Identifying the Buyer Agent

Who's Your (Buyer's) Agent?

James L. Goldsmith, Esquire

The Buyers, a married couple from New Jersey, purchased land in Susquehanna County and were about to begin building what would become their permanent residence.

Through frequent over-the-fence conversations, Mr. Buyer became friendly with the neighbor, a retired farmer who owned a large piece of property. Mr. Buyer learned that the farmer would likely part with a number of acres contiguous to the Buyers' property. They were excited about acquiring additional land to serve as a buffer against potential development.

Mrs. Buyer, a licensed broker in New Jersey for over 20 years, contacted a local real estate brokerage and spoke to one of the salespersons. According to Mrs. Buyer, she identified the farmer offering the land and asked the salesperson to represent her in purchasing it. Mrs. Buyer contended that an agency relationship was established in this phone call; the salesperson testified that agency was not discussed other than in his reading the oral Consumer Notice. Both agreed that a date and time were scheduled for the salesperson to meet with Mr. and Mrs. Buyer at their land.

During the meeting, Mr. Buyer was mostly preoccupied with the couple's children and Mrs. Buyer did the talking. She reiterated the couple's interest in acquiring the neighbor's land. The salesperson brought over a tax map and also gave his card to Mrs. Buyer. The salesperson claims to have also offered a Consumer Notice that Mrs. Buyer refused to accept; Mrs. Buyer claims that the salesperson never offered a Consumer Notice. Mrs. Buyer testified that she believed the salesperson was working as the agent for her and her husband.

Several days after the meeting, Mrs. Buyer provided the salesperson with a single-page written document that provided the essential terms of three offers: one to buy a number of acres at a specific price, another to purchase more acreage for a higher price (though less money per acre); and a third indicting a willingness to purchase a remainder interest in the land so that the farmer could retain a life estate.

These offers were never placed in a formal contract presented to the farmer, though they were presented to him. The salesperson later notified Mrs. Buyer that the offers were low and that she would have to raise them. Mrs. Buyer stated that she would not now revise any offer and that her family was leaving for vacation; the matter could wait for her return. She also advised the salesperson that she and her husband were going to look at other properties. At no time did she or her husband contact the salesperson with regard to any other properties.

Sometime after the couple's return from vacation, Mrs. Buyer learned that the salesperson bought a substantial portion of the farmer's land that she and her husband had wanted to buy! She and her husband filed suit claiming their entitlement to the land that the salesperson purchased as their agent.

The sole question for the Court was whether an agency relationship existed between the Buyers and the defendant salesperson. The Court reviewed the basic elements of agency, taking note that the party asserting the existence of an agency relationship has the burden of proving the relationship by a fair preponderance of evidence. The Court also noted that an agency relationship need not be established by proof of specific authority; rather, an agency relationship may be inferred from the facts if the intent to create a relationship of principal and agent existed.

Here, though, there was insufficient evidence to satisfy the burden of proof. The Court found little evidence to support the contention that an agency relationship arose during the initial conversation or in the meeting that followed several days later. Moreover, the Court took note that as a real estate agent in New Jersey, Mrs. Buyer was well aware of the rules required to invoke an agency relationship in that state. (New Jersey uses a Consumer Information Statement similar to the Pennsylvania Consumer Notice which states that a buyer agency relationship should be established in writing.) Therefore, the Court said, "it would, as a practical matter, make sense that she would have been more careful regarding this type of engagement . . . "

In an opinion delivered in January 2008, Judge Kenneth W. Seamans of the Court of Common Pleas of Susquehanna County refused to find that an agency relationship existed between these buyers and the salesperson. This was a rather expensive win for the salesperson, who could have avoided litigation by documenting the nature of the relationship in writing. In this situation the best approach would have been to have Buyers sign a PAR Business Relationship form with a checkmark in the box identifying the relationship as "Seller Agency."

Proceeding in the absence of a clearly defined relationship is extremely risky. The outcome of this case turned in part on Mrs. Buyer's special knowledge as a real estate licensee in another state. It is far more likely that a court would infer a buyer agency relationship in the case of an untrained buyer working with a licensee who has not clearly defined the relationship.

Copyright © Brett M. Woodburn, Esquire, CALDWELL & KEARNS, P.C., 2008

All Rights Reserved

Mr. Goldsmith is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees. He and his firm defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends REALTORS® in disciplinary hearings conducted by the Real Estate Commission. He is one of the voices of the PAR Legal Hotline. Jim may be reached through www.realcompliance.com.