Chattanooga Real Estate Blog

Standard of Practice 3-4
REALTORS^®, acting as listing brokers, have an affirmative obligation to disclose the existence of dual or variable rate commission arrangements (i.e., listings where one amount of commission is payable if the listing broker’s firm is the procuring cause of sale/lease and a different amount of commission is payable if the sale/lease results through the efforts of the seller/ landlord or a cooperating broker). The listing broker shall, as soon as practical, disclose the existence of such arrangements to potential cooperating brokers and shall, in response to inquiries from cooperating brokers, disclose the differential that would result in a cooperative transaction or in a sale/lease that results through the efforts of the seller/landlord. If the cooperating broker is a buyer/tenant representative, the buyer/tenant representative must disclose such information to their client before the client makes an offer to purchase or lease. (Amended 1/02)

This one can get tricky.  Lets say John Smith with John Smith Realty (made up name) has listed Sally Jones’ home.  John has agreed to market the home for a 6% fee.  However, if an agent with John Smith Realty procures the buyer he will reduce the fee to 5%.  This is a variable or dual commission. 

It is perfectly fine to do this.  However, it must be disclosed to potential cooperating brokers.  In our area there is actually a place in the MLS to note if it is a variable or not.  If I called John Smith and asked the particulars of the variable rate he is obligated to tell me.  I can ask what the difference to the seller would be if someone from John’s company wrote the same offer as opposed to me writing it.  Then I must disclose this information to my buyer client prior to writing an offer.

It puts everyone on a level playing field.  For example if I have an offer for list price and John has an offer for list price the seller will net more on Johns offer even though they are for the same amount because the commission due from the seller is lower if they accept John’s offer.

Standard of Practice 3-3
Standard of Practice 3-2 does not preclude the listing broker and cooperating broker from entering into an agreement to change cooperative compensation. (Adopted 1/94)

Obviously if everyone agrees to changing the compensation then it’s not a violation.

Standard of Practice 3-2
REALTORS^® shall, with respect to offers of compensation to another REALTOR^®, timely communicate any change of compensation for cooperative services to the other REALTOR^® prior to the time such REALTOR^® produces an offer to purchase/lease the property. (Amended 1/94)

This means no changing the compensation amount without notifiying the other agent.  For example:  If the compensation listed in the MLS is 3% when I present an offer to the listing agent then it is 3%.  They can’t change it to 2.5% since at the time I submitted the offer it was 3%.
 

Article 3
REALTORS^® shall cooperate with other brokers except when cooperation is not in the client’s best interest. The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise compensate another broker. (Amended 1/95)

REALTORS^®, acting as exclusive agents or brokers of sellers/ landlords, establish the terms and conditions of offers to cooperate. Unless expressly indicated in offers to cooperate, cooperating brokers may not assume that the offer of cooperation includes an offer of compensation. Terms of compensation, if any, shall be ascertained by cooperating brokers before beginning efforts to accept the offer of cooperation. (Amended 1/99)

There is a difference between cooperation and compensation.  A REALTOR^® working with a buyer or tenant must work out compensation prior to making an offer to the selling or landlord agent.  For example:  I can’t write an offer on a home for a buyer and just automatically assume the selling agent is going to compensate me for bringing a buyer to the home.  In most cases if a home is listed in the MLS on offer of compensation is in the listing so we don’t run into this often.  However, we do have some agents who don’t list in the MLS and the compensation or lack of must be worked out prior to an offer being made. Sometimes the buyer pays for my services themselves and in that case, I would not accept compensation from the listing agent.

Totally confusing??

In Article 2 we will be discussing disclosure.  The article reads:

REALTORS^® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS^® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non-agency relationships as defined by state law. (Amended 1/00)

We must be truthful about properties and transactions.  Disclosure is a must if I am aware of any type of problem with the property.  However, I am not an expert in many fields and will not advise on anything outside the scope of my real estate license.  Meaning I will not give advise on electrical matters plumbing, roofing, etc.  I will however recommend you have a professional inspect anything that we have questions about.  And, of course, I will not disclose confidential information of my client.

Sellsius posted the answers today.  OK, I’ll admit it.  I missed one

Great quiz today at Sellsius on the Code of Ethics.  The very first question is:

The Code of Ethics is based on the concept:

a. Let the buyer beware
b. Let the seller beware
c. Let the public be served
d. Let the public be dammed, how do I get paid?

I’ll give you a couple of clues:  there is no need to beware and my pay has nothing to do with it

I’ll run thru the answers tomorrow so be sure to check back and see how much you know!

Standard of Practice 1-15
REALTORS^®, in response to inquiries from buyers or cooperating brokers shall, with the sellers’ approval, disclose the existence of offers on the property. Where disclosure is authorized, REALTORS® shall also disclose whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker. (Adopted 1/03, Amended 1/06)

A lot of people don’t understand this one.  They think we all know how many and what offers have been received on a specific property and that we can tell them.  Not true.  If I have a listing and we have received an offer then get a call that another one is coming in, it is up to the seller to as to whether I can tell anyone we have another offer.  If the seller says it’s OK I also have to disclose who wrote the other offer.  Not the person specifically but was it someone from the listing firm, another firm or did I write it myself.

It is also up to the seller if it is OK to let others know that offers had been received in the past but not worked out. 

Woo Hooo!!  We are finished with Article 1.  Next up Article 2.

Standard of Practice 1-14
Fees for preparing appraisals or other valuations shall not be contingent upon the amount of the appraisal or valuation. (Adopted 1/02)

No bribes for inflated value estimates or appraisals.  Sometimes the truth hurts.  You can not withhold payment because you don’t like the value given.

Standard of Practice 1-13