On Suing Clients

Fair warning, a bit of a rant ahead. But this is also a call for help. I need someone to explain to me why this attitude is so prevalent, because I just don’t get it.

A couple of days ago on Trulia Voices (a “forum” for agents, home buyers and sellers and the general public to pose and answer questions) Home Buyer “Morgan” posed this question:

Broker insisting on getting his 3% even when she, in my opinion, breached our buyer broker contract.

My husband and I started the process of buying a house with a buyer broker. After the first round of contracts were signed we realized she missed that this was a short sale transaction. She lied about typing out the contract….she was handwriting it on her steering wheel when we arrived to sign the papers. It took her over 1 week to pick up a signed counter offer. Asked us to talk with the listing agent to find out what was taking so long. Doesn’t call me back when promised and when we wanted to back out of the deal she told us she would sue us for the 3% if we ever bought the house with another agent. She let us out of the buyer broker contract but is still insisting we cant buy the house thru anyone but her……else she is owed 3%. Is there any way I can buy this house without paying her?

That is my emphasis in bold. When asked if she had consulted with the agent’s broker (in effect, the agent’s boss) Morgan followed up with this:

I talked to her broker and I have never been so angry after a phone conversation in my life. He said he would never let me buy the house without paying his agency and he would sue me for the 3% if I did. I feel like I have no recourse other than legal action, which is probably going to cost me as much as paying the broker the 3%. I am so frustrated. I will probably walk away from this house if it turns out I have to pay him.

My emphasis in bold again.

At this point I want to either: 1) Poke a sharp stick in my eye; or 2) poke a sharper stick in the eye of this agent and her broker.

Granted, we don’t have all the details, and only have Morgan’s side of the story. But her frustration is obvious. If only a fraction of what Morgan reports about her agents ineptitude is true, then clearly the agent has not done their duty.

Threatening to sue clients seems like an odd business practice.  It’s hard to imagine Morgan telling her friends and family, “You should use my sue-happy agent, she’s awesome!”.

Some agents may be reading this and say, “Yeah, but ‘procuring cause’ entitles the agent and broker to a commission! They earned it!”

(For those not aware, “procuring cause” is defined by the National Association of Realtors (members only link, sorry) as: “the interplay of factors which together demonstrate that the unbroken efforts of a specific broker were responsible for the buyer making the decision to consummate the sale on terms which the seller found acceptable. In other words, a broker who is the procuring cause of a sale is a sine qua non of the sale — the sale would not have occurred but for the broker’s efforts.”)

Procuring cause is complicated. It’s a bunch of legal mumbo-jumbo that is evaluated on a case-by-case basis by arbitration panels across the country every day.

I am not an expert in procuring cause, I am not a trained arbitrator, and I’ve never taken a commission dispute to arbitration. But there appears to be a factor to consider in this case – estrangement.

The NAR’s Arbitration Guidelines defines estrangement as:

…the issue then becomes whether the broker engaged in conduct which caused the purchaser to terminate the relationship (estrangement). This can be caused, among other things, by words or actions or lack of words or actions when called for.

From the NARs “7 Key Questions to Determine Procuring Cause” comes this:

“Did the broker/salesperson engage in conduct that prompted the buyer to look elsewhere for assistance?”

Maybe it’s just me, but not knowing a transaction is a short sale (simply mind-boggling), not responding to calls, lying, not dealing with counters in a timely fashion, telling your client to call the other agent in the transaction – I can see how that might prompt a buyer to look elsewhere for assistance.

Here’s an idea… treat your clients right, do your job, and my guess is you won’t have to threaten to sue them to get paid.

Oh sure, any agent that has been around any length of time has been “screwed” by a client. Typically this isn’t intentional on the clients part. Maybe, despite being instructed not to, they walk into a new home development to check out the shiny new homes. And you aren’t there to register them. Now the builder’s sales agent swoops in and gets the commission. Or your client happens to drive by a For Sale sign, and they call the listing agent. That agent comes over and shows the home. With visions of dollar signs from double-siding the transaction dancing in their head, they don’t bother to ask your client if they are working with someone. With visions of little Sally playing with Rover in the immaculate backyard, your client fails to mention they are working with you.

BAM! All that time, energy, gasoline and effort you’ve spent with that client is all for naught. They are now the listing agents client and you get nothing.

Sucks, doesn’t it?

Yeah, yeah, I know someone is thinking, “Get your clients to sign a Buyer Broker agreement (BBA)^[1] and protect yourself!” I don’t like buyer broker agreements. Never used one, probably never will. I like to trust that I can educate my clients about agency and representation. I tell them how I’ll “get screwed” if they do certain things and I say, “Please don’t screw me. I have children to feed". I don’t like the idea of forcing a client to sign a contract to work with me. Heck, we put a “fire me” clause in all our listing agreements, and I’d put one in a BBA if I used them, so what’s the point? I’m not ever going to force someone to work with me.

Instead, I think I’ll just provide kick-ass service and leave the idea of suing a client for commission right where it belongs. When (not if, when) I get “screwed” by a client, I chalk it up to part of doing business. So far it’s happened once (a new home build). It will probably happen again.

But it won’t happen because I’ve neglected my client’s needs.

And I won’t be threatening to sue my client.

(Of note: I know some very good agents that always use BBAs. That’s fine, and there is nothing wrong with it. I simply choose to do business differently. This doesn’t make me “better” or them “worse”. We’re just different. My beef isn’t with agents using BBAs. It’s with agents and brokers that fire off threats of suing their clients. I’ve seen and heard about “Just sue them” a remarkable number of times. THAT I don’t get. At all.)

1. Briefly, a buyer broker agreement is a contract signed between a prospective home buyer and their agent that helps ensure the agent gets paid. You can see the “BBA” typically used in Arizona here [↩]

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