The Intent is Clear
This (the title of this article) is what an agent told me when I was nitpicking a special clause he inserted in an agreement of sale. My clients were sellers who had not listed their property (yes….FSBOs). Multiple offers came quickly and my clients selected their favorite. It wasn’t highest and the reasons they favored it could be the subject of an article. To keep it short, I’ll just say that these astute sellers considered some of the buyers, including a REALTOR®, to be squirrelly and therefore, more likely to be problems down the road.
You should be aware the agent for the favored buyer had wisely produced a Broker’s Fee Agreement (“BFA”) for the sellers’ signatures when he first approached the sellers. The 3% commission sought was negotiated to 2.5%.
While the offer was being vetted by sellers, the buyer, fearing the competition, sweetened her deal. She agreed to pay $5,000 of the sellers’ commission. For you buyer agents looking for an edge in this competitive market, this is something to consider. Regardless, my sellers were thrilled and advised the buyer agent to put this concession in writing for their signature.
Had it been me, I would have amended the BFA to reflect that sellers would owe him 2.5% of the sale price less $5,000 to be paid by buyer. And I would have had the buyer agree to her share of the commission in a buyer agency contract or an amendment to that contract. Instead, the agent insisted on keeping the BFA at 2.5% with this special clause inserted in the sales agreement: “BUYER AGREES TO PAY $5,000 TOWARD REALTOR® COMMISSION.” Now I know that the agent meant the language to mean that of the sellers’ commission, the buyer would pay $5,000 with the balance to be paid by the sellers. But it doesn’t say that! Suppose, as is likely, the buyer and her broker have a contract that provides for a minimum fee. Does the special clause apply to the buyer’s commission obligation or what the seller is to pay? While all involved understood the intent, the language is not clear.
When I offered some tweaks to the language, the buyer agent became agitated. He told me I was being petty and wasting his time on a nothing issue. I admit to feeling petty, but my job is to be precise. Over 40 years I’ve seen hundreds, if not more, disputes that could have been avoided by clarity. What if he, the buyer agent, is out of the picture (accidents happen) and others are left to determine if the buyer’s fee was independent or used to offset the sellers’ obligation?
And here’s the lesson. The law does not allow judges, juries, arbitrators and other fact-finders to determine what the parties’ intent was if the contract is clear. If we allowed parties to say that clear language yields to intent, parties would try to reinvent the intent if it will benefit them. In our example, the BFA is clear. That the contract says buyer will pay an amount toward the commission, it isn’t clear that the commission to be reduced by that payment is the commission to be paid by seller.
I confess to nitpicking. And I understand that the buyer agent has worked particularly hard given the absence of a listing agent. But, the language is everything and we can’t rely on all involved to interpret ambiguous provisions in the same way. As a lawyer who represents licensees in malpractice cases, I urge that you, too, nitpick! Best to all.