Code of Ethics: 6 Common Misunderstandings

To err — or at least to misunderstand — is human, but avoiding these common misconceptions about NAR policies and regulations can keep you from getting into an unnecessary dispute with a fellow practitioner.

May 1, 2008

Misunderstanding 1: Showing a property proves procuring cause and entitles you to a commission if your buyer purchases the home.

The real story: Procuring cause is a complex issue, and no one action ensures that you’re entitled to compensation after a sale. Appendix II to Part 10 of the Code of Ethics Arbitration Manual givers a basic definition of procuring cause as “the uninterrupted series of causal events which results in the successful transaction.” Neither showing the property nor having a buyer’s representation agreement with the purchaser automatically demonstrates procuring cause.

Misunderstanding 2:It’s OK to contact the seller directly to present an offer or discuss other terms of the sale on behalf of your buyer.

The real story: Standard of Practice 16-13 requires that cooperating brokers deal with the client's exclusive agent or representative, not directly with the client. A cooperating broker or agent can contact a client directly only with the consent of the exclusive agent or when the client initiates the dealings.

Misunderstanding 3:An offer of cooperation in the MLS automatically means that a buyer’s representative will receive compensation.

The real story: Article 3 of the Code explains that cooperation does not automatically include compensation. Unless an offer of compensation is made, such as including it in a listing placed in the MLS, a buyer’s representative may not assume that the listing broker will pay a cooperative commission. Standard of Practice 3-1 requires the cooperating broker to "ascertain" the terms of cooperation and compensation before beginning efforts to cooperate.

Misunderstanding 4: All documents relating to the real estate transaction must be in writing.

The real story: While it’s probably good business practice to have everything about a transaction in writing and some state laws may require it, Article 9 only states that agreements such as listings and purchase contracts be in writing and furnished to all parties. Documents such as the seller disclosure statement are not covered by Article 9 of the Code.

Misunderstanding 5: Since a Web site is designed to establish an agent as a brand, it’s good marketing practice to include only your name and contact info on your site, not that of your broker.

The real story: Standard of Practice 12-9 requires that Realtors® include the brokerage’s name and the states in which the Realtor® is licensed in a readily apparent place on all the Realtor®’s business Web sites.

Misunderstanding 6: Having worked with a client on an exclusive basis in the past gives you an ongoing relationship with that individual and prohibits other real estate professionals contacting them.

The real story: Standard of Practice 16-7 makes it clear that once any exclusive representation agreement has expired between you and a client, it’s completely acceptable for any other real estate practitioner to solicit that client’s business.