that exclusive listing contracts have always been given.

Let's look first at the REALTORS' ethical obligations. Standard of Practice 16-13 now provides that:

All dealings concerning property exclusively listed, or with buyer/tenants who are subject to an exclusive agreement shall be carried on with the client's agent or broker, and not with the client, except with the consent of the client's agent or broker or except where such dealings are initiated by the client ( Adopted 1/93, Amended 1/98 ).

Under this section, REALTORS are expected to honor a buyer agency relationship just like they would an exclusive right to sell. Thus, it would be a violation of Article 16 of the Code of Ethics to show a buyer property, write an offer for a buyer or negotiate with a buyer if you know the buyer is exclusively represented by another Realtor. However, if the buyer initiates the contact then this behavior does not constitute a violation of Article 16.

So under the Code of Ethics, how should you handle the open house situation described at the beginning of this article? First, it would probably be prudent to try to find out what type of relationship the buyer has with the agent they are working with. This is certainly required under the Code of Ethics if you are planning on offering your services as a buyer's agent (and thus become a dual agent since the property is listed with you). Standard of Practice 16-9 provides that REALTORS, prior to entering into an agency agreement, have an affirmative obligation to make reasonable efforts to determine whether the client is subject to a current, valid exclusive agreement to provide the same type of real estate service. If it is determined that the buyer is not subject to an exclusive buyer agency agreement, you may, under the Code of Ethic certainly write an offer for this buyer.

However, even if the buyer has signed an exclusive agency agreement with another Realtor, Stand of Practice 16-13 allows for the listing agent to directly deal with that buyer because the buyer initiated the contact.

Is the result the same under Ohio's license law? Probably not. Ohio Revised Code Section 4735.18(A)(19) has always prohibited a licensee from negotiating directly with a seller if the licensee knows the owner has exclusively listed that property with someone else. This section was expanded in HB 354 to now cover written exclusive buyer agency agreements as well. This means it is a violation of the license law for a licensee to negotiate directly with a buyer if the licensee knows that the buyer has signed an exclusive written buyer agency contract with another brokerage.

For a violation of section 4735.18(A)(19) to occur, the following facts have to exist:

1. The buyer has to have an exclusive agreement with a buyer's agent to represent him in the purchase of property;
2. That the agreement has to be in writing and must still be in effect (not terminated or expired);
3. The other licensee had to have engaged in negotiations with the buyer; and
4. The licensee must have done this knowing that the buyer was still under this exclusive agreement.

In our open house scenario, the listing agent doesn't know if the buyer has signed a written exclusive buyer agency agreement, but does know the buyer has some sort of relationship with another agent. According to a rule adopted by ODRE in this situation the listing agent has a duty to ask the buyer whether they have signed a written, exclusive buyer agency contract with their agent. If they respond that they have, or even think they may have, then the listing agent cannot write an offer or engage in any form of negotiation with that buyer. This is true even though the buyer initiated the contact and wants the listing agent to write the offer. Instead they must be directed to their own agent. This is because unlike the Code of Ethics, the license law does not make an exception for situations where the buyer initiates the contact.

On the other hand if the buyer indicates that they have not signed a written exclusive contract with a buyer's agent, then the Division's rule states that the listing agent can negotiate directly with the buyer. However, the Division strongly urges REALTORS in this position to have the buyer sign a statement that they have not entered into an exclusive written buyer agency agreement with someone else before doing so. This will help the REALTOR to avoid allegations that he has violated the license law.

It is important to note that both the Code of Ethics and the license law sections discussed in this article only apply to "exclusive" buyer agency agreements. Whether an agreement is exclusive or not will depend upon the terms of that agreement. Certainly contracts that contain clauses that state the buyer's broker will be the "exclusive" agent or that the buyer agrees to work "exclusively" with a broker in the purchase of property will most likely be found to constitute an exclusive agency relationship. Brokers who want to assure that other REALTORS don't infringe upon their relationship with their buyer clients are advised to make sure that they use written agreements with their buyers and that these agreements are exclusive.