Flat Fee, Minimum Service, and A La Carte Brokers
September 21, 2018 |
The same strategy that low-cost airlines utilize is also becoming more common in the real estate industry. Consumers find it attractive to only pay for what they need. If they aren’t traveling with luggage, why should they pay the same price as a passenger that does? For buyers and sellers, why not do some of the work themselves thereby reducing the commission owed to a licensee. Sellers can take photos of their own house, write the narrative about the property and even show the property to potential buyers. Buyers can research their own properties and tour open houses unaccompanied. This is where flat fee, minimum service, and a la carte brokers enter the picture.
These brokerages provide limited services to their clients in exchange for a lower commission. Issues do come up when consumers working with these brokerages have different expectations of the brokerage’s duties and a minimum level of service to be provided. To aid in avoiding confusion in this area, Ohio utilizes a form called a Waiver of Duties Statement. The form is mandatory for any brokerage that is offering limited or reduced services to clients. First, the law provides that fiduciary duties a licensed agent owes to their client cannot be waived, in any circumstance. Those duties include:
- Exercising reasonable skill and care in representing the client and carrying out the responsibilities of the agency relationship
- Performing the terms of any written agency agreement
- Following any lawful instructions of the client
- Performing all duties specified in this chapter in a manner that is loyal to the interest of the client
- Complying with all requirements of this chapter and other applicable statutes, rules, and regulations, including the Ohio fair housing law, division (H) of section 4112.02 of the Revised Code and the federal fair housing law, 42 U.S.C.A. 3601
- Disclosing to the client any material facts of the transaction of which the licensee is aware or should be aware in the exercise of reasonable skill and care and that are not confidential information pursuant to a current or prior agency or dual agency relationship
- Advising the client to obtain expert advice related to material matters when necessary or appropriate
- Accounting in a timely manner for all money and property received in which the client has or may have an interest
- Keeping confidential all confidential information, unless the licensee is permitted to disclose the information pursuant to division (B) of section 4735.74 of the Revised Code. This requirement includes not disclosing confidential information to any licensee who is not an agent of the client.
The duties an agent can waive for seller clients are as follows:
- Seek a purchase offer at a price and with terms acceptable to the seller. Unless the seller so directs, the licensee is not obligated to seek additional offers if the property is subject to a contract of sale, lease, or letter of intent to lease
- Accept delivery of and present any purchase offer to the seller in a timely manner, even if the property is subject to a contract of sale, lease, or letter of intent to lease
- Within the scope of knowledge required for licensure, answer the seller’s questions and provide information to the seller regarding any offers or counteroffers
- Assist the seller in developing, communicating, and presenting offers or counteroffers
- Within the scope of knowledge required for licensure, answer the seller’s questions regarding the steps the seller must take to fulfill the terms of any contract.
The duties an agent can waive for buyer clients are as follows:
- Seek a property at a price and with purchase or lease terms acceptable to the purchaser. Unless the client so directs, the licensee is not obligated to seek additional purchase or lease possibilities if the purchaser is a party to a contract to purchase property, or has entered into a lease or has extended a letter of intent to lease
- Within the scope of knowledge required for licensure, answer the purchaser’s questions and provide information to the purchaser regarding any offers or counteroffers
- Assist the purchaser in developing, communicating, and presenting offers or counteroffers
- Present any offer to purchase or lease to the seller or the seller’s agent in a timely manner, even if the property is subject to a contract of sale, lease, or letter of intent to lease, and accept delivery of and present any counteroffers to the purchaser in a timely manner
- Within the scope of knowledge required for licensure, answer the purchaser’s questions regarding the steps the purchaser must take to fulfill the terms of any contract.
In order for an agent to waive any duties listed above for buyer and seller clients, they must complete the state-mandated Waiver of Duties Statement and designate which duties the client agrees to waive. The client must then sign and date the form and the agent must retain the form for three years.
Even if your jurisdiction does not require a similar form, you may want to consider adding it to your practice. The form is a useful aid for those brokerages offering minimum services, in as much as it avoids confusion and misunderstandings between agents and clients as to exactly what services the agent will provide. It also protects the agent form any allegation that they failed to fulfill fiduciary duties to their client. As the number of flat fee, minimum service, and a la carte brokerages rise, tools like this form are useful in continuing to fully represent brokerage clients.