Code of Ethics-Duties to Clients and Customers
Posted in REALTORS Code of Ethics by Karen Rhodes on December 12th, 2006 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.
