Avoid Address Envy

Give people a 'true picture' of listings' location

May 1, 2004

Q. I live in Trenton, N.J., which is about 13 miles or 25 minutes from Princeton, N.J. Many of the residents in the towns bordering Princeton aspire for a Princeton address because of the city’s fame as the home of Princeton University, its charming architecture, and its convenient location, midway between New York City and Philadelphia. Aspiration is one thing. But isn’t it a violation of the REALTOR® Code of Ethics if a real estate practitioner advertises a listing as being in the Princeton ZIP code when the property actually is located in a different town and school district and has a different ZIP code?

A. Article 12 of the Code of Ethics calls on REALTORS® to present to the public a “true picture” in their advertising and representations. If advertising leads a reasonable reader to believe that the property is located in Princeton when it isn’t, that’s not a true picture. But if the ad says something like “near Princeton,” it’s probably fine. Ad copy should honestly describe a property.

For further guidance, read Case Interpretations 12-2 and 12-3 in the Code of Ethics and Arbitration Manual at REALTOR.org. The cases discuss exaggeration and misrepresentation in ads promoting listed property.

Q. I spent more than three hours with potential clients discussing strategies to prepare their house for sale, as well as to represent them when they purchased their next home. We didn’t sign a buyer representation agreement but came to an understanding that we would look at homes together.

Four days later, I called them and found that they’d signed a purchase contract through another listing salesperson. When I asked why, they said they’d viewed the home at an open house. The listing salesperson told them that the sellers would pay a reduced commission if the buyers purchased the home through the listing broker (and presumably favor the offer brought by the listing salesperson). She encouraged my prospective buyers to make an offer through her. I don’t believe she asked them if they were working with another salesperson. Doesn’t this violate the Code of Ethics?

A. No, it doesn’t seem to be a violation. Misconceptions arise about what’s “fair,” “right,” and “ethical” when it comes to prospective transactions. When you discuss the possibility of establishing a representation relationship with a prospect, you have limited rights. In fact, until you enter into an agreement to represent someone, your “potential” client is just that—a prospect.

As you describe the scenario, you had nothing more than an understanding that you would show the sellers homes. You state that you didn’t have a representation agreement with them, written or otherwise. Having a written agreement is a critical step to cementing a relationship.

If you’d had an exclusive representation agreement, you could’ve looked to Article 16 for protection. It specifies that REALTORS® mustn’t interfere with exclusive agreements other REALTORS® have with their clients. In addition, Standard of Practice 16-13 prohibits other REALTORS® from working with your clients except when you consent or your client initiates such dealings. It also states that a REALTOR® must ask prospects if they’re subject to an exclusive representation agreement with another salesperson before providing a “substantive service.” Writing a purchase offer is considered such a service.

Finally, there’s no prohibition against a listing agent giving prospects information about reduced or variable commission arrangements. The Code doesn’t govern what REALTORS® charge for their services. All brokers have the right to determine and negotiate commissions and fees on a case-by-case basis.

The good news in all this? Now, you know what to do when you meet your next prospects: Establish an exclusive written agreement for your services.

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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