Whose Client is it?

When a salesperson leaves with clients in tow, legal, ethical, and moral issues may arise.

November 1, 2002

Q. Recently, a sales associate, while licensed at my company, showed an in-house company listing to a buyer twice and signed the appointment book as a buyer’s agent.

The day after she quit my company, the salesperson showed the same buyer the same home and submitted an offer to purchase as a buyer’s agent. After accepting her purchase agreement, I told her I felt the contract should’ve been written with my company. Since she signed the appointment book as a buyer’s agent, and a buyer agency contract is between broker and buyer client, the client “belongs” to my company.

The salesperson said she didn’t do anything ethically wrong because she’d already changed brokers when the buyer made the offer. The salesperson also claims she signed in as a buyer’s agent in error. She said she didn’t have a disclosure form or buyer contract signed until she went to her new broker.

Neither my company’s independent contractor agreement nor our policy manual addresses buyer clients. The other broker told me that since the subject wasn’t addressed in either document, the salesperson had a right to take the client.

I’m considering asking for a referral fee and filing a grievance. What’s your opinion?

A. It’s not uncommon, as in this example, for legal, ethical, and moral issues to mix together. From your story, I can’t determine whether the facts involve a legal issue. But there’s potentially an ethical one.

Standard of Practice 16-20 of the NATIONAL ASSOCIATION OF REALTORS®’ Code of Ethics prohibits a salesperson who’s leaving a company from inducing company clients to cancel their exclusive agreements with the company. Associates often believe a person is “their” client, when in fact the client has an agreement with the company. The salesperson doesn’t automatically have the right to take the client with her, assuming there was an exclusive representation agreement in effect in this situation.

On a moral level, I have a problem with the salesperson’s and other broker’s attitude about the buyer. It’s inappropriate for them to deny a connection to your company.

If you assume the salesperson was instrumental in this sale, a solution would be to recognize the contributions of both your company and the salesperson and settle on a fee split.

Q. A cooperating MLS broker, a subagent, brought buyers to one of my listings. The buyers made an offer to purchase, and both parties signed the contract.

The next day, the subagent informed me the buyers had buyer’s remorse and were backing out of the purchase. Coincidently, the subagent listed a new property and the buyers immediately made an offer, which was accepted.

If the subagent was acting in the interest of the buyers rather than the seller, his client, has he breached the Code of Ethics?

A. We can’t assume the subagent was responsible for the buyers’ choice to terminate. It may simply be a coincidence that the buyer found the other house right away.

If the subagent urged the homebuyers to cancel their original contract and buy the house he was listing, the subagent may have been protecting and promoting his interests, instead of protecting and promoting the interest of his clients, as Article 1 of the Code of Ethics requires.

REALTORS® must always be on the lookout for potential conflicts of interest and choose the client’s interests over their own.

Bruce Aydt
columnist

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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