Cooperation is First

Compensation level is open to negotiation

October 1, 2005

Q. Can an exclusive agency listing be entered into the MLS if the broker offers no compensation to cooperating brokers?

A. The Code of Ethics doesn’t require brokers to compensate one another—but MLS rules may.

Article 3 of the Code of Ethics requires that “REALTORS® shall cooperate with other brokers except when cooperation isn’t in the client’s best interest.” The Code goes on to say “the obligation to cooperate doesn’t include the obligation to share commissions, fees, or to otherwise compensate another broker.” REALTORS® must cooperate with other brokers regardless of whether or not compensation is offered. This “cooperation” may include sharing information about listings and allowing others to show a listing.

Taking cooperation a step further, an MLS is defined, in part, in NAR’s Handbook on Multiple Listing Policy as a means by which participants make offers of compensation to other MLS participants. Policy Statement 7.23 of the handbook clearly provides that “in filing a property with the multiple listing service of a Board of REALTORS®, the participant makes a blanket, unilateral offer of compensation to the other MLS participants and shall therefore specify on each listing filed with the service the compensation being offered by the listing broker to the other MLS participants.”

A listing filed with the MLS must specify some amount of compensation (the amount of which is wholly at the discretion of the listing broker) to other participants in the MLS, including buyer’s agents, subagents, or transaction brokers. Otherwise no contract can be formed between the participants. Yet, it’s critical to remember that cooperation and compensation are not interdependent. Brokers who choose to participate in an MLS must abide by its rules. But the Code of Ethics is clear that cooperation doesn’t require compensation.

Q. If I’m holding an open house, do I have to ask all visitors if they have an exclusive representation agreement before I give any details on the property?

A. The Code of Ethics does not require you to bar the door until you’ve asked the representation question. You don’t have to ask every casual looker who comes to an open house or every prospect who calls you with questions about a listing whether the person is subject to an exclusive representation agreement. The second paragraph of Standard of Practice 16-13 requires only that you ask prospects whether they have an exclusive representation agreement with another broker before you provide a “substantive service.” The types of services the standard mentions as substantive include writing a purchase offer or presenting a CMA. So if the open house visitor calls you the next day and wants to discuss making an offer, then you’d have to ask about representation.

If the prospect does have an exclusive agreement, you may not knowingly provide substantive services unless you have the permission from the prospect’s exclusive representative or unless the prospect directs you to do so.

Although it’s not required by the Code, you should probably suggest that a prospect who has an exclusive agreement with another broker but has asked you to write a purchase order should first talk to an attorney. Unless the other licensee has released the prospect from the contract, the prospect probably has some contractual obligations to the exclusive representative.

Standard 16-13 is an amplification of Article 16 of the Code of Ethics, which says “REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with clients.” The whole idea of Article 16 and Standard of Practice 16-13 is to ensure that REALTORS® respect the exclusive agreements that other REALTORS® have with their clients.

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 NAR Professional Standards Committee.

You can send him your ethics questions at ethics@realtors.org.

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