Since the National Association of Realtors settled landmark commission lawsuits in 2024 and new industry practices went into effect, there has been a lot of talk about buyer-broker agreements.
However, not much of the conversation has focused on what exactly the consequences are if a buyer breaks their contract with the firm representing them.
Jeff Lichtenstein | Echo Fine Properties
Echo Fine Properties broker-owner Jeff Lichtenstein learned first-hand what happens in this situation when he found out in late 2024 from a mortgage broker that a buyer who had signed an exclusive agreement with Echo Fine Properties was purchasing a property with a different firm.
After unsuccessfully attempting to get in contact with the buyer, Lichtenstein’s firm filed for arbitration after the buyer’s home purchase had closed.
“For the brokerage community, if the Buyers Broker Agreement is written up and executed properly and the Buyer purchases, it means we will get compensated for the work we have done,” Lichtenstein told HousingWire in an email. “That is reassuring on our end, and a sigh of relief as most every other profession gets paid as they do their job and with health and 401k benefits. Our pay structure is by choice, and we get out of it what we put into it. But getting compensated is something we expect at the end of a deal.”
How the arbitration went down
Lichtenstein told Inman in an email that the arbitration process “took a long time,” but seems to have paid off for the firm.
Once the firm learned their buyer had presented a written offer on a property with a competing agent, they notified the buyer in writing that they had violated their buyer broker agreement, Lichtenstein said.
The very next day, Echo Fine Properties received an amended buyer broker agreement that had replaced the name of the original buyer with their mother’s name. Then, three weeks after that, another amendment replaced the buyer’s mother’s name with the original buyer’s name again.
Lichtenstein said a variety of reasons were given for the name changes, from spiritual ones to the claim that the buyer was only a “lender” on the home.
The arbitrator determined that the buyer-broker agreement was unambiguous and clear and that the buyer read and understood the contract before signing it.
The arbitrator also found that the buyer’s argument that the 180-day contract period established in the buyer-broker agreement was “excessive” was not persuasive. Likewise, the buyer’s argument that their Echo Fine Properties agent provided little to no value was also found unpersuasive by the arbitrator, given that the agent educated the buyer on the market and home values in the area and brought the buyer to view homes with their family.
The award
Ultimately, the arbitrator determined that by entering into a purchase agreement without their Echo Fine Properties agent and refusing to pay them a commission for that agent’s services as stipulated in their contract, the buyer violated their buyer broker agreement.
Therefore, the buyer was responsible for paying Echo Fine Properties the 3 percent commission that was agreed upon in their buyer broker agreement, the arbitrator said. The buyer ended up purchasing an $800,000 property in February 2025, so 3 percent of that amount — $24,000 — was awarded to Echo Fine Properties as a result of the breach of contract.
Lichtenstein told Inman the brokerage has learned of two other such instances where buyers have violated their buyer-broker agreement with the firm — one on a $1.4 million home sale, and another on a $357,000 home sale — and the brokerage has notified the buyers of the violation.
“The amount of litigation that will occur nationwide with over four million home sales transpiring nationwide could be very high,” Lichtenstein said in an email. “Hopefully, the results of this will be a benchmark so consumers don’t try to not pay a Realtor what they rightfully owe.”
Lichtenstein added that the brokerage has two Buyer Guides on its website that detail everything a buyer’s agent handles over the course of a transaction to show how they earn their commission with the work they put in.
“The BBA protects not only the consumer but the real estate agent as well,” Lichtenstein said. “Both parties need to work in good faith with each other and respect the work that goes into [being] an agent. The decision by the arbitrator confirms that a BBA contract is legally binding.”
