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Understanding the Risks and Guiding Your Team: The article we're sharing today from the North Carolina Real Estate Commission (NCREC) delves into a growing trend in our industry: listing and buyer agents hiring licensees not affiliated with their brokerage to show properties.
This practice, while seemingly convenient, brings with it a host of legal and ethical concerns. From agency roles and disclosure requirements to potential violations of Commission rules, this article provides a comprehensive examination of the top ten issues that can arise when brokers not affiliated with the same firm are involved in a transaction.
Brokers-in-Charge, pay special attention to the information in this article. It's not only crucial that you stay informed about these developments, but also that you guide your teams effectively. We strongly suggest considering the addition of a policy to your firm manual regarding the use of showing services.
Concerns When “Showing Agents” Are Not Affiliated with Your Brokerage
June 2023 ebulletin
By Len Elder, Director of Education and Licensing Division
A current trend involves listing and buyer agents hiring licensees not affiliated with their brokerage to show a property to a buyer. Sometimes the showing agents are hired and paid directly by brokers affiliated with a firm other than the listing or buyer agent’s firm. Sometimes showing companies such as Showami.com, ShowforME.com, or Instashowing.com are used.
There are a number of concerns for the brokers involved on both sides of this practice when the brokers are not affiliated with the same firm. Here are the top ten:
What is the agency role of the showing broker?
The showing agents are probably not operating under a valid existing agency agreement. They have not been hired by or authorized to work on behalf of the buyer. The buyer agency agreement (whether oral or written) is with the buyer agent’s affiliated firm of which the showing agent is not a part. Because all representation in North Carolina must be by express agreement, such relationships create compliance issues with the provisions of Rule 58A .0104(a) of the North Carolina Real Estate Commission rules.
Some brokers have suggested that the showing agent is acting as a seller subagent. We previously provided a relevant eBulletin article on this matter, Getting Agency Representation Right: Clarifying the Practice of Seller Subagency. It is questionable whether the showing brokers have met the appropriate requirements to legally practice subagency. Even assuming the showing agent is a subagent of the seller, has the buyer been advised that everything the buyer said during the showing would have to be reported back to the listing agent and/or seller? We doubt that showing agents are operating in this fashion.
Is the showing broker providing and reviewing the Working with Real Estate Agents Disclosure with the buyer?
Are buyer agents who use outside showing agents attempting to create an exclusive oral buyer agency agreement?
How are both brokers fulfilling their obligation to discover and disclose material facts?
Is the showing agent being paid directly by the hiring broker?
Are both the hiring broker and the showing broker paying to, and receiving brokerage service fees from, an unlicensed entity?
Have both the hiring broker and the showing broker received the required consent from their principal for the payment or receipt of such compensation?
Have both brokers verified the existence of E&O coverage regarding their practices?
Is the broker showing properties on behalf of another firm a provisional broker?
Are the brokers involved in the showings affiliating themselves with an unlicensed entity in order to provide brokerage services?
There are a lot of pitfalls and liabilities that can be created when a broker uses a showing agent that is not affiliated with their brokerage. Brokers and Brokers-in-Charge are urged to carefully consider all of the above issues to ensure compliance with North Carolina statutes and Commission rules. Brokers-in-Charge are also urged to take the time and thought necessary to create written policies and procedures for their office regarding the use of non-affiliated showing agents.
Would you like to learn how to use Chat GPT to write a policy to address the use of showing services by agents in your firm?
References
Elder, L. (2023, June). Concerns When “Showing Agents” Are Not Affiliated with Your Brokerage. North Carolina Real Estate Commission Bulletins. Retrieved June 23, 2023.
The information provided in this article is intended for educational purposes only. It does not constitute legal advice and should not be relied upon as such. We strongly recommend consulting with a qualified legal professional or the North Carolina Real Estate Commission directly for guidance related to your specific circumstances.