Breach of Buyer Broker Agreement

Breach of Buyer Broker Agreement, Now What?

27 Jan, 2022

As you know, even the most seasoned real estate professionals experience challenges. With so many moving parts in the real estate transaction, there can be times where agents need some additional advice. In the following Q& A article, we will examine a common mishap in regard to “Broker Compensation,” and what contractually should be done to ensure commission will be paid.

Real Estate Agent Question: I am executing an Exclusive Buyer Residential Brokerage Agreement with my buyers, and I generally put zero percent (0%) or “Seller to pay per MLS” at paragraph 7(a) under “Broker Compensation.”  What happens if the buyers breach the Buyer Brokerage Agreement, or the seller otherwise refuses to pay a buyer broker commission compensation?

Answer: By putting zero percent (0%) or “Seller to pay per MLS” the broker or agent has effectively neutered their own ability to be compensated or enforce any payment from a buyer to the broker for commission compensation. Maryland follows the “4 corners of the document rule” when enforcing agreements between two contracting parties. That is, the court will first look to the specific language and terms in a contract and only look outside the contract language where there are ambiguous or conflicting terms. In this example where the real estate professional puts zero percent commission compensation to be paid by the buyer or “seller to pay per MLS,” the contract literally is saying that no matter what the cause the buyers owe zero to the brokerage. Even if the buyer breaches the agreement and purchases a property through another broker without first terminating the Buyer Brokerage Agreement, the buyer will owe nothing as the contract’s commission compensation provision has the buyer owing nothing.

The lesson learned here for the real estate professional is to make sure that you have included all the terms of the agreement in the documents with your buyers and sellers. Doing this protects your hard-earned compensations and fully discloses to the buyers and sellers what their responsibilities are when working with real estate professionals.

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