What Happens During A Commission Dispute?
“What Happens During A Commission Dispute?” was the topic in question when close to 100 REALTORS® watched and listened attentively as The Broker’s Exchange presented a mock arbitration hearing at the REALTOR® Association in April. The purpose of the event was not only to educate members on the process that takes place in an arbitration, but also to stimulate conversation within the real estate community on how to avoid circumstances that can lead an agent or broker into trouble, according to JJ Jones, Co-Chair of Broker Exchange. “We thought this would be a great learning tool for all members of the association,” she said.
The mock hearing comprised of the complainant ‘Nell Fenwick,’ played by Tara Molloy of Riverside Realty Group LLC; the respondent ‘Bruce Wayne,’ played by Craig Dorfman of Berkshire Hathaway Florida; Panelist ‘Lois Lane,’ played by Fran Davis of 4 Seasons Realty LLC; Panelist ‘Clark Kent,’ played by Jacob Meyer of The New Home Spot Inc.; and Hearing Officer ‘Dudley Do-Right,’ played by Bob Wade of Real Living Cypress Realty. Moderators of the event included Jones and her Co-Chair Henry Albrecht of Gulf Gateway Realty, Inc.
The dispute involved Real Estate Agent Fenwick who met another buyer through an open house she held for one of her listings. She was introduced to the buyer through another resident at the community. The buyer showed great interest and the REALTOR® began to correspond with her back and forth answering questions for about a week when all of a sudden correspondence stopped. Five days later, Real Estate Agent Bruce Wayne submitted an offer on her condo. The buyer for this offer turned out to be the same buyer who Fenwick met at her open house. Fenwick stated that she was entitled to the commission from the sale. Through a detailed explanation of the case from each side and a series of questions posed by the panelists, the audience then heard the deliberation and a verdict presented by the hearing officer. Throughout the mock hearing, Albrecht and Jones would stop the arbitration and discuss with the audience the events that had taken place and answer any questions that the audience members may have had. The audience was also encouraged to ask both the complainant and the respondent any questions that the panelists may not have asked. At the end of the deliberation, moderators asked the audience who they believed was entitled to the commission.
The room was split between who felt the complainant was entitled and who thought the respondent was entitled. Some agents felt that Nell Fenwick, the listing agent, did most of the work in answering questions the buyer had asked and gathering information for her, and so should be entitled to the commission. Others felt that since Wayne helped the buyer get a mortgage and got the buyer to sign the contract, he was entitled to the commission.
“Arbitration panels analyze the entire course of events and compare Broker A’s series of events to Broker B’s series of events,” said Moderator Albrecht. “Simply put, the devil is in the details.” One of the details included the buyer’s lawyer advising that she not use the same REALTOR® as the one who listed the property as they may not have the buyer’s best interest at heart, which is why she went with another agent. The buyer took her lawyer’s advice.
“In this case, there are two questions you have to ask regarding the relationship between broker and buyer,” said Ward, posing as the hearing officer. “Is there abandonment? Is there estrangement?” Ward’s rationale was that since the buyer estranged herself from the listing agent, that agent did not have procuring cause and the commission should be given to the other agent.
“It’s hard to say who should get the commission,” said REALTOR® Maria Musler from Century 21 Sunbelt. “Most of us work as transaction brokers. If she had gotten her client to sign a broker’s/buyer’s agreement, it would have been cut and dry.”
Holly Lopez of 4 Season’s Realty, LLC, said she has never used a buyer’s agreement. “I would rather have my clients be loyal to me because of my efforts than be contractually bound to me because they have to be. You win some, you lose some. It’s the nature of the business,” she said, adding that the listing agent may have been able to negotiate some part of the commission if the brokers had been able to work this out before it was taken to arbitration. Ward had mentioned that in an arbitration hearing, the resolution is never to give partial commissions.
Much of what was discussed during and after the event was how the whole arbitration could have been avoided had the agents’ brokers been able to try to resolve the dispute ahead of time. “If you have the opportunity to do so, you need to make every effort to settle before it gets to the Professional Standard Committee,” said Ward.
This event marked the first time Broker Exchange held a mock hearing. According to Jones, the committee is considering performing another one next year and possibly writing their own script. The script from the mock hearing was originally presented on a state level to the Committee of Professional Standards, who brought this back to Broker Exchange. “This event was really well-received [by the members],” said Jones who also sits on the Committee of Professional Standards. “I think the audience was completely engaged.”
“It’s a good experience that hopefully none of us will have to participate in for real,” said REALTOR® Andrea Quilter of Century 21 Birchwood Realty. “Hopefully it will help us all stay out of trouble.”