Code Resolves Agency Conflicts

August 1, 2002

Q. In my market, there are regular conflicts between listing agents and buyer’s representatives about contact with buyers and, ultimately, who gets paid. When buyers attend open houses without their agents and get interested in a home, they often end up working directly with the listing agent. In such cases, the onus is on buyer’s reps to better establish loyalty with their clients, but isn’t there also an ethics issue at work here?

A. Yes, the struggle between listing agents and buyer’s agents is one of the most difficult issues we face in today’s cooperative real estate environment.

To best understand the issues governing commission entitlement and procuring cause, review the extensive Arbitration Guidelines in the NAR Code of Ethics and Arbitration Manual. Ultimately, there are no predetermined entitlement rules. Arbitrators must examine each case in light of all the facts and circumstances to determine procuring cause. (See Appendix II in the Manual.)

As to ethics, the buyer’s rep vs. listing agent topic raises serious conduct issues governed by the Code. Article 16 says REALTORS® shouldn’t interfere with the agency relationships other REALTORS®have with their clients. Depending on your particular situation, you may also want to consult Standards of Practice 16-5, 16-9, and 16-13, which stipulate, respectively, that salespeople cannot solicit agreements from buyers or tenants already exclusively represented; should check whether a prospective client already has exclusive representation; and should work directly with a buyer’s exclusive rep, not the buyer.

Buyers themselves may exacerbate the agency problem. For instance, they may want to make an offer on a home they see during an open house and decide, independently, to work with the listing agent. This can happen even when the listing agent asks buyers whether they’re represented and encourages them to work with their own agent.

In other cases, buyer clients may visit an open house and state that they are represented. But listing agents may use overbearing behavior to induce buyers not to work with their contracted agents. Listing agents may tell buyers, “You can buy the home only through me since your agent isn’t here,” or “You’d better write a contract right now through me, because there are other offers on the table. By the time you contact your agent the home is likely to be gone.” These tactics can be an intentional interference in the buyer-rep relationship.

Sometimes, buyer’s reps set up a problem by failing to fulfill their agency duties to their clients in terms of education and service. For instance, a buyer’s rep who says, “Call me when you find something and I’ll write it up for you,” isn’t being fair to the client and is putting a burden on listing agents who end up working with those buyers.

Clearly, all the parties to the transaction should consider how they might do things differently. All sales associates should evaluate their behavior and ask themselves whether they’re truly working according to the spirit of NAR’s Code of Ethics—those timeless principles of integrity, honesty, fairness, and competence so prominently mentioned in the Code’s Preamble.

Finally, we should all commit to that famous tenet, the Golden Rule, quoted in the Preamble to our Code: “Whatsoever ye would that others should do to you, do ye even so to them.”

Bruce Aydt

Attorney Bruce Aydt, ABR, CRB, SRS, is a national real estate educator, a Missouri real estate broker, and past chair of the National Association of REALTORS® Professional Standards Committee.

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