Agency by Estoppel

Summary

In this week's installment by Z Real Estate, the concept of 'agency by estoppel' or 'apparent agency' is broken down for potential buyers. When a buyer allows an agent to believe that they are representing them, whether implicitly or explicitly, they can be legally obligated to pay a commission. The absence of a formal agreement does not exempt a buyer from this responsibility if the agent is acting on such belief due to the buyer's actions. The transcript emphasizes the ethical necessity for buyers to clearly communicate their intentions with agents and why doing so can prevent unintended legal and financial obligations. Ultimately, this segment aims to inform buyers on the importance of transparency towards agents to maintain fairness in the real estate process.

Highlights

• Even without a formal agreement, a buyer can owe an agent a commission if that agent believes they're representing the buyer. 🤯
• Typically, the situation is resolved by the agent a buyer eventually chooses, who might waive their commission to the first agent. 💸
• Ethical communication is key! Failing to inform the first agent of your intentions could lead to misunderstanding and obligation for a commission. ⚠️

Key Takeaways

• Agency by estoppel occurs when a buyer's actions lead an agent to believe they are representing that buyer, even without a formal agreement. 🏡
• Buyers should be upfront with agents about their intentions to avoid legal and financial repercussions. 📢
• Understanding the ethics of agent representation protects both buyers and agents in the real estate market. 🤝

Overview

In this enlightening conversation by Z Real Estate, the focus is on 'agency by estoppel,' a scenario where buyers might unknowingly bind themselves to pay a commission to an agent. This occurs when the buyer's actions lead the agent to believe they're representing the buyer, even if no formal agreement exists. This often-overlooked aspect is crucial for potential home buyers to understand to avoid unexpected costs.

The host stresses the importance of open communication. As buyers navigate property viewings, they should be honest with each real estate agent regarding their plans to maintain clarity and fairness. It is commonly observed that if there's a misunderstanding, the agent chosen by the buyers often relinquishes their commission to the initial agent who helped first, ensuring fairness in the transaction process.

Ultimately, this session underscores the value of honesty and transparency in real estate dealings. By clarifying intentions early, buyers not only respect the agents' efforts but also protect themselves from potential legal obligations. This proactive approach is essential for maintaining trust and fairness in the real estate world.

Chapters

• 00:00 - 00:30: Introduction In this chapter, the discussion focuses on a common issue faced by real estate buyers regarding the role of agents. The speaker addresses questions about the legality and ethical considerations of working with multiple agents, especially when a buyer writes an offer with a different agent than the one who showed them the property. The chapter aims to clarify whether the initial agent is owed a commission in such scenarios.
• 00:30 - 01:00: Agency by Estoppel Explained In this chapter, the concept of 'Agency by Estoppel', also known as ostensible or apparent agency, is explored. The discussion centers around situations where a buyer's actions lead a licensed agent to reasonably believe they are acting as the buyer's agent, even if no formal agreement has been made.
• 01:00 - 01:30: Implications of Misleading Agents The chapter discusses the potential consequences of having a misleading understanding in an agent-client relationship. It stresses the importance of correcting any misconceptions if someone believes they are acting as your agent without your explicit agreement. Failure to clarify your lack of engagement with such an agent might result in an obligation to pay them a commission should any transaction occur. The chapter notes that, in reality, it's rare for buyers to face these situations, but the legal implications remain.
• 01:30 - 02:00: Agent's Commission and Procuring Cause In the chapter titled 'Agent's Commission and Procuring Cause,' the concept of a commission structure in real estate transactions is discussed. It is explained that the agent who first introduces a property to a prospective buyer is often regarded as the 'procuring cause.' This means they are entitled to the commission if the buyer eventually purchases the property, even if another agent closes the deal. The chapter emphasizes the importance of recognizing the role and efforts of the first agent in the property buying process and acknowledges potential scenarios where agents might share their commission.
• 02:00 - 02:30: Obligations to Inform Agents In this chapter titled 'Obligations to Inform Agents,' the focus is on the importance of transparency and ethical conduct when dealing with real estate agents. It discusses the obligation to inform agents if you plan to view a property with them but not write the offer through them. This transparency is crucial because failing to inform them could result in the agent not showing you the property. This scenario highlights the fairness issue regarding commission for the agent who did the work. Therefore, there's an ethical obligation to be upfront and honest to ensure fair treatment for all parties involved.
• 02:30 - 03:00: Conclusion and Advice The chapter titled 'Conclusion and Advice' discusses the concept of agency by estoppel, emphasizing the importance of recognizing relationships that may not be explicitly defined by formal agreements. It explores how actions and behaviors can lead to implied relationships, encouraging readers to be mindful of this dynamic even in the absence of signed agreements. The chapter stresses the significance of understanding the true nature of relationships and agreements in practice.

Agency by Estoppel Transcription

• 00:00 - 00:30 ladies and gentlemen thank you and welcome for another weekly edition of z real estate's discussion on real estate this week i want to talk about something um that i've been getting a lot of questions about and that uh specifically pertains to you buyers out there you know who you are who get an agent have an agent show your property and then what do you do you write the offer with another agent okay so the question is can we do that is that legal do i owe the first agent a commission
• 00:30 - 01:00 well the short answer is yes you do why excellent question that's what we're going to talk about now what that is called is that's called agency by estoppel okay which is another way of saying ostensible or a parent agency if you and when i say you i mean you as buyer do something to create a situation in which the agent the licensed agent now believes that they are acting as your agent
• 01:00 - 01:30 interestingly enough whether or not you believe it is irrelevant if they believe that they're acting as your agent and you don't correct them and set the record straight by clarifying that you already have an agent you're working with an agent or you're not in the market to buy or sell or whatever the reason is then yes if you end up doing something you owe that agent a commission now realistically what happens is i very rarely see buyers having to
• 01:30 - 02:00 pay a commission to that agent what usually happens is that the agent they do end up going with ends up forfeiting their commission or a large portion thereof to the first agent who showed the property and is what we call in real estate the procuring cause they showed the property to the buyer so yes they are entitled to the commission so for your buyers out there and you know who you are that want to look at a property but feel
• 02:00 - 02:30 uh you have a familial obligation an ethical obligation or some other form of an obligation to another agent tell the agents that you plan on viewing the property with that you're not going to write the offer with them you're not going to do that though right why because we all know if you tell them that then they're not going to show you the property which as you can see right there is why the commission is owed it's not fair it's not fair to the agent that did the work and it's not fair for you to allow them
• 02:30 - 03:00 to believe something that you know in your heart is not true so going over it again agency by stoppable means when you do something that creates an apparent or ostensible relationship whether or not one has been expressly created meaning the lack of a listing agreement the lack of a buyer broker agreement or the lack of anything signed expressly delineating an agency relationship has been created in lieu of any of that if you do
• 03:00 - 03:30 something that creates a a situation where the agent now thinks they represent you and you don't correct them yes they represent you and you do owe a commission and you are obligated to that so i hope that kind of clarify clarifies things a little bit and um makes makes a little bit more sense so please if you're looking at a property with an agent do the right thing and have that agent that shows you the property write the offer
• 03:30 - 04:00 okay thanks a lot everybody until next week