Get Commissions in Writing

Verify, don’t assume, compensation terms.

May 1, 2003

Q. My clients found a property they liked and called the salesperson listed on the yard sign to set up a showing. After the showing, they told the salesperson they wanted to make an oral offer to the seller and that I was their agent.

It turned out the salesperson didn’t have a listing on the property. She presented the buyer’s oral offer to the seller and had the seller sign a one-party listing agreement, on which she wrote, “Payable to [the name of her brokerage] only. Not to be co-brokered.”

A few days later my clients asked to visit the property again with me and with the other salesperson present. My clients told the salesperson I was their agent in this transaction, and I presented her with a written offer on the property. Later I received a counteroffer and a copy of the listing agreement indicating our office wouldn’t receive any commission. Were the salesperson’s actions ethical?

A. Article 12 of the NATIONAL ASSOCIATION OF REALTORS®’ Code of Ethics calls for REALTORS® to present a “true picture” in advertising and representations to the public. Standard of Practice 12-4 prohibits REALTORS® from advertising property “without authority.” It’s possible to have authority without a listing agreement, but the agreement is usually how REALTORS® get authority to put signs on properties. If the listing broker can prove she received the seller’s permission to post the For Sale sign and state law doesn’t require a listing agreement to advertise a property for sale, there’s no violation of the Code.

As to the payment of the co-brokerage commission, the burden is on co-brokers to determine if and how much they’ll be paid. Standard of Practice 3-1 provides that cooperating brokers must ascertain the terms of compensation, if any, before cooperating. Don’t assume listing brokers will pay cooperative compensation because they allow you to show a property.

Q. I’m an appraiser. A neighbor came to my office saying she’d listed her home with a local real estate office for $100,000 but that her agent hadn’t been aggressive in selling the home. She had received an offer for $90,000, which her agent had urged her to accept. She was hesitant, thinking she should be able to get the full $100,000.

Since I believed recent sales would support a value near $100,000, I advised her to obtain an appraisal to help her decide whether to accept the $90,000 offer. I told her she’d need the appraisal anyway, when the house sold. She wrote me a check for the appraisal fee and went to see her agent.

She came back an hour later and asked me to return her check. Her agent had advised her that the appraiser is the buyers’ choice and that she didn’t need an appraisal, because the buyers would obtain one when they applied for financing. Did her agent violate the Code of Ethics?

A. There are potential conflicts of interest on both sides of this story. First, the agent must be guided by her fiduciary duty to her client, as expressed by Article 1 of the Code: “When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client.” If the lower offer price wasn’t consistent with the agent’s research of what a fair list price was, she may not have been properly protecting and promoting her client’s interest.

As to the appraisal issue, the agent was right when she said the buyer’s lender would normally require an appraisal from the lender’s approved appraiser. My experience is that a seller’s appraisal wouldn’t normally be needed. Although your advice suggesting that she confirm the offer price with an appraisal may have been sound, it seems self-serving to solicit appraisal work in this situation. Referring the seller to a different appraiser would’ve avoided this conflict.

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.

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.

Related