Disclosure of Referral Fee Arrangement in Multiples

Assume Bob the real estate agent meets Bill a Buyer at a Open House. He doesn’t want to take Bill on as a client, since that will be a conflict of interest. Also, he doesn’t want to transfer Bill over to someone else in his office, since again, we will have the same problems.

Bob decides to refer Bill to Mary a real estate agent at another Brokerage. He is going to receive a 25% referral fee.

Does that have to be disclosed to others in a multiple offer situation?

 Let’s consider the legislation: “If a brokerage has a seller as a client and an agreement between the brokerage and the seller contains terms that relate to remuneration and that may affect whether an offer to buy is accepted, the brokerage shall disclose the existence of and the details of those terms to any person who makes a written offer to buy, at the earliest practicable opportunity and before any offer is accepted.”

Referral is an “agreement”, refers to “remuneration” and may “affect” whether an offer is “accepted”. It meets all the criteria. Bill will certainly be “cheering” for Mary in multiples. So, disclosure is required.

Brian Madigan LL.B., Broker


Comments 2

  1. Does the same requirement for disclosure exist if Mary was in the same brokerage as Bob? So, In addition to disclosing that the competing offer is from an agent in his own brokerage, Bob has to disclose that he is receiving a referral fee should Mary’s offer be selected, correct? Assuming no commission reduction agreement for the seller’s benefit.

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