A is for Arbitration
Perhaps the title of this blog should be Avoiding Arbitration which, by the way, still starts with A. For the purposes of this entry, I will be talking about the arbitration that happens between two real estate agents within TREB and the MLS system. I asked Brian Torry, one of our managers and the Vice-Chair of the arbitration Committee, to list the top 5 reasons agents choose go to arbitration. Without missing a beat, Brain said that commission arguments account for 99% of his committee work. The complaints generally revolve around a buyer signing a Buyer Representation Agreement with one agent and another agent selling that client a property. Here is a particular example;
Client Albert meets Agent Jones at an open house. While the house isn’t really what Client Albert is looking for, he and Agent Jones seem to hit it off. A few weeks after the open house, Agent Jones calls Client Albert about a new listing up the street and offers to show it to him . The showing goes pretty well and Client Albert decides to put in an offer. Agent Jones is pretty excited. He prepares all the paperwork and goes to Client Albert’s house to sign the offer. He explains Working with a Realtor and has Client Albert sign a BRA. He casually asks him if he has ever signed one before and Client Albert admits that he signed one a long time ago but says that it has probably expired by now. Agent Jones submits the offer which is accepted. Three weeks later Agent Jones receives a call from Agent Smith who tells Jones that she has a BRA signed with Client Albert and would like a 75% referral on his sale. Agent Jones tells Agent Smith to politely jump in the lake. Smith sends a copy of the BRA, signed by Client Albert, to Jones, but Jones believes that he has done his job and tells Agent Smith to collect from Client Albert.
So, what was the outcome of this situation? The Arbitration Committee ruled in favour of Agent Smith. It was determined that Agent Jones did not ask enough questions about Client A’s previous Buyer Representation Agreement. As a result, Agent Jone’s lost all her commission to Agent Smith. So, it begs the question, is asking a potential client if he ever signed a BRA enough? The answer is unequivocally NO. To satisfy himself completely, Agent Jones should have asked the following questions;
- Have you met any other agents prior to meeting me?
- Have you viewed any properties prior to our meeting?
- Did you see those properties at an Open House?
- Has an agent personally showed you any houses?
- How many properties did you see with an agent?
- Did you ever sign any paperwork with an agent?
- Did you ever sign a BRA?
- Do you have a copy?
- Who was the agent you worked with and can I call them?
- Have you ever made an offer on a property?
The case above outlines how important the Buyer’s Representation Agreement is to the protection of your commission. Most importantly, it is your obligation to thoroughly explain to a potential client what the BRA is. It is also clear that no matter how uncomfortable asking the questions above may seem, if you don’t ask them you could do a lot of work for nothing. In Arbitration there is a loser and a winner. There are no shades of right or wrong. If you have asked the potential client all the questions and explained the BRA to them in full, you have done your job.
One last note to doubly protect yourself. On the bottom of the first page of the Buyer Representation Agreement, there is a little box that says “This statement confirms that the buyer has not signed a contract of this nature with any other real estate company.” Put a circle in this box and have your client sign it. It is a good way to protect yourself even further.