In Whose Interest?

Co-op offer shouldn’t dictate showings

June 1, 2006

Q: I recently received a call from a salesperson who wanted to show one of my listings. During the call, she asked if the cooperative compensation percentage offered in the MLS was a mistake. When I said no, the agent said that she wasn’t sure she was willing to show her client the property unless I offered her one-half a percentage point more than the cooperative commission offered in the MLS. Is this salesperson violating the Code of Ethics by putting her own concerns about how much commission she might receive before her client’s best interest?

A: If the salesperson is indeed putting her own interests before the legitimate interests of her buyer client in finding a property, then she has violated Article 1 of the Code of Ethics. Article 1 requires that “Realtors® pledge themselves to protect and promote the interests of their client.”

Case Interpretation #1-26, “Subordination of Client’s Interests to REALTOR®’s Personal Gain” in the Code of Ethics and Arbitration Manual (in the Law and Policy section at REALTOR.org), illustrates the point. In the case, a practitioner showed and sold a property for which the owner agreed to pay a sale bonus but failed to show her buyer client another property that better fit the client’s special needs. The practitioner put her own interest in getting the bonus before the client’s need to find the right property and violated the Code.

Salespeople who choose to do what I call “sell to the higher commission” need to be very careful to make sure they’re serving their clients’ best interests. At the same time, you can’t assume that a salesperson who inquires about—or even requests—a higher amount of cooperative compensation isn’t looking out for her client’s interests. What if the buyer representation agreement obligates the buyer to pay the buyer’s agent the higher amount the agent requested? If that’s the case, the buyer’s agent may very well be looking out for her client’s interests by seeking to ensure she will be paid by the listing broker rather than requiring her client to pay cash out of pocket to make up the difference. The best course in either situation is to make sure buyers have information about all the available properties that fit their expressed needs.

Q: Should REALTORS® have a list of preferred home inspectors to offer to their clients? What if some of these home inspectors are more interested in obtaining future referrals than they are in serving the interests of the buyer client?

A: Because Article 2 of the Code says “REALTORS® shall not be obligated to discover latent defects in the property [or] to advise on matters outside the scope of their real estate license . . .,” home inspections can be a great tool for helping buyers assess the structural soundness of a property. However, salespeople who recommend a particular inspector raise questions of risk for themselves and their broker. A negligent recommendation for a particular inspector can precipitate a legal claim. For this reason, many companies have policies to provide a list of preferred home inspectors rather than recommending a particular one.

However, if an inspector isn’t doing the job properly, or you’re using an inspector more interested in protecting the deal than the client’s interests, you may be in violation of Article 1, which states that a REALTOR®’s obligation to the client is primary. Specifically, Article 1 requires that “Realtors® pledge themselves to protect and promote the interests of their client.” Practitioners ought to ask the question “If this were my home purchase, would I use this inspector?” If the answer is no, remove the inspector’s name from the preferred list.

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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