Oregon broker Sam has been working with buyers for two months under a signed buyer representation agreement. The buyers find a home they love, but it is a For Sale By Owner (FSBO) property. The seller, who is not represented, tells Sam he is willing to pay a 2.5% buyer's broker commission. Sam's buyer representation agreement specifies a 3% commission. Before writing the offer, Sam must address the commission gap. Under Oregon agency and disclosure law, which of the following best describes Sam's obligations?
Correct Answer
A) Sam must disclose the commission gap to the buyers and obtain their written consent before proceeding, because the shortfall creates a potential conflict of interest that could compromise Sam's loyalty
Under ORS 696.810, an Oregon buyer's agent owes a duty of full disclosure and loyalty to the buyer client. A commission shortfall — where the seller is offering less than the agreed-upon buyer's broker fee — creates a direct financial conflict of interest: Sam could be tempted to steer buyers away from FSBO properties or to accept less-than-optimal terms to close the deal. Oregon agency law requires Sam to disclose this conflict in writing and obtain the buyers' informed consent before proceeding. The buyers can then decide whether to make up the difference, negotiate with the seller, or modify the representation agreement.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A practice where the agent or brokerage represents only one party in a transaction — either the buyer or the seller, but never both.
A relationship where a listing broker authorizes other brokers to act as agents of the seller, extending the seller's agency relationship to cooperating brokers.
A non-agency relationship where the broker facilitates a real estate transaction without representing either party, owing limited duties of honesty, fairness, and competence to both.
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