Marketing: Licensee’s obligations to vendors and potential buyers

‘My buyer’. It’s a term commonly used by a licensee to refer to a potential buyer they have established a connection with and introduced to a property. Helping buyers navigate the tricky world of purchasing a property is a significant part of the work that a licensee undertakes. However, licensees must understand clearly who they are representing and be open and transparent about it with all parties.

It’s an exciting time to be part of the industry, but there is no doubt that low housing stock is putting pressure on buyers, vendors, and real estate professionals alike.

Securing a listing and working with a vendor to market and sell their property is the backbone of a licensee’s role. In a typical transaction, where a buyer is introduced by the listing licensee, it should be clear-cut who the licensee represents and where their fiduciary obligations lay.

But what happens when another licensee from your agency gets involved in the transaction by introducing ‘their buyer’?

The key rule for licensees to remember is that, in a particular real estate transaction, a real estate professional can represent either the vendor or the buyer — but never both at the same time.

Rule 9.14

A licensee must not act in a capacity that would attract more than one commission in the same transaction.

When a vendor signs an agency agreement, it is important to remember they are listing with the company licensee, not the individual listing licensee. All licensees who work under the company licensee are bound by fiduciary obligations to the vendor (the client). Whilst a licensee may

have introduced ‘their buyer’ to a property listed by a colleague, they still have a fiduciary obligation to the vendor (the client) and not ‘their buyer’.

A good way to remember this is to ask yourself, ‘who pays my commission if this transaction is successful?’ Whilst you may only be entitled to receive part of the commission if “your buyer” is the successful buyer, it is the vendor (the client) that pays that commission. Fiduciary obligations override internal agency commission policies. You should avoid giving the potential buyer (the customer) the impression that you’re working on their behalf, when in reality your fiduciary obligation is to the vendor (the client).

The Code of Conduct sets out this expectation under Rule 9.1:

Rule 9.1

A licensee must act in the best interests of a client and act in accordance with the client’s instructions unless to do so would be contrary to law.

Cold calling in a vendor market

In a market with low listings and plenty of buyers, cold calling is a legitimate way of contacting homeowners to check whether they want to sell their property.

There is nothing wrong with cold calling potential vendors, but again, the licensee must be open and transparent about who they are representing. If you sign an agency agreement with a vendor, your fiduciary obligations are to the vendor and not your database of potential buyers.

Buyer’s agent

Although still relatively uncommon, buyers may choose to engage a licensee through an agency agreement to assist them with purchasing a property, especially in the current market. Under this arrangement, the buyer pays the licensee according to their agreement upon the successful purchase of a suitable property.

In the instance when a licensee is engaged as a buyer’s agent and approaches a home owner on behalf of their buyer, they are not allowed to offer their services to the potential vendor. They must disclose to the vendor that they are acting on behalf of a buyer and act in the best interests of their client — the buyer.

NOTE: If the vendor has an agency agreement with another listing agency, professional ethics denotes that both licensees should liaise with each other to allow each licensee to fulfil their fiduciary obligation to their client.

For more information, refer to Rule 4 Interpretation in the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, which defines customer and client, with the client being whoever holds the Agency Agreement with an agent to carry out real estate agency work. Find out more at rea.govt.nz.

Nadine Thomas

Head of Engagement, Insights and Education, REA