Agency and open houses
Are you handling agency correctly in open houses?
Michigan REALTORS has a Q and A on how REALTORS should handle open houses, particularly if they are asking someone else to staff the event for them.
Spoiler alert, you may need to adjust paperwork.
Open Houses and Agency – a Deeper Dive
As Realtors® are well aware, under the NAR Settlement Agreement, when working with a buyer, a Realtor® must enter into a written agreement with that buyer before touring any home. The agreement must specify the compensation the Realtor® will be paid, regardless of the source of that payment. We continue to receive questions about this requirement in the context of open houses hosted by someone other than the listing agent. With this publication, we’re providing additional analysis and answers to questions that we’ve received over the last several weeks.
1. Can a listing agent still authorize another agent to host an open house?
Yes, however, the agency status of the open house host must be clearly established so that the correct procedures are followed.
2. How do I authorize another agent to represent my seller at an open house?
If the listing firm is a traditional agency firm, all agents in that firm also represent the seller, so any of the firm’s agents can host the open house. If another agent in a designated agency firm is going to host an open house, there needs to be an addendum to the listing agreement which adds the host agent as an additional designated agent for the seller. If the agent is with a different firm, then the listing agent can, with the seller’s permission, enter into a subagency relationship with that agent through their brokerage.
3. If the open house is hosted by an agent of the seller, can that agent prepare an offer on behalf of an attendee of the open house?
Yes. If a buyer who attends the open house wants to submit an offer, the host agent can prepare such an offer but would do so as an agent of the seller. Compensation to the host agent, if any, would be subject to negotiation between the listing agent and the host agent. This should be agreed upon before the open house takes place.
4. Can an agent host an open house in a non-agency capacity?
Yes, but you will need to take care to make sure that the open house host is not deemed to be “working with” any of the buyer attendees within the meaning of NAR’s Settlement Agreement. An agent working with a buyer cannot tour a home with that buyer at an open house without a home tour agreement. However, NAR’s position is that where a Realtor® is hosting an open house not as an agent for the seller, but as for the purpose of attracting buyer clients, the Realtor’s® mere presence at the open house does not mean that the host is “working with” the buyer attendees. Realtors® are cautioned, however, that under Michigan law, an agency relationship can be implied through words or actions even in the absence of a written agreement.
5. Can a designated agency listing agreement contain a blanket authorization for any agent in the firm to host an open house as an agent of the seller at any time during the listing?
No. Under Michigan law, designated agents must be specifically named.
6. Can a home tour agreement state that there will be no compensation paid under the home tour agreement, but that if the buyer decides to put in an offer on that home, the parties will first enter into an agency agreement spelling out the compensation to be paid?
Such an agreement—in essence an agreement to agree in the future—is not legally enforceable.
7. Can a salesperson in a designated agency office be added as a seller’s designated agent for the sole purpose of hosting an open house?
Yes. In an amendment to a listing agreement adding a designated agent, the seller can limit that new agent’s authority to a particular time period or a particular task. In the attached sample form, the parties may agree that the new designated agent will represent the seller for a stated period of time—for example, while the original designated agent will be unavailable for medical reasons or out of the country.
Likewise, in the attached sample form, the seller can authorize the new designated agent to work on the seller’s behalf only in connection with an open house and any transaction arising out of that open house. This would leave the new designated agent free to represent any buyer for the seller’s home other than one of the open-house attendees. Note that the language in the attached sample form does not permit the open house host to represent any purchaser of the home who attended the open house even after the open house is over. While we have seen language that purports to allow such representation, we would not recommend such a practice. During an open house, an agent representing a seller should not be arranging to represent attendees of the open house in the purchase of that home. Not only could such discussion raise agency responsibility issues but also could be deemed to be “working with a buyer” under the NAR Settlement Agreement.
If you have additional questions, please email Brian Westrin at bwestrin@mirealtors.com or Rebecca Berke at bberke@mirealtors.com for further assistance.
