Early principal broker involvement is absolutely critical at the first signs of a dispute involving an agent. The first thing that must be done is an objective risk assessment. That means understanding that disputes aren’t just about who is right and who is wrong. Getting to right and wrong costs money whether you turn out to be right or wrong. Every post-closing dispute raises the issue of negotiating against transaction costs. Negotiating against transaction costs means a rational objective assessment of the difference between the cost of resolving the dispute through arbitration, court action or administrative investigation and the cost of settlement.

There is no pat answer to settlement questions. What is it worth in a particular case to maintain a good relationship with a former client or customer? What is it worth to protect your license even if you believe you have done nothing wrong? How much less will it cost to settle now before going to the expense in time, money and stress necessary to prove you did nothing wrong? These are questions that need to be answered in each individual case in close consultation between principal broker and agent.

Negotiating against the transaction costs associated with formal dispute resolution feels a lot like being blackmailed but that doesn’t change the costs associated with dispute resolution. Fighting about the cost of a used refrigerator, a hot water heater or new bedroom carpeting is probably going to be a fool’s errand if fighting means a Real Estate Agency investigation and dealing with judges or arbitrators. Other claims may be too expensive or too frivolous for there to be much choice. Being able to tell the difference between the two is what early principal broker involvement and negotiating against transaction cost is about.
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