The Nest

NestApple's Real Estate Blog

Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.

REBNY rules on buyer representation in New York City

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Is a buyer always entitled to be represented in a transaction?​​

Yes, the New York State Department of State (“DOS”) has consistently stated that a buyer​​ always has a right to be represented in a real estate transaction and the listing broker must always honor this right. The DOS has stated that “any such denial will be construed as a violation of the listing broker’s duty to deal honestly, fairly and in good faith with the buyer.

May a listing broker refuse to work with a buyer’s broker if the seller has specifically asked the listing broker not to do so?

No, doing so would still amount to a violation of the listing broker’s duty to deal honestly, fairly and in good faith with the buyer even though the listing broker was following the seller’s instructions. According to the DOS, “If a seller chooses to use the services of a real estate broker, the seller must do so with the understanding that the broker cannot refuse to cooperate with real estate brokers who represent buyers.

Is a buyer’s broker entitled to a commission by virtue of introducing the buyer to the property?

No, simply showing a buyer a property does not necessarily entitle a REBNY member to a commission.

A broker is only entitled to a share of the commission if he or she is considered the “procuring cause” of the transaction. As defined by the National Association of Realtors (NAR) is “the uninterrupted series of causal events that leads to a successful transaction.” This means who will actually deserve the commission for getting the sale done.

In NYC, the Appellate Division has stated that there must be a “direct and proximate link” between the broker and the eventual transaction in order for the broker to be eligible for a commission.

What constitutes “procuring cause?”

visiting a NYC homeThere is no specific definition of “procuring cause.” However, case law suggests that in order to be considered the procuring cause, a real estate broker must show a “direct and proximate link between the bare introduction of the buyer and seller and the consummation [of a sale].” In other words, a REBNY member must bring together a meeting of the minds between the buyer and seller and show that he or she generated a chain of circumstances which led to the sale. The ultimate determination of whether or not the REBNY member procured the buyer, and thus can be considered the procuring cause, is a fact-sensitive inquiry that turns on the specific facts and circumstances of each case.

May a buyer switch real estate brokers at any time during a transaction?

signing a real estate contractYes, absent an exclusive representation agreement, a buyer may switch real estate brokers at any time during a transaction. A Buyers Broker Agreement details who represents he buyer. Once you sign a buyer’s agent agreement, you are legally obligated to work with that agent.

The buyer’s decision to change brokers does not necessarily dictate which broker is the procuring cause of the buyer.

For example, let’s assume that Broker A represented the buyer for the entire transaction and, on the night before closing, the buyer instructs Broker A not to come to the closing because the buyer wants to bring Broker Z to the closing.

The buyer has the right to change to Broker Z, but doing so does not negate the fact that Broker A was the “procuring cause” of the buyer. In this case, Broker A would still be entitled to share in the commission even though the buyer has changed brokers. Once again, the determination of who is the procuring cause of the transaction is a fact-sensitive inquiry that turns on the specific facts and circumstances of each case.

 

 

 



Georges Benoliel Founder of NestApple - NestApple NYC cashback rebate

Georges Benoliel

Georges has been working in Wall Street for the last 16 years trading derivatives with hedge funds. He has been an active real estate investor for over a decade. Georges graduated from HEC Business School in Paris and holds a master in Finance from ESADE Barcelona.