Latest / Dishin' Dirt with Gary Pickren / The Builder's Agent Cannot Go Around You or Cut You Out — Know Your Rights Before It Happens

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The Builder's Agent Cannot Go Around You or Cut You Out — Know Your Rights Before It Happens · Dishin' Dirt with Gary Pickren

• 0:01
  SPEAKER_00: This is Dish and Dirt with Gary Pickering, South Carolina's only podcast dedicated to the real estate agent craft.
• 0:09
  SPEAKER_00: And now the host of Dish and Dirt, Gary Picker.
• 0:17
  SPEAKER_00: I'm your often opinionated, rarely wrong host, Gary Pickering, coming to you from the beautiful downtown Columbia, South Carolina offices of Blair Keto Pickering Castellan.
• 0:25
  SPEAKER_00: This, the last week of a very, very hot July.
• 0:29
  SPEAKER_00: Great topic in store for you today.
• 0:32
  SPEAKER_00: We have another real estate commission guidance letter, as they like to call it.
• 0:35
  SPEAKER_00: This one's gonna deal with builder agents and what they should not be doing with the clients that you represent.
• 0:42
  SPEAKER_00: Get lots of questions from real estate agents saying the builder's doing this or the builder's agent's doing that.
• 0:48
  SPEAKER_00: Can we do this?
• 0:49
  SPEAKER_00: Can they do this?
• 0:50
  SPEAKER_00: So we're gonna set the record straight today on what builder agents can and cannot do with your represented clients.
• 0:57
  SPEAKER_00: So this is a podcast, whether you're a builder's agent or not a builder's agent, just have buyers that buy houses from builders.
• 1:04
  SPEAKER_00: You need to listen to this and make sure that the builder's agent's following the law, you're following the law, and that everybody's doing what is in the best interest for the consumer.
• 1:12
  SPEAKER_00: That's what our laws are all about, protecting the consumer.
• 1:15
  SPEAKER_00: We want to make sure that our consumers are being protected, particularly when it comes to agency and disclosures.
• 1:20
  SPEAKER_00: So let's go ahead and get started.
• 1:22
  SPEAKER_00: On June 12th of this year, the real estate commission issued a guidance letter on builder real estate agents.
• 1:29
  SPEAKER_00: And particularly, the guidance letter was entitled No Builder Agent Exemption in South Carolina.
• 1:36
  SPEAKER_00: Now, if I was a real estate agent and saw that heading, I might not click on that particular guidance letter because I'm like, what do I care about a builder agent exemption letter?
• 1:45
  SPEAKER_00: That's partly what it is about, but it is not all of what it's about.
• 1:50
  SPEAKER_00: It's really more about what a real estate agent can do as a builder's agent and what they can't do when it becomes comes to your client's agency, whether or not they have to give certain disclosures, can they interfere with your agency and things of that nature?
• 2:02
  SPEAKER_00: Which brings me to a big point.
• 2:04
  SPEAKER_00: Obviously, you're a top real estate agent because you're listening to the number one podcast in real estate in South Carolina.
• 2:08
  SPEAKER_00: If you weren't, you wouldn't be listening to this podcast, right?
• 2:10
  SPEAKER_00: I would strongly suggest, therefore, that you go to the South Carolina Real Estate Commission's website once a month, look at the guidance letters, don't worry about what the header is it says it's about, read the whole thing because even if it's a topic that doesn't really relate to your type of practice, there's going to be a nugget or two in there that you can take away and use.
• 2:28
  SPEAKER_00: You also should probably go look at some of the orders just to make sure that you're following the law there as well.
• 2:33
  SPEAKER_00: Since we issued this guidance, most non-builder agents have been saying it's about time that builder agents are held to the exact same standards that all licensees are, and that builder agents must follow agency law, the disclosure laws, and not interfere with agency just like everybody else.
• 2:49
  SPEAKER_00: And to that, I 100% agree.
• 2:52
  SPEAKER_00: Builder agents, some, not all, are not following the rules when it comes to agency, interference with agency, and certain disclosures.
• 3:00
  SPEAKER_00: I am not here saying that all builders are doing this.
• 3:04
  SPEAKER_00: We know that's not to be the case.
• 3:05
  SPEAKER_00: We represent several really, really wonderful builders who do it the right way.
• 3:09
  SPEAKER_00: I've advised several builders as to how to operate their own real estate agencies and so forth.
• 3:14
  SPEAKER_00: So we know there's a large numbers that follow the rules and do it the right way, but there are some builder agents perhaps that are not doing it, or there's some builders that are pushing it to the edge.
• 3:24
  SPEAKER_00: And we want to make sure that they don't overstep that line.
• 3:28
  SPEAKER_00: However, since this guidance letter has come out, there's been a lot of builder agents who have been very, very upset.
• 3:34
  SPEAKER_00: As my good friend Austin Smallwood over at South Conor Realtors Association said, the hotline has been lit up since this opinion came out or this guidance letter came out.
• 3:43
  SPEAKER_00: And builder agents have been complaining to him left and right, saying this is new law, this isn't fair.
• 3:48
  SPEAKER_00: But unfortunately, as I said, there have been some builders and builder agents who don't believe this applies to them.
• 3:52
  SPEAKER_00: And if they do believe it applies to them, they're either ignoring it or believe they can just push it right up to the limit.
• 3:58
  SPEAKER_00: And this guidance letter says, no, you can't do it.
• 4:00
  SPEAKER_00: The outrage that we're seeing from builder agents proves to me that the real estate commission was right in seeing this interference issue as a big issue, and that the commission was right in issuing guidance not only as to represented clients, but also unrepresented consumers and what the duties that the builder agent has in terms of disclosure as in terms of agency.
• 4:24
  SPEAKER_00: And I think this their outrage 100% proves it.
• 4:27
  SPEAKER_00: It's like, you know, if you weren't outraged, it means you were doing it the right way in the first place.
• 4:32
  SPEAKER_00: The fact that you're so outraged that you now have to do it this way tells me you weren't doing it right in the first place.
• 4:37
  SPEAKER_00: The real estate commission was also correct that believing that some agents were simply disobeying the law when it comes to these issues, particularly with agency.
• 4:46
  SPEAKER_00: And again, I don't think anybody on the real estate commission, and I certainly do not believe this, that this is every builder, that all the builders are out there, or it's a majority of the builder.
• 4:54
  SPEAKER_00: There are many builders who do things the right way and have their agents work the right way, whether they are agents in their own company or whether it's agents they've hired through a brokerage.
• 5:05
  SPEAKER_00: However, there can be no doubt, no argument, that there are a swath of agents out there who do not think agency rules apply to them, that they don't have any duty to determine whether agency has been established with another agent or that they can contact a client and speak directly to your client.
• 5:20
  SPEAKER_00: And that's what this guidance letter goes to.
• 5:22
  SPEAKER_00: Now, over the past year or so, I have personally noticed a tremendous increase in the number of phone calls from real estate agents asking, can this builder agent do this?
• 5:32
  SPEAKER_00: Can this builder agent do that?
• 5:33
  SPEAKER_00: And inevitably, the answer is usually no, they can't.
• 5:36
  SPEAKER_00: That's in violation of your agency rules or they're interfering with your agency or that's against the law.
• 5:40
  SPEAKER_00: And here are the four main areas that I receive complaints, which I'm gonna talk about, which are basically addressed by the real estate commission in the letter.
• 5:48
  SPEAKER_00: The first one that I see mostly is about a builder agent contacting a represented buyer directly away from the real estate agent.
• 5:59
  SPEAKER_00: This meaning basically your client is signed a contract, and then the builder's agent essentially, I'll take it from here, and they start communicating directly with your client as to loan issues, delays, selection issues in the house, and so forth.
• 6:13
  SPEAKER_00: And make no mistake about it, you cannot do that.
• 6:16
  SPEAKER_00: As a builder agent, you may not have direct communication with a represented client.
• 6:21
  SPEAKER_00: That discussion must go directly through the real estate agent.
• 6:25
  SPEAKER_00: And I don't know why that is supposedly some new issue or law, but I know that that has been the case in the belief of a bunch of real estate agents, which is wrong.
• 6:34
  SPEAKER_00: Number two, issue I see is that there's apparently a builder that when you take your client to their model home, their policy is you hand the client over to us, we'll guarantee your commission.
• 6:44
  SPEAKER_00: Now you leave.
• 6:45
  SPEAKER_00: You are out, you're cut off.
• 6:46
  SPEAKER_00: Or you can stay, but you have to go sit in the corner while I handle the client.
• 6:51
  SPEAKER_00: Well, that is obviously violating the agency agreement that this consumer has with the buyer's agent.
• 6:58
  SPEAKER_00: And that is wrong, and we know that to be wrong, because if you look at the purpose of our statute, which is consumer protection, the reason we have agency is so that the consumer can decide who they want representing their issues, create a fiduciary duty from that real estate licensee to themselves, and know that they are in good hands with somebody who is working on their behalf, trying to get the best deal for them.
• 7:22
  SPEAKER_00: The builder's agent in no shape or manner represents the best interest of the buyers.
• 7:27
  SPEAKER_00: And never do they represent the best interest of the buyers.
• 7:30
  SPEAKER_00: They can say they do, but the reality of it is their master in this situation is the builder.
• 7:35
  SPEAKER_00: And that's it.
• 7:36
  SPEAKER_00: That's who they answer to.
• 7:37
  SPEAKER_00: That is who they're responsible to, that is who their fiduciary duties are to.
• 7:40
  SPEAKER_00: And so once a consumer decides that they want this particular agent to represent their issue, then that has to be honored to protect the consumer.
• 7:50
  SPEAKER_00: And that's why we have these rules.
• 7:52
  SPEAKER_00: The third thing we see is that your client will have signed agency with you, go to an open house on a weekend or a model home, and the builder's agent is not taking appropriate steps to determine if the client's represented.
• 8:04
  SPEAKER_00: They may simply ask, are you working with an agent?
• 8:06
  SPEAKER_00: And the buyer will say no, or they may not ask it.
• 8:08
  SPEAKER_00: They may have them sign in and say they're not working with an agent, but they're not asking the same probing questions that any real estate licensee is required to ask before you can show a house to somebody.
• 8:20
  SPEAKER_00: If I am a buyer's, uh buyer and I come to you and ask if I can go see a pre-existing house in this neighborhood in Sumter, you have a duty that goes beyond simply saying, are you working with another agent?
• 8:33
  SPEAKER_00: You should be asking me questions like, well, have you seen any other houses in Sumter?
• 8:37
  SPEAKER_00: And I can say, Yes, I've seen these two.
• 8:38
  SPEAKER_00: And you should then know that obviously I'm working with somebody and say, Well, what was the agent's name who showed you the property?
• 8:43
  SPEAKER_00: You have to take reasonable steps.
• 8:46
  SPEAKER_00: The statute is not just do your best.
• 8:48
  SPEAKER_00: It says you shall not interfere.
• 8:50
  SPEAKER_00: That's an a positive.
• 8:51
  SPEAKER_00: You will not do it.
• 8:52
  SPEAKER_00: You cannot do it.
• 8:53
  SPEAKER_00: It's not do your best job or ask a question or hopefully the guy's not lying to you or understood the question, that you will not interfere.
• 9:01
  SPEAKER_00: The only way you can ensure that you don't interfere is asking probing legitimate questions.
• 9:05
  SPEAKER_00: And that is one thing that Brandy Duncan, our advice counsel, did an outstanding job in this guidance letter, is that she attaches an appendix that gives examples of types of questions you should ask.
• 9:16
  SPEAKER_00: Now, a lot of the builder agents are getting up and uproar over this saying that these are what I mean, we have to re-as these questions.
• 9:22
  SPEAKER_00: This is a requirement.
• 9:23
  SPEAKER_00: That is not what it says.
• 9:24
  SPEAKER_00: These are example questions you should use to determine whether or not there's agency.
• 9:29
  SPEAKER_00: You can use whatever questions you want, but your attempt needs to be reasonable because if you have to answer to the real estate commission, you better be able to show that it was more than are you represented by somebody or are you working with an agent?
• 9:41
  SPEAKER_00: That would not be considered reasonable under any circumstance.
• 9:44
  SPEAKER_00: There has to be more effort than that.
• 9:46
  SPEAKER_00: And what Brandy has done is given you an outstanding uh list of examples of ways you could ask it.
• 9:52
  SPEAKER_00: Brandi, of course, our our legal counsel, as I said, she wrote the guidance letter with the assistance of the real estate commission.
• 9:59
  SPEAKER_00: All of the real estate commissioners did uh participate and give advice and uh guidance on this letter that Brandy then composed for us.
• 10:07
  SPEAKER_00: And then the fourth thing I hear real estate agents complaining to me about is that you will have a client that will go look at a house outside of your presence.
• 10:16
  SPEAKER_00: And because you did not register the client before your client saw the house, the builder doesn't want to pay you.
• 10:22
  SPEAKER_00: Now, of course, as you know, the real estate commission has no jurisdiction over commissions, and quite frankly, there's nothing that requires the builder to ever pay you.
• 10:29
  SPEAKER_00: That's a negotiated term of the contract.
• 10:32
  SPEAKER_00: What is required is that your buyer would have to pay you.
• 10:34
  SPEAKER_00: But the way some of these things go down is that you didn't register the client, so the buyer doesn't have to pay you either because the builder's agent's telling them they don't have to pay you.
• 10:43
  SPEAKER_00: But there's a big interference issue here when this happens, and we're gonna talk about that uh as we move forward.
• 10:49
  SPEAKER_00: Mainly the commission addresses the first three of the four.
• 10:52
  SPEAKER_00: I will address the fourth one as we get there.
• 10:55
  SPEAKER_00: Just last year, I was standing in a real estate agent friend of mine's office named Damien, and he was on the phone with a real estate agent who represented a builder, and they were getting into it pretty badly.
• 11:05
  SPEAKER_00: This agent keeps talking to my client uh about changing lenders and all this other stuff.
• 11:11
  SPEAKER_00: And so I sit there and just sat there and listened.
• 11:13
  SPEAKER_00: And the builder agent says, I've been doing this for 20 years.
• 11:16
  SPEAKER_00: I can talk to who I want to.
• 11:17
  SPEAKER_00: I don't have to go through you to talk to the client.
• 11:19
  SPEAKER_00: They're my client too.
• 11:20
  SPEAKER_00: And Damon said, Well, attorney Gary Pickering's right here.
• 11:23
  SPEAKER_00: Why don't you ask him if that's true?
• 11:24
  SPEAKER_00: And I say, Well, first of all, they're not your clients, you don't have agency with them.
• 11:26
  SPEAKER_00: And secondly, you're 100% wrong in what you're saying.
• 11:29
  SPEAKER_00: You may not interfere with the agency that Damon has.
• 11:31
  SPEAKER_00: You cannot call his client.
• 11:33
  SPEAKER_00: Quit doing it.
• 11:34
  SPEAKER_00: She got very quiet and couldn't believe I just told her that.
• 11:37
  SPEAKER_00: Um, which brings us to the very first part of the guidance letter and why I think a lot of this happens.
• 11:41
  SPEAKER_00: Some builder agents think that the guidance letter doesn't apply to them.
• 11:44
  SPEAKER_00: And I want to address this one more time here.
• 11:46
  SPEAKER_00: This is not an anti-builder podcast today.
• 11:49
  SPEAKER_00: This is not an anti-builder agent podcast.
• 11:51
  SPEAKER_00: Matter of fact, a builder agent is in my office right now as I record this, and I was talking to the builder agent about this, and he's like, please get this message out there.
• 11:58
  SPEAKER_00: Couldn't agree with you more.
• 12:00
  SPEAKER_00: We love all agents, whether you represent new construction or resale or whatever, land.
• 12:04
  SPEAKER_00: We love real estate agents.
• 12:05
  SPEAKER_00: That's where Blair Cato has strived for many years is building our practice based on helping real estate agents.
• 12:11
  SPEAKER_00: The purpose of this podcast is to help you as a builder agent not violate these rules so that you don't get in trouble.
• 12:18
  SPEAKER_00: We're also here today to try to help give the builders the information they need so they can more effectively work with you and work with the consumer.
• 12:25
  SPEAKER_00: And then thirdly, we want to make sure that the buyers and buyers agents know what is expected and not expected, and they're working with you as a builder.
• 12:32
  SPEAKER_00: And so that's what this guidance letter was about, and that's what this podcast is about, is protecting everybody.
• 12:37
  SPEAKER_00: I'm all about consumer protection here, but I believe the best way to protect consumers is by protecting the agents.
• 12:42
  SPEAKER_00: Tell the agents what you can and can't do, they'll follow the rules and we don't have to worry about it.
• 12:46
  SPEAKER_00: Let's look at the first part of the guidance letter.
• 12:48
  SPEAKER_00: The first part of the guidance letter is does a South, does South Carolina have a builder exemption?
• 12:52
  SPEAKER_00: Essentially, does the statute exempts builders from having to follow it?
• 12:56
  SPEAKER_00: North Carolina, Georgia have exemptions that's built in the law that allows builder agents to operate on the builder's behalf uh without having her license as a real estate licensee, which is utterly insane to me, and or without having to comply with certain real estate agency laws, which also might be insane.
• 13:12
  SPEAKER_00: I oppose this.
• 13:13
  SPEAKER_00: You should 100% be licensed to sell real estate in any form or fashion, which brings me to a kind of an issue about representing yourself.
• 13:20
  SPEAKER_00: Sure, a seller can sell the property themselves without having representation.
• 13:24
  SPEAKER_00: A builder can do the same thing if he's not incorporated.
• 13:27
  SPEAKER_00: So, for example, if I was a builder as an individual, Gary Pickerin, I could build houses and sell them myself.
• 13:32
  SPEAKER_00: I'd be a fool not to have incorporated it.
• 13:34
  SPEAKER_00: But once I incorporate it, Gary Picker, the individual, and Gary Picker builders are two different entities, and Gary Picker builders cannot be represented by Gary, an unlicensed agent.
• 13:44
  SPEAKER_00: If I'm licensed, then I can also sell my own property in that situation.
• 13:47
  SPEAKER_00: But if I'm unlicensed, I cannot do that as a builder if my business is incorporated.
• 13:53
  SPEAKER_00: That's no different than an LLC company, an Inc.
• 13:56
  SPEAKER_00: partnership cannot represent itself in court.
• 13:58
  SPEAKER_00: You have to have a lawyer represent you.
• 14:00
  SPEAKER_00: You cannot, as a member of an LLC, go represent your company in court because you are a separate entity than the company.
• 14:07
  SPEAKER_00: Every person should have a licensed real estate agent representing them in a transaction, whether it's new construction or not.
• 14:12
  SPEAKER_00: In fact, I would argue it's probably more needed in new construction because of the unequal bargaining position that a builder has over a consumer.
• 14:22
  SPEAKER_00: And we're going to talk in a minute about a case here that the court just ruled on that shows what that unequal bargaining power is.
• 14:28
  SPEAKER_00: Now, as to the license law, all licensees should follow all license law, period.
• 14:33
  SPEAKER_00: There shouldn't be an exemption because you sit work in new construction or commercial that says you don't have to follow these rules.
• 14:38
  SPEAKER_00: You should have to follow the rules.
• 14:39
  SPEAKER_00: Now, with that being said, there are certain rules that need to be cleaned up, maybe and clarified, that that makes it impractical.
• 14:46
  SPEAKER_00: For example, you should not have to get a listing agreement on every single lot in every single subdivision when you're working for a builder.
• 14:53
  SPEAKER_00: However, you should have to get one on the entire subdivision and not just have a blanket one that's good for anything they ever sell.
• 14:59
  SPEAKER_00: It should be able to be done on the subdivisions.
• 15:02
  SPEAKER_00: The other thing I could see is the issue of you can't list property until they own it.
• 15:06
  SPEAKER_00: Well, a lot of builders will be under contract to take down a hundred lots.
• 15:10
  SPEAKER_00: They've already taken down two, so they own two.
• 15:12
  SPEAKER_00: They don't own the other 98, but you're already selling all hundred lots.
• 15:16
  SPEAKER_00: You're advertising and marketing all those.
• 15:18
  SPEAKER_00: Hypertechnically, under the statute, that's probably not allowed.
• 15:21
  SPEAKER_00: But I don't think the real estate commission would ever hold you in default of that statute because we recognize how unworkable that is.
• 15:26
  SPEAKER_00: The builder has the right to buy the entire neighborhood.
• 15:29
  SPEAKER_00: They're already taking lots down, so you have the right to go ahead and sell the whole neighborhood because at any time a lot sells, they'll take that lot down and sell it.
• 15:36
  SPEAKER_00: Some things we should be able to try to work through to clean up, but just saying that they're not responsible for following agency rules, interference with agency, disclosure issues, 100% opposed to that because that does not protect the consumer and the consumer's rights.
• 15:49
  SPEAKER_00: So now let's talk about that case I was talking about.
• 15:52
  SPEAKER_00: This is an unpublished opinion, came out July 16th of 2025, Dawkins versus Eastwood Homes of Columbia, LLC.
• 15:58
  SPEAKER_00: In case you want to look it up, it's 2025-UP-239.
• 16:03
  SPEAKER_00: It's a South Carolina Court of Appeals case.
• 16:05
  SPEAKER_00: And what the case said was that the provision which allows a builder to unilaterally terminate the contract was unconscionable.
• 16:12
  SPEAKER_00: Finding of procedural unconscionability, noting that the contracts were adhesion contracts with non-negotiable terms, and the home own home buyers were in an unequal bargaining position compared to Eastwood at large home builder.
• 16:25
  SPEAKER_00: The court found, and get a load of this language here, substantive unconscionability in chapter 26, as it allows Eastwood to unilaterally terminate the contract at will, creating a one-sided and oppressive, oppressive imbalance of power.
• 16:40
  SPEAKER_00: This is where Eastwood has apparently in their contract that if they want to terminate the contract anytime they want, they can.
• 16:45
  SPEAKER_00: The court said that that is a one-sided and oppressive imbalance of power and not enforceable.
• 16:51
  SPEAKER_00: The court also found substantive unconscionability in paragraph 25, as it provided Eastwood with extensive remedies in the event of buyer default but limited buyer's remedies to a refund in$100.
• 17:02
  SPEAKER_00: But the point here is that the court has already recognized that the builder is in a much stronger bargaining position than any consumer ever will be, that the builder is also more learned, has more knowledge than the average seller, so the positions are already unequal uneven.
• 17:15
  SPEAKER_00: That is why I believe that if the courts already recognize that, that's going to be the same way with the consumers.
• 17:21
  SPEAKER_00: The courts recognize that a consumer buyer buying a house from a builder is in an unequal bargaining position.
• 17:27
  SPEAKER_00: So therefore, we have to do everything to ensure fair representation, agency rules are being complied with, agencies not being interfered with, and disclosures are happening because already it's determined that there's an unequal bargaining position.
• 17:42
  SPEAKER_00: In my opinion, a buyer should always have its separate real estate representation, particularly with new construction, because it is an absolute unequal bargaining power.
• 17:51
  SPEAKER_00: In fact, many good builders that I have worked with prohibit their agents from doing dual agency because they know that the real estate agent ultimately has to keep the builder happy.
• 18:01
  SPEAKER_00: And so it's just unequal.
• 18:02
  SPEAKER_00: There's a difference in loyalty there.
• 18:04
  SPEAKER_00: There's no way they can be equally loyal to both the buyer and the builder because the builder is where they're getting their business.
• 18:09
  SPEAKER_00: And I believe every builder should go even a step farther.
• 18:12
  SPEAKER_00: And besides outlawing dual agency, I think builders should be telling their agents that all consumers need to have representation.
• 18:19
  SPEAKER_00: They need to do everything they can to convince the buyers to go get their representation.
• 18:24
  SPEAKER_00: Now, why in the world would they do that?
• 18:25
  SPEAKER_00: Well, it protects the buyer, but it also protects the builders from more claims of unequal bargaining positions.
• 18:31
  SPEAKER_00: They are represented, Your Honor, by a top licensed real estate agent who is protecting their interests.
• 18:37
  SPEAKER_00: It equals that argument out.
• 18:39
  SPEAKER_00: When they are unrepresented, it makes that argument even greater.
• 18:42
  SPEAKER_00: So I think it's in everyone's best interest and protection that the buyer always be represented by independent real estate agent.
• 18:49
  SPEAKER_00: The real estate commission went on and stated that unlike North Carolina and Georgia, South Carolina law has no provisions built into its statute to exempt builders' agents from having to be real estate licensees or from having to comply with all of the normal rules and requirements regarding agency.
• 19:02
  SPEAKER_00: Listen to that.
• 19:02
  SPEAKER_00: All of the rules, not some of them, not the ones you like, not the ones that are not inconvenient, all of the rules regarding agency.
• 19:09
  SPEAKER_00: Therefore, builder agents in South Carolina must comply with all South Carolina real estate laws, including but not limited.
• 19:14
  SPEAKER_00: Now she listed five.
• 19:15
  SPEAKER_00: There's others out there, but these are the five.
• 19:17
  SPEAKER_00: Number one was being a real estate licensee.
• 19:19
  SPEAKER_00: Again, we mentioned that earlier, that that shouldn't be a question.
• 19:22
  SPEAKER_00: If you're going to sell real estate, you should be licensed or the owner.
• 19:25
  SPEAKER_00: This has always been the law.
• 19:26
  SPEAKER_00: So for real estate agents representing builders that think this is new law, they're crazy.
• 19:30
  SPEAKER_00: Number two and number four are essentially the same.
• 19:32
  SPEAKER_00: It's provide a disclosure of brokerage relationship form approved by the commission to the builder per upon first subjective contact for each property to be sold.
• 19:40
  SPEAKER_00: And number four is that same form uh to potential buyers upon first subjective contact.
• 19:46
  SPEAKER_00: Again, this is the law.
• 19:47
  SPEAKER_00: This is nothing new.
• 19:48
  SPEAKER_00: You have to require, you are required to provide this disclosure of brokerage relationship upon first subjective contact.
• 19:54
  SPEAKER_00: The real estate commission has stated that subjective contact does occur before you show a house.
• 20:00
  SPEAKER_00: And then you have to add to this the lawsuit, the Sitzer Burnett lawsuit, which now requires all realtors prior to showing the house to have a form signed by the buyer.
• 20:09
  SPEAKER_00: And so this is the same thing here.
• 20:11
  SPEAKER_00: The real estate commission fixed this form and added a place for it to be signed and added the necessary language before showing the house.
• 20:17
  SPEAKER_00: You need to provide a copy of the disclosure of brokerage relationships.
• 20:20
  SPEAKER_00: My advice is to print a copy of it out and just keep it on your desk at the model or open home and hand it to them when they're there.
• 20:26
  SPEAKER_00: What does it hurt you to do?
• 20:27
  SPEAKER_00: It's nothing big deal here.
• 20:28
  SPEAKER_00: Before you show the house, we're required to give this disclosure relationships.
• 20:31
  SPEAKER_00: It shows that you're an honest builder agent.
• 20:33
  SPEAKER_00: It shows that you are doing the things the right way.
• 20:35
  SPEAKER_00: It's that simple.
• 20:36
  SPEAKER_00: Number three, entering into a written agency listing agreement is appropriate for each property to be sold.
• 20:41
  SPEAKER_00: Again, I don't understand why that would be of any controversy.
• 20:44
  SPEAKER_00: Of course, you know you can't market and advertise property without having listing.
• 20:47
  SPEAKER_00: Moves us to number five, respecting any agency relationship that may exist between potential buyers and buyers' agents.
• 20:53
  SPEAKER_00: That's 4057-350.
• 20:54
  SPEAKER_00: Again, this is not new law.
• 20:55
  SPEAKER_00: This is not groundbreaking interpretation.
• 20:57
  SPEAKER_00: It's always said you may not interfere with the agency relationship.
• 21:00
  SPEAKER_00: And again, that relationship uh protection, the word is you they use a shall.
• 21:04
  SPEAKER_00: You shall not interfere.
• 21:05
  SPEAKER_00: It's a requirement.
• 21:06
  SPEAKER_00: It's not a suggestion.
• 21:07
  SPEAKER_00: It's not a do the best you can.
• 21:09
  SPEAKER_00: It is an absolute requirement.
• 21:11
  SPEAKER_00: So frankly, I don't know what the big to-do is and why people are calling Austin whining about this.
• 21:16
  SPEAKER_00: The fact that you were crying and whining about this tells me you haven't been obeying the law for years.
• 21:20
  SPEAKER_00: And these aren't new tasks.
• 21:23
  SPEAKER_00: This is the way it's always been.
• 21:24
  SPEAKER_00: So after this section, the real estate commission went in and broke down your requirements for represented versus unrepresented consumers.
• 21:32
  SPEAKER_00: So we're going to talk about represented first and some of the issues that were presented that mainly cover the three big issues we've talked about.
• 21:39
  SPEAKER_00: Brandy comes right out in her written argument for the commission with some examples.
• 21:44
  SPEAKER_00: For example, builder's agent encounters a buyer, a potential buyer represented by a buyer's agent.
• 21:49
  SPEAKER_00: They may not show a home for sale to the buyer without their buyer agent present.
• 21:54
  SPEAKER_00: Bottom line is you've got to determine whether the buyer is represented.
• 21:58
  SPEAKER_00: The buyer's represented, you need to have the buyer's agent there.
• 22:00
  SPEAKER_00: No doubts about it.
• 22:01
  SPEAKER_00: You can't have the buyer's agent drop off the client and then you tell them to leave.
• 22:05
  SPEAKER_00: I know there's a builder doing that.
• 22:06
  SPEAKER_00: That needs to stop.
• 22:07
  SPEAKER_00: The buyer's agent needs to be with the buyer at all times when they're showing the house, negotiating a contract, signing the contract, and so forth.
• 22:14
  SPEAKER_00: And that's not happening.
• 22:15
  SPEAKER_00: I'm understanding that sometimes a contract's being negotiated and signed outside of the buyer's agent.
• 22:20
  SPEAKER_00: The buyer's agent's there to represent, protect the buyer.
• 22:22
  SPEAKER_00: Period.
• 22:23
  SPEAKER_00: Must be there.
• 22:24
  SPEAKER_00: A builder agent may have an open house at a model home, but must ensure they continue to comply with all laws regarding agency, remaining respectful of and in compliance with laws surrounding agency is a requirement of 4057-710-A24.
• 22:38
  SPEAKER_00: Again, this goes back to you cannot interfere with the agency of another agent.
• 22:42
  SPEAKER_00: You need to be asking questions.
• 22:43
  SPEAKER_00: So if you're sitting in a model home or having an open house and some consumer walks in off the street, you have a bigger duty than simply saying, Are you represented or are you working with somebody?
• 22:52
  SPEAKER_00: You have to ask probing questions so that you can reasonably give an effort to try to determine if they're represented.
• 22:57
  SPEAKER_00: If they're represented, that's the end of it.
• 22:59
  SPEAKER_00: You've got to have their agent there.
• 23:00
  SPEAKER_00: Can't show them a house, get them to sign a contract, write out that other agent.
• 23:04
  SPEAKER_00: Next, when working with a buyer that is represented buyer's agent, a builder agent needs to ensure they're communicating with the buyer through their buyer's agent.
• 23:11
  SPEAKER_00: Cutting the buyer's agent out of the communication relating to negotiations, details of the purchase of the land of the home, inspections, including final walkthroughs, punch list items, is a violation of the agency relationship, can cause harm to the buyer due to buyer not having their best interests.
• 23:25
  SPEAKER_00: Being told that while you negotiate the contract, you just leave agent and will negotiate the contract with the buyer.
• 23:30
  SPEAKER_00: No, the buyer's agent's going to be there.
• 23:32
  SPEAKER_00: Not including them in details of what's going on during the construction, talking directly to the buyer during the construction process, talking directly to the buyer about the loan process.
• 23:40
  SPEAKER_00: That can't happen.
• 23:41
  SPEAKER_00: Doing the final walkthrough in the punch list without the agent being involved.
• 23:45
  SPEAKER_00: That's a violation if you're directing that.
• 23:47
  SPEAKER_00: All of this is interfering with the buyer's agent.
• 23:50
  SPEAKER_00: In short, you do not have to turn over your client to the builder's agent.
• 23:54
  SPEAKER_00: And I've heard that too many times that, oh, this builder requires us to essentially turn our client over to them or their agent and they'll handle it from there.
• 24:01
  SPEAKER_00: That is 100% a violation of agency, period.
• 24:05
  SPEAKER_00: And this violation, this communication requirement doesn't only exist before the contract sign, but during contract signing and after contract signing, all the way up to closing.
• 24:15
  SPEAKER_00: Very clear as to that.
• 24:17
  SPEAKER_00: Next, the commission warns builder agents need to consider that the contracts they ask buyers to sign are these contracts don't violate agency protections or mislead the buyer.
• 24:27
  SPEAKER_00: This is because unclear contract structures and commission languages are unintentionally or interfering with agency duties and confuse the buyer as to who represents whom in the transaction.
• 24:37
  SPEAKER_00: It cannot be anything, there cannot be anything in the contract that is confusing as to who's representing the buyer.
• 24:43
  SPEAKER_00: Builder's agent is not representing the buyer.
• 24:45
  SPEAKER_00: Nothing can be done to confuse that or to interfere with that representation of that buyer's agent.
• 24:51
  SPEAKER_00: The commission gives three examples and three statements.
• 24:53
  SPEAKER_00: Number one, builder imposed commission terms or related restrictions that condition commission payment to a buyer's agent or builder pre-approval, specific specified percentages or internal registration systems may conflict with already signed buyer agency agreements.
• 25:08
  SPEAKER_00: That's where we go back to, where you have to pre-register your client.
• 25:11
  SPEAKER_00: Could be interference with buyer agency.
• 25:13
  SPEAKER_00: I've already signed my client.
• 25:14
  SPEAKER_00: My client doesn't need to sign in with you to see the house.
• 25:17
  SPEAKER_00: If I'm representing a buyer, tell your buyer, don't sign in.
• 25:20
  SPEAKER_00: They don't need to sign any registration.
• 25:21
  SPEAKER_00: That's going to be violation of buyer agency agreements.
• 25:24
  SPEAKER_00: Number two, contractual language that restricts rebates, gifts, or commission credits from the buyer's agent to the buyer, if misapplied, that could inhibit lawful and transparent compensation arrangements that are permitted when properly disclosed.
• 25:35
  SPEAKER_00: Number three, ambiguity related to the performance of advisory tasks versus clerical tasks.
• 25:39
  SPEAKER_00: If builder's agent advises, negotiate, or suggests terms to the buyer without clearly deferring to the buyer's agent and including them in the communication, then buyer's agent risks creating an implied agency relationship and violating buyer's agent exclusive representation agreement.
• 25:53
  SPEAKER_00: This is why you should not communicate with the buyer at all outside of the buyer's agent.
• 25:58
  SPEAKER_00: When you start giving them advice, telling them what they should do, leading them to a path, that is when you have violated agency.
• 26:06
  SPEAKER_00: After that, the real estate commission then looked at what a builder agent has to do with unrepresented consumers.
• 26:12
  SPEAKER_00: And essentially, they have to provide the disclosure of brokerage relationship forms at substantive contact.
• 26:16
  SPEAKER_00: We've discussed in many podcasts that substantive contact when that occurs, when the conversation turns substantive regarding one's real estate needs or abilities and things of that nature.
• 26:25
  SPEAKER_00: It's really no different than for a resale agent.
• 26:28
  SPEAKER_00: The guidance letter does state discussions about types of homes other than the model home that may be available for sale.
• 26:33
  SPEAKER_00: It's definitely a subjective contact.
• 26:35
  SPEAKER_00: Showing homes other than the model home, which could be considered open house to potential buyers.
• 26:38
  SPEAKER_00: I think the subjective contact is shown in the model home, quite frankly.
• 26:41
  SPEAKER_00: Discussing or showing specific plots of land which could be built on, prices for homes that could be built, upgrades that can be added, all of that is subjective contact.
• 26:49
  SPEAKER_00: All of that requires a disclosure of brokerage relationship.
• 26:52
  SPEAKER_00: You also have the duty to explain client relationships with the buyer, particularly if they're going to enter into any type of agency agreement with the buyer, where that would create a dual agency.
• 27:02
  SPEAKER_00: So dual agency must be explained in detail.
• 27:05
  SPEAKER_00: If you're going to continue to represent the builder but only represent the buyer as transaction brokerage, you have to explain what transaction brokerage relationship is and the limitations of it.
• 27:16
  SPEAKER_00: And I think you telling the consumer that they will save money by not having real estate agent involved, I think it's a very hard argument to prove that the price was somehow in less because they did not have a real estate agent.
• 27:28
  SPEAKER_00: I think you probably can go look at the sales history and see that there's not a significant difference in the pricing.
• 27:34
  SPEAKER_00: So let's circle around in conclusion here.
• 27:36
  SPEAKER_00: What we've learned from the guidance letter in the podcast today is you cannot contact a represented client without directly going through the real estate agent who represents that client.
• 27:45
  SPEAKER_00: Number two, builder agents quit telling buyer agents that they have to hand their client over to you.
• 27:50
  SPEAKER_00: They can't participate in the showing of the house, the negotiation of the terms, the signing of the contract, the inspections, the closing.
• 27:57
  SPEAKER_00: Quit doing that.
• 27:58
  SPEAKER_00: You cannot cut the real estate agent out.
• 28:00
  SPEAKER_00: The real estate agent is representing the buyer's interest.
• 28:03
  SPEAKER_00: You are not representing the buyer's interest.
• 28:04
  SPEAKER_00: And when you cut them out, you are interfering with that agency relationship.
• 28:08
  SPEAKER_00: You have to take appropriate steps to determine that that client is not represented, simply saying, Do you have an agent is simply not good enough?
• 28:14
  SPEAKER_00: You have to take reasonable steps to ensure that you are not interfering with the agency relationship of another agent.
• 28:20
  SPEAKER_00: Lastly, let me address this registering thing.
• 28:23
  SPEAKER_00: Understand that because of the Sitzer Burnett case, commissions are no longer guaranteed.
• 28:28
  SPEAKER_00: There is no requirement that a builder has to pay you.
• 28:30
  SPEAKER_00: The builder can put whatever barrier they want there to not pay you.
• 28:34
  SPEAKER_00: But remember, if the builder says they don't pay you because you didn't register them, your buyer still does.
• 28:40
  SPEAKER_00: And the builder's agent can't tell the buyer's agent, well, you didn't register, your agent can't be involved in this transaction.
• 28:46
  SPEAKER_00: That is interference.
• 28:48
  SPEAKER_00: The buyer's agent can always be involved in the transaction.
• 28:51
  SPEAKER_00: But if they want to try this crap, I think you can remind the buyer that they owe you the money.
• 28:55
  SPEAKER_00: The builder's agent is probably interfering with your agency because they're showing a house and they're working with the buyer that you're representing.
• 29:03
  SPEAKER_00: So let's make sure you understand that.
• 29:05
  SPEAKER_00: I'm a real estate agent.
• 29:06
  SPEAKER_00: My client goes and looks at an open house Saturday, doesn't tell me about it.
• 29:10
  SPEAKER_00: Now on Sunday wants me to go show it to them.
• 29:12
  SPEAKER_00: I show up and the builder says, you didn't register, then they've already looked at the house.
• 29:15
  SPEAKER_00: I'm not paying you a commission.
• 29:16
  SPEAKER_00: And the builder's agent tells my client, your agent can't be involved in the transaction, we're not paying them.
• 29:21
  SPEAKER_00: So now they want to take the client, show the client, sign the client to a contract, close it.
• 29:26
  SPEAKER_00: That's not how that works.
• 29:27
  SPEAKER_00: I'm still involved, 100% involved.
• 29:29
  SPEAKER_00: I have to be involved.
• 29:31
  SPEAKER_00: I may not get commission paid by the builder, but the buyer's going to pay me.
• 29:34
  SPEAKER_00: And the buyer cannot turn to me and say, well, I'm not going to use you on this transaction and then turn to the builder agent and say, Well, I'm not going to use him for the transaction.
• 29:42
  SPEAKER_00: I want you to show me the house.
• 29:44
  SPEAKER_00: The builder's agent knows they are represented.
• 29:47
  SPEAKER_00: They may not work with that buyer outside of you.
• 29:50
  SPEAKER_00: So I don't know how they're going to continue to do this registration stuff and follow the law unless they're going to tell them, well, you don't register, but I can't talk to you without your agent being present because you're represented.
• 30:01
  SPEAKER_00: So hope that clears that up.
• 30:03
  SPEAKER_00: That's very, very important because this is a provision that is really causing a lot of anger and consternation.
• 30:08
  SPEAKER_00: All right, that's our show for today.
• 30:10
  SPEAKER_00: I hope everybody enjoyed the roundup on what builders can and can't do.
• 30:13
  SPEAKER_00: Again, not saying that all builders are doing this.
• 30:15
  SPEAKER_00: Some are.
• 30:16
  SPEAKER_00: Some builder agents are doing the things the wrong way.
• 30:18
  SPEAKER_00: Some of them just don't know that this law applies.
• 30:20
  SPEAKER_00: We love all agents, whether they're builder agents or not builder agents.
• 30:24
  SPEAKER_00: Our job here is to protect the public, protect the agents, and hopefully y'all learn something today that will help protect everybody.
• 30:30
  SPEAKER_00: All right, y'all have a great weekend.
• 30:31
  SPEAKER_00: Come back again next week.
• 30:32
  SPEAKER_00: Don't forget to like, share us, and subscribe to Edition Dirk.
• 30:35
  SPEAKER_00: Y'all take care now.