Clauses in Commercial Listing Agreements

1. Clauses in CommercialListing Agreements The Need for Special Clauses An ideal listing agreement would cover every possible contingency, but not every owner will sign such a comprehensive agreement. Compare a lease for a small store to the needs of leasing an entire floor of a large office building. Discuss the idea that commercial owners are seeking the best business deal and how a property listed for sale may end up being leased or visa-versa. Commission disputes do occur and are typically ruled upon based on the technical language of the agreement. Great care must be taken in developing the right listing agreement for each property and circumstance. We will review a series of clauses used in commercial listing agreements; this group has been developed by and are quoted with permission of the New York State Commercial Association of REALTOR� s (NYSCAR). They appear in various Standard Listing Forms developed by that organization. An ideal listing agreement would cover every possible contingency, but not every owner will sign such a comprehensive agreement. Compare a lease for a small store to the needs of leasing an entire floor of a large office building. Discuss the idea that commercial owners are seeking the best business deal and how a property listed for sale may end up being leased or visa-versa. Commission disputes do occur and are typically ruled upon based on the technical language of the agreement. Great care must be taken in developing the right listing agreement for each property and circumstance. We will review a series of clauses used in commercial listing agreements; this group has been developed by and are quoted with permission of the New York State Commercial Association of REALTOR� s (NYSCAR). They appear in various Standard Listing Forms developed by that organization.

2. Legal Notice This is a legally binding contract. If not fully understood, we recommend consulting an attorney before signing. The commercial practitioner is asking the client to enter into an agreement, whereby that practitioner is given permission to sell or lease the client�s property under certain terms and conditions outlined in the agreement. Typically, such agreements are considered contracts and contain the legal notice.The commercial practitioner is asking the client to enter into an agreement, whereby that practitioner is given permission to sell or lease the client�s property under certain terms and conditions outlined in the agreement. Typically, such agreements are considered contracts and contain the legal notice.

3. Lease in Lieu The owner agrees to pay a commission in the event of a lease agreement. But the broker must attach a commission schedule to this agreement. The expiration date for this Listing of Sale agreement is extended through the full term of the lease and any extension of that lease. If in the future, the buyer-tenant decides to purchase the building, further commission will be due the broker for that sale. Refer students to page 27 of the text and read the clause aloud. Explain that owners may change their mind about the disposition of their property; brokers need this clause in their listing agreement to protect them if they do. Review the other key elements of the clause on the slide.Refer students to page 27 of the text and read the clause aloud. Explain that owners may change their mind about the disposition of their property; brokers need this clause in their listing agreement to protect them if they do. Review the other key elements of the clause on the slide.

4. Sale or Exchange in Lieu In the event the Owner agrees to Sell or Exchange said property to a �tenant� in lieu of a Lease, Owner shall pay to the broker at closing, a commission equal to ____% of the purchase or exchange price of the property. A property may be listed for lease, and the customer expresses a desire to purchase the property. Read the clause. It also mentions the possibility of the property being transferred as a result of a 1031 Tax Deferred Exchange and that a commission is also due in that event.A property may be listed for lease, and the customer expresses a desire to purchase the property. Read the clause. It also mentions the possibility of the property being transferred as a result of a 1031 Tax Deferred Exchange and that a commission is also due in that event.

5. Exchange Disclosure This form is not appropriate for listing a property for exchange under IRC 1031 regulations. Internal Revenue Code (IRC) requires a tax exchange, generally referred to as a 1031Tax Deferred Exchange, to originate as such. In some areas, a separate listing agreement for exchanges is used. If so, a notice, as on the slide, usually appears at the beginning of the form or above the signature line.Internal Revenue Code (IRC) requires a tax exchange, generally referred to as a 1031Tax Deferred Exchange, to originate as such. In some areas, a separate listing agreement for exchanges is used. If so, a notice, as on the slide, usually appears at the beginning of the form or above the signature line.

6. Legal, Professional, and Technical Advice Real estate practitioners should recommend that clients and customers seek legal, professional, tax, and technical advice from others qualified in those fields. Refer students to the clause on page 28 of the text; ask for a volunteer to read the clause aloud.Refer students to the clause on page 28 of the text; ask for a volunteer to read the clause aloud.

7. Sale of Property If during the term of this agreement, or any extension thereof, a transfer, sale or exchange of the property or any portion thereof is made, effected or agreed upon with anyone, the Owner agrees to pay the Broker a commission of ____% of the sale or exchange price of the property. Give the students a moment to read the slide. Explain that this language covers two additional situations. What if the property were land and a joint venture is proposed, the owner putting in the land and the �buyer� constructing the building? Title to the property may be �transferred� to a new corporation, but no money may be exchanged. This language entitles the broker to his or her commission. �Or any portion thereof� covers a buy-in to a corporation owning the property or with land just selling part of it.Give the students a moment to read the slide. Explain that this language covers two additional situations. What if the property were land and a joint venture is proposed, the owner putting in the land and the �buyer� constructing the building? Title to the property may be �transferred� to a new corporation, but no money may be exchanged. This language entitles the broker to his or her commission. �Or any portion thereof� covers a buy-in to a corporation owning the property or with land just selling part of it.

8. Option to BuySales Option A sales option is a contract whereby the buyer pays for the right to purchase the property at a future time. It compensates the owner for taking the property off the market. At the end of the option period, the buyer must decide if he or she is going forward with the purchase. Money paid for an option is usually non-refundable. If the buyer does not go forward, his or her money is lost; if he or she does purchase the property, the money is usually credited towards the purchase price.It compensates the owner for taking the property off the market. At the end of the option period, the buyer must decide if he or she is going forward with the purchase. Money paid for an option is usually non-refundable. If the buyer does not go forward, his or her money is lost; if he or she does purchase the property, the money is usually credited towards the purchase price.

9. Reasons to Buy an Option Future Growth or Expansion Time to Raise the Money Zoning Contingency Buying an option can tie up a parcel for future growth of one�s business or to prevent a competitor from buying it. An owner will not sell a property subject to a zoning change but will sell a buyer an option to buy for the time needed to get approvals.Buying an option can tie up a parcel for future growth of one�s business or to prevent a competitor from buying it. An owner will not sell a property subject to a zoning change but will sell a buyer an option to buy for the time needed to get approvals.

10. �Sale� Includes A Broker gets paid commission on option dollars. If a sale occurs, the Broker is paid a sales commission, but credit is given to the owner for the previously paid option commission against the sales commission now due. Refer students to the clause on page 30 of the text. Read the first paragraph aloud. Explain that this clause broadens the sales agreement to include purchase options and then goes on to define a fair treatment of commissions. Read the remainder of the clause aloud.Refer students to the clause on page 30 of the text. Read the first paragraph aloud. Explain that this clause broadens the sales agreement to include purchase options and then goes on to define a fair treatment of commissions. Read the remainder of the clause aloud.

11. Option A Confusing Word Explain that in leases the use of the word option usually connotes an extension of the lease term, but as we have just seen it can also refer to purchasing a sales option, a purchase option, or an option to buy. These terms will be discussed shortly. The option to renew or extend the term of a lease is often referred to as �five and five� or a � ten plus two fives�, meaning a five-year lease with a five-year option, or a ten-year lease with two five-year options. The rent for the option period may be determined at initial lease signing or determined at the time the option is exercised.Explain that in leases the use of the word option usually connotes an extension of the lease term, but as we have just seen it can also refer to purchasing a sales option, a purchase option, or an option to buy. These terms will be discussed shortly. The option to renew or extend the term of a lease is often referred to as �five and five� or a � ten plus two fives�, meaning a five-year lease with a five-year option, or a ten-year lease with two five-year options. The rent for the option period may be determined at initial lease signing or determined at the time the option is exercised.

12. Lease of Property Commission Structure (Subject to Negotiation) ��a commission of X% of the gross rent for the first three years and Y% of the gross rent for each year thereafter. When options are executed a further commission of Y% of the gross rent for each year in the option period will be due.� Discuss how lease commissions are based on the monies the landlord receives each year for the entire term of the lease. Read the typical commission structure used, stressing additional commissions are due if the tenant extends the lease or exercises an option. Commissions, for the full amount due, are usually paid on lease signing or tenant occupancy. Direct students to the Lease of Property clause on page 31 of the text.Discuss how lease commissions are based on the monies the landlord receives each year for the entire term of the lease. Read the typical commission structure used, stressing additional commissions are due if the tenant extends the lease or exercises an option. Commissions, for the full amount due, are usually paid on lease signing or tenant occupancy. Direct students to the Lease of Property clause on page 31 of the text.

13. Renewal or Expansion by Tenant Your due a commission on all the financial benefits the landlord receives from the tenant you placed in that building�provided your Listing Agreement says so! Discuss the concept that a Broker is entitled to compensation for the entire time a tenant occupies space in that owner�s building or property. This includes expansions of the space occupied and extensions of the time they stay in the building. However, the listing agreement must specify that if these events occur, the owner is obligated to pay the broker a commission. Ask for a volunteer student to read the clause on page 31 of the text. Explain that this could also involve leasing additional space from the landlord. This could be done with a rider to the current lease, or a new lease could be drawn. The language in the clause covers this. �Successors or assigns� in important language. Give an example of a ten-year lease with a ten-year option. The business is sold, and the lease is assigned to the business buyer. Although the broker did not place this new tenant, it is the same lease; if the option is exercised, a further commission is due from the building owner.Discuss the concept that a Broker is entitled to compensation for the entire time a tenant occupies space in that owner�s building or property. This includes expansions of the space occupied and extensions of the time they stay in the building. However, the listing agreement must specify that if these events occur, the owner is obligated to pay the broker a commission. Ask for a volunteer student to read the clause on page 31 of the text. Explain that this could also involve leasing additional space from the landlord. This could be done with a rider to the current lease, or a new lease could be drawn. The language in the clause covers this. �Successors or assigns� in important language. Give an example of a ten-year lease with a ten-year option. The business is sold, and the lease is assigned to the business buyer. Although the broker did not place this new tenant, it is the same lease; if the option is exercised, a further commission is due from the building owner.

14. Purchase by Tenant Purchase Option Option to Buy Unexpected Event Discuss the concept that a tenant may purchase the building, and with the proper agreement, a broker would be entitled to a sale commission. The opportunity for the tenant to purchase the building may or may not have been known at lease signing. Purchase Option or Option to Buy clauses may be added to a lease, in some cases the purchase price is stated and generally a timetable is established, for example: the tenant may, within two years, purchase the building for $X dollars. Other language may call for the price to be �market value� at the time of purchase. Describe the �dual appraisal� method where at the time of purchase the owner and buyer each have an independent appraisal done. Both appraisals should have relatively the same conclusion of value, which becomes the basis of the sales price. Refer the students to page 33 of the text. Read the Purchase by Tenant clause aloud.Discuss the concept that a tenant may purchase the building, and with the proper agreement, a broker would be entitled to a sale commission. The opportunity for the tenant to purchase the building may or may not have been known at lease signing. Purchase Option or Option to Buy clauses may be added to a lease, in some cases the purchase price is stated and generally a timetable is established, for example: the tenant may, within two years, purchase the building for $X dollars. Other language may call for the price to be �market value� at the time of purchase. Describe the �dual appraisal� method where at the time of purchase the owner and buyer each have an independent appraisal done. Both appraisals should have relatively the same conclusion of value, which becomes the basis of the sales price. Refer the students to page 33 of the text. Read the Purchase by Tenant clause aloud.

15. �Fairness Clause� Terminates future lease commissions; there may be an option(s) that if exercised would create another commission due. Adjusts for commissions previously paid to the Broker for the unexpired lease term Illustrate the �Fairness Clause� concept by walking the students through the Purchase by Tenant Problem on pages 33�35 of the text.Illustrate the �Fairness Clause� concept by walking the students through the Purchase by Tenant Problem on pages 33�35 of the text.

16. Assumption Agreement Without an Assumption Agreement, upon the sale of the property or leasehold interest, you have NO COMMISSION CLAIM AGAINST THE NEW OWNER, for any commission remaining due under the lease. Explain that your listing agreement is between you the broker and the current owner of the building. Unless something is done, a new owner has no agreement with you and therefore would not have to honor any future commissions you nay be entitled to. This issue is covered under a clause called �Sale or Exchange by Owner�. Have students read the clause on page 36 of the text. This obligates the current owner to obtain an assumption of the liability for any future commissions that may become due from the buyer.Explain that your listing agreement is between you the broker and the current owner of the building. Unless something is done, a new owner has no agreement with you and therefore would not have to honor any future commissions you nay be entitled to. This issue is covered under a clause called �Sale or Exchange by Owner�. Have students read the clause on page 36 of the text. This obligates the current owner to obtain an assumption of the liability for any future commissions that may become due from the buyer.

17. Structural & EnvironmentalConcerns Disclosure Language Indemnification of the Broker Read aloud the clause on page 36 of the text. With today�s concern about environmental issues, this is an important clause.Read aloud the clause on page 36 of the text. With today�s concern about environmental issues, this is an important clause.

18. Smart Business Clauses Successor Clause Extension Clause Expense Reimbursement Early Termination When Payable Review these clauses, referring to the text pages 37�39. Important features: Successor Clause�Corporations may change officers. Extension Clause�Corporate decisions may take several months; may need Board of Directors approval. Large deals may have advertising budgets and expenses that may be adjusted if the agreement ends. When Payable�Explain that technically a commission is generally considered earned when a �meeting of the minds� occurs, hence the language in the clause that refers to an oral agreement. However, from a practical point of view most client�s attorney�s will insist that the commission is not earned until the lease is signed or with a sale the passage of title.Review these clauses, referring to the text pages 37�39. Important features: Successor Clause�Corporations may change officers. Extension Clause�Corporate decisions may take several months; may need Board of Directors approval. Large deals may have advertising budgets and expenses that may be adjusted if the agreement ends. When Payable�Explain that technically a commission is generally considered earned when a �meeting of the minds� occurs, hence the language in the clause that refers to an oral agreement. However, from a practical point of view most client�s attorney�s will insist that the commission is not earned until the lease is signed or with a sale the passage of title.

19. Protecting Your Commissions Escrow Clause Attorney�s Fees Clause Discuss the 11th hour squeeze, where the Broker is asked to reduce his or her commission at the closing table and how some client refuse to pay or arbitrarily reduce the commission as much as 20�25%, realizing it would cost more than that in legal fees to sue. These two clauses, when added to listing agreements, can help deter these actions. Refer students to the Escrow clause on page 39 of the text. Read aloud. Note that this clause requires the full amount of the commission as stated in the listing agreement to be escrowed. This keeps the money in the state where closing occurs. Read the Attorney�s Fees Clause on page 40 of the text. In essence it says that if a commission is withheld and the Broker hires an attorney to recover it and wins the case, the seller must pay the full commission plus the Broker�s legal expenses.Discuss the 11th hour squeeze, where the Broker is asked to reduce his or her commission at the closing table and how some client refuse to pay or arbitrarily reduce the commission as much as 20�25%, realizing it would cost more than that in legal fees to sue. These two clauses, when added to listing agreements, can help deter these actions. Refer students to the Escrow clause on page 39 of the text. Read aloud. Note that this clause requires the full amount of the commission as stated in the listing agreement to be escrowed. This keeps the money in the state where closing occurs. Read the Attorney�s Fees Clause on page 40 of the text. In essence it says that if a commission is withheld and the Broker hires an attorney to recover it and wins the case, the seller must pay the full commission plus the Broker�s legal expenses.

20. Commission Disputes Prove You were the Procuring Cause. You represented the Owner�s Terms. You brought about a �meeting of the minds� Show the Buyer�s ability to close. Note that each state has its own laws, which should be reviewed regarding commission dispute remedies and permissible legal actions. Typically four points need to be proven to win in court. Review the �tools� available to do so. (Make a list on the flip chart) Written Agreements Letters of Confirmation Offer Letters (in writing) Showing Records Signed Commission Agreements Stress the advantage of a strong �paper trail� and keeping chronological notes of showings offers and negotiations. Discuss Lien Laws. Detail if available in the state you are in.Note that each state has its own laws, which should be reviewed regarding commission dispute remedies and permissible legal actions. Typically four points need to be proven to win in court. Review the �tools� available to do so. (Make a list on the flip chart) Written Agreements Letters of Confirmation Offer Letters (in writing) Showing Records Signed Commission Agreements Stress the advantage of a strong �paper trail� and keeping chronological notes of showings offers and negotiations. Discuss Lien Laws. Detail if available in the state you are in.

21. Types of Listing Agreements Sale of Property Lease of Property Combination Lease or Sale of Property Buyer or Tenant Representation 1031 Tax Deferred Exchanges Note that properties will sometimes be listed for sale or lease�with the owner accepting the best business deal. Which form to use depends on many things: the size of the deal, what the client will sign, and what the client�s comfort zone is. A small shop owner may be intimidated by an extensive listing agreement, and leasing a large office space may require more that a �one-page� agreement. Some areas also have many owners who will only give brokers open or non-exclusive listings. Another concern is the probability of payment�any risk to collecting the commission? Is the owner retiring and moving out of state? Is the property over mortgaged? Is the business in trouble? Ideally all listing agreements would be exclusives, but this is not always possible. We will explore other forms shortly.Note that properties will sometimes be listed for sale or lease�with the owner accepting the best business deal. Which form to use depends on many things: the size of the deal, what the client will sign, and what the client�s comfort zone is. A small shop owner may be intimidated by an extensive listing agreement, and leasing a large office space may require more that a �one-page� agreement. Some areas also have many owners who will only give brokers open or non-exclusive listings. Another concern is the probability of payment�any risk to collecting the commission? Is the owner retiring and moving out of state? Is the property over mortgaged? Is the business in trouble? Ideally all listing agreements would be exclusives, but this is not always possible. We will explore other forms shortly.

22. Elements of a Listing Agreement Parties Involved Property Description Time (Agreement in effect for) Asking Price Commission & When Payable Type of Agreement Jurisdiction Discuss the primary elements needed for a listing agreement. Then have students review the short form example on page 45 of the text. Point out where each element is found. Compare the short form exclusive agreement to the clause previously discussed. Point out the value of a more comprehensive agreement. Also note that many of the standard listing forms available are four to six pages in length and contain many of the clauses reviewed previously.Discuss the primary elements needed for a listing agreement. Then have students review the short form example on page 45 of the text. Point out where each element is found. Compare the short form exclusive agreement to the clause previously discussed. Point out the value of a more comprehensive agreement. Also note that many of the standard listing forms available are four to six pages in length and contain many of the clauses reviewed previously.

23. Open Listings Convert the �exclusive� agreement to an �open� listing agreement to preserve the benefit of the clauses it contains. Some clients will not sign an exclusive listing but will give the broker an open or non-exclusive listing. Stress that even open listings should be in writing. Use the exclusive form, and cross out and initial the changes of the word exclusive to open. If the owner signs the form, all the other important clauses have been agreed to. Refer students to the example on page 47 of the text.Some clients will not sign an exclusive listing but will give the broker an open or non-exclusive listing. Stress that even open listings should be in writing. Use the exclusive form, and cross out and initial the changes of the word exclusive to open. If the owner signs the form, all the other important clauses have been agreed to. Refer students to the example on page 47 of the text.

24. Goal:Listing Agreement in Writing Listing Authorization Forms Confirmation Letter When no agreement has been signed by the owner, another attempt to �get a signature� can be made by using the technique of requesting a Listing Authorization or requesting a confirming signature. Review examples of theses forms on page 48 and 49 of the text. Note these techniques are applicable to sale or lease listings.When no agreement has been signed by the owner, another attempt to �get a signature� can be made by using the technique of requesting a Listing Authorization or requesting a confirming signature. Review examples of theses forms on page 48 and 49 of the text. Note these techniques are applicable to sale or lease listings.

25. Commission Agreements Commission Agreement (at the time of listing) Commission Agreements (with purchase offer) Lease Commission Presentation If no other �paperwork� is obtained at the time of listing, request for the owner to sign a Commission Agreement. This is an indication that if you bring forth a satisfactory buyer or tenant you will have earned a specific rate of commission. See examples on pages 5�52 of the text. Whether a listing agreement states commissions due or that a separate commission agreement has been signed, another commission agreement is submitted at the time of offer. In the case of a sale, this agreement will state the exact dollars of commission due. See example on page 53 of the text, In the case of a lease, a similar form stating the exact dollars of commission due will be used. In addition, a summary of the lease should be given to the owner. It shows the rent the owner will receive and the commissions due year-by-year of the lease term. The total income the owner will receive in rent over the life of the lease and the total commission due are clearly stated. See example on page 54 of the text.If no other �paperwork� is obtained at the time of listing, request for the owner to sign a Commission Agreement. This is an indication that if you bring forth a satisfactory buyer or tenant you will have earned a specific rate of commission. See examples on pages 5�52 of the text. Whether a listing agreement states commissions due or that a separate commission agreement has been signed, another commission agreement is submitted at the time of offer. In the case of a sale, this agreement will state the exact dollars of commission due. See example on page 53 of the text, In the case of a lease, a similar form stating the exact dollars of commission due will be used. In addition, a summary of the lease should be given to the owner. It shows the rent the owner will receive and the commissions due year-by-year of the lease term. The total income the owner will receive in rent over the life of the lease and the total commission due are clearly stated. See example on page 54 of the text.

26. Presenting Offers Always in Writing Only a written offer can receive an acceptance signature. Commercial transactions are sometimes complicated, and many things other than just the offer price may need to be considered. A written offer with a signed acceptance can then be easily converted to a contract or lease with no misunderstandings.Commercial transactions are sometimes complicated, and many things other than just the offer price may need to be considered. A written offer with a signed acceptance can then be easily converted to a contract or lease with no misunderstandings.

27. Offer LettersLetters of Intent General Requirements Description of Property (Be Specific) Buyer�s Name�May be Company Authorized to Sign; Board of Directors Approval Required? All Offering Terms � Including Commission Attach Credibility Place for Signature of Acceptance Note Attach Credibility�Who are the Buyers or Tenants? Information about their company and financial statements are appropriate. Note Attach Credibility�Who are the Buyers or Tenants? Information about their company and financial statements are appropriate.

28. Terms for Purchases Money and Time Offer price is important as are the financing arrangements. Is it an all-cash purchase, and if not how much is the down payment. Has the buyer already spoken to a bank to arrange financing? Indicate how long to close. Are there any other conditions, subject to engineering, environmental, �due diligence�? A complete picture is necessary for the owner�s evaluation of the offer.Offer price is important as are the financing arrangements. Is it an all-cash purchase, and if not how much is the down payment. Has the buyer already spoken to a bank to arrange financing? Indicate how long to close. Are there any other conditions, subject to engineering, environmental, �due diligence�? A complete picture is necessary for the owner�s evaluation of the offer.

29. Lease Terms Rent�Additional Rent Term of Lease Options�to extend�to buy Concessions Work Letter There are many areas of discussion regarding lease transactions, all of which must be considered in developing an offer.There are many areas of discussion regarding lease transactions, all of which must be considered in developing an offer.

30. Tenant or BuyerRepresentation Agreements Search area needs to be defined Unique commission arrangement Confidentiality issues These agreements require a definition of the assignment, the criteria of the property being looked for and the geographic area the broker has authority to work in. Read and review the Broker�s Duties clause on page 57 of the text. Refer the students to the Professional Service Fees exhibit on page 57. Note the following points regarding commissions: Agreement covers all forms of acquiring or occupying a site: purchase, exchange, options to buy and leasing. It establishes the commission rate to be paid to the broker. In the case of a lease, an �aggregate� rate will be used. This is a single rate of commission applied to the total money the landlord will receive during the entire term of the lease. As an alternative, a flat fee for compensation can be negotiated. The customer is responsible to see that the broker earns the full commission agreed upon. However, if a seller pay all or part of the agreed commission, those moneys are credited against what is due. In this arrangement, the broker can solicit sites from other brokers and owners directly (even those who refuse to pay brokers), knowing they will be paid in full from their customer if they are not fully paid by another broker or owner. Principal�s Identity�Cite an example of approaching a gas station owner and advising him or her that you represent the largest fast food company in the country and want to buy the property. Is it possible that the owner may inflate the price for this customer? Often in these agreements, the customer requires his or her identity to be kept confidential until a transaction is agreed upon. These agreements require a definition of the assignment, the criteria of the property being looked for and the geographic area the broker has authority to work in. Read and review the Broker�s Duties clause on page 57 of the text. Refer the students to the Professional Service Fees exhibit on page 57. Note the following points regarding commissions: Agreement covers all forms of acquiring or occupying a site: purchase, exchange, options to buy and leasing. It establishes the commission rate to be paid to the broker. In the case of a lease, an �aggregate� rate will be used. This is a single rate of commission applied to the total money the landlord will receive during the entire term of the lease. As an alternative, a flat fee for compensation can be negotiated. The customer is responsible to see that the broker earns the full commission agreed upon. However, if a seller pay all or part of the agreed commission, those moneys are credited against what is due. In this arrangement, the broker can solicit sites from other brokers and owners directly (even those who refuse to pay brokers), knowing they will be paid in full from their customer if they are not fully paid by another broker or owner. Principal�s Identity�Cite an example of approaching a gas station owner and advising him or her that you represent the largest fast food company in the country and want to buy the property. Is it possible that the owner may inflate the price for this customer? Often in these agreements, the customer requires his or her identity to be kept confidential until a transaction is agreed upon.