A One-Party Listing Agreement obligates the seller to pay a broker’s commission only if he/she sells the home to a buyer who has been brought to him/her by that broker. One-Party Listings are generally used in situations where a seller is attempting to sell their home without the assistance of a real estate broker. Such sellers are known in the industry by the acronym, “FSBO,” i.e. “For Sale By Owner.”
For example, say Mr. and Mrs. Seller are trying to sell their home themselves, and Broker A, acting as a buyer’s agent, tells them that she has a buyer who is looking for the type of property Mr. and Mrs. Seller are selling. However, Broker A will not introduce her buyer client to the property, since she has no written agreement with them to pay her a commission upon sale. Rather, she may suggest that Mr. and Mrs. Seller enter into a One-Party Listing Agreement for a limited period of time, which provides that if Broker A’s client buys the home, then Mr. and Mrs. Seller are obligated to pay her a specified commission or percentage of the sale price. If the client does not purchase the home [or the One-Party Listing Agreement expires] Mr. and Mrs. Seller are free to continue marketing the property on their own.[1]
TIP ~ The commission rate on a one-party listing is normally less than the full interest rate that would become due if Mr. and Mrs. Seller entered into a full listing agreement with Broker A. Most properties are sold not by the listing agent, but another broker exclusively representing the buyer. It is for this reason that when a listing is first published in the local MLS, the seller’s broker also discloses an “offer of compensation” – i.e. offering to share a portion of the full listing commission with another broker who brings a buyer to the table. Since a sale through a One-Party Listing involves only compensation to the buyer’s broker, the commission to be negotiated between the FSBO and that broker is something less than a full commission [since the “offer of compensation” portion will not also be paid].
Under Oregon’s agency disclosure law, when a one-party listing is entered into with Mr. and Mrs. Seller, the parties will have to decide whether Broker A will be representing both the FSBO and the buyer, or just the buyer, alone. This is an important consideration for most brokers, since it is far more difficult and risky to represent both seller and buyer in the same transaction.
For the above reason, some buyer brokers avoid One-Party Listing Agreements, preferring, instead, to enter into a “Compensation Agreement” with FSBO sellers for the payment of a commission if the buyer purchases the home. No listing agreement is signed with the seller, and the written Compensation Agreement makes it clear that the broker is solely representing the buyer. Thus, Broker A’s primary legal responsibilities are owed to the buyer, not the seller. Nonetheless, Broker A still has two important affirmative obligations to the FSBO seller: (a) To deal honestly and in good faith; and, (b) To disclose material facts known by the buyer’s broker and not apparent or readily ascertainable to the seller. [See, ORS 696.810(2.]
It is generally believed in the industry that Compensation Agreements create far less risk of liability to real estate brokers dealing with FISBOs, since the dangers inherent in disclosed dual agency are not present.
Additionally, for liability reasons, the FISBO seller may also prefer to enter into a written Compensation Agreement with a buyer’s broker than a One-Party Listing. Generally, buyers who later discover an undisclosed material defect in the property purchased, will bring a claim against both the seller and their broker, based upon the legal theory that a principal (i.e. the seller) should be held liable for any misrepresentations of their authorized agent. Thus, if the seller does not employ their own broker, they may be able limit their liability for any misrepresentations the broker may make to the buyer or buyer’s agent.~PCQ
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[1] Note that most FSBO sellers sooner or later come to realize the importance – and perhaps inevitability – of at least one broker becoming involved in their selling efforts. It is for this reason that when advertising their property, many FSBO sellers include the message “Will cooperate with brokers,” or words to that effect.
[2] Note: Oregon law provides that the payment of compensation alone does not create an agency or fiduciary relationship. [See, ORS 696. 840.]
[3] Of course, when a buyer is looking for compensation, they are less likely to bring a claim against their own broker, and instead look directly to the FSBO seller as the real culprit.
