Treading on Thin Ice

Talk to an attorney before posting FSBO ads.

October 1, 2003

Q.We want to put information about properties offered by owners on our company’s Web site at no charge for 30 days. We would list sellers’ phone number as the contact, not ours. In return, we would ask that FSBOs, should they decide to participate in this way, give us the opportunity to make a listing presentation to them before they list with someone else. Is there a reason why we couldn’t do this?

A. The Internet has changed some aspects of the way we do business and encouraged all of us to think up innovative ways to practice real estate. Don’t forget, though, that the Code of Ethics and the law still apply in the online realm. Although it may be possible to do what you want to do, you should talk to your company’s attorney before proceeding. The posting of unlisted properties on your company Web site is advertising and therefore governed by the Code of Ethics as well as your state’s license law and its rules and regulations.

Standard of Practice 12-4, the applicable provision of the Code, provides that a REALTOR® may not advertise property without authority. The usual way we obtain authority to advertise is through a listing agreement. But there isn’t a listing agreement in a FSBO situation.

Although your attorney may be able to draft a document that gives you authority to advertise without a listing agreement, your state license law and regulations may specifically require one before you can advertise a property. Contact your state real estate commission to find out. You’re treading on thin ice unless you obtain and follow exactly the right information and advice.

Q. One of my associates was involved as the listing agent in a transaction with a salesperson from another company who represented the buyer. My associate took the listing at X percent and offered a co-op fee of Y percent in the MLS, which was less than half the total commission.

The cooperating agent found out from the closing company about the difference between the co-op fee and what we retained as the listing company and contacted the sellers directly, asking them if they were aware of the difference in the brokerage fee split. Although the co-op fee that would be offered wasn’t established in the listing agreement, the sellers were aware of the split we intended to offer.

It’s my opinion that the cooperating agent violated the Code of Ethics by contacting the sellers directly and disputing the co-op amount offered in the MLS. Am I right?

A.Yes, you’re correct. You actually raise several issues. Since this was an MLS listing, your associate had an exclusive listing. Because your associate had exclusivity, Article 16 and Standard of Practice 16-13 apply: A cooperating agent can’t deal with the client of another REALTOR® unless the REALTOR® gives permission or unless the client initiates the dealings.

In addition, Standard of Practice 3-1 provides that the cooperating agent must ascertain the terms of compensation before beginning efforts to cooperate. If the co-op agent didn’t like the compensation you offered, he should’ve contacted you before even showing the property to negotiate a different fee.

I also want to point up a change to Standard of Practice 1-12, which affects compensation disclosures. From your letter, it sounds as if you executed this standard appropriately. Effective January 2003, the standard requires that, before taking a listing, REALTORS® must advise sellers of the amount of compensation that will be paid to cooperating brokers. The standard doesn’t require that the disclosure be included in a listing agreement or even that it be in writing, but it does require that the seller be told what the cooperative fees will be.

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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