Welcome back to part 3 in my series on the Texas Association of Realtors Code of Ethics. These are rules of conduct that all real estate agent members of the TAR must follow at risk of fines, discipline, or even being thrown out.
Previously we discussed Article 2. Today is Article 3!
Article 3 is a pretty sensitive one for agents, because it’s all about getting paid!
More specifically, it is about cooperating with other brokers?
Say what? Cooperating with other brokers? The competition? Isn’t that collusion?
An example of what cooperating with other brokers would be, if I were the listing agent, acknowledging and working through a buyer’s designated broker and agent, instead of insisting on dealing with the buyer directly.
Compensating Other Brokers. When listing their home, sellers usually are agreeing to cooperate with other brokers and pay the buyer’s broker/agent a fee. But the other agent cannot assume that there is any compensation unless it is offered. Cooperating with that broker by, for example, bringing a buyer by does not guarantee the buyer’s agent a certain commission unless advertised.
This isn’t often an issue, because most buyer’s agents are brining buyers to listings advertised on the MLS, where the buyer agent’s compensation is plainly advertised already. The other agent earns the advertised commission once an offer is submitted – not contract execution. The compensation can only be changed after that point if both agents agree.
Preferential Compensation Disclosure. A listing may have what is called a variable rate commission. A variable rate commission means that the commission varies depending on which brokerage brings the buyer. For example, the listing agent may have a lower commission if their brokerage brings the buyer versus a higher commission from other brokerages (maybe as a concession to allay the seller’s intermediary concerns, or as a thank you for getting two sides to one transaction). If there is a variable rate commission, the other agent has a right to know, and to know what the difference in commission is. It is not at all common in the Killeen area in my experience.
This is not the same as having, for example, a 2% commission for the listing agent and a 3% commission for the buyer’s agent. Those commission are different, but not based on which brokerage represents either side.
Disclosing Accepted Offers. Contrary to popular belief, a listing agent does not have to disclose if there are multiples offers on a property unless the seller specifically instructs them to (although it is usually in the seller’s interest to do so). An agent does have to disclose if the seller has accepted an offer. This is further reinforced by board rules like FHAAR’s that an MLS listing must be updated from “Active” to “Under Contract” within 24 hours of going under contract.
Inquiring about a Property for Personal or Professional Reasons. Interestingly, if I, a Realtor®, call another agent asking about their property, I have to ethically disclose if I am asking for myself or for an actual client, and what my relationship to the client is (e.g., whether I have a buyer representation agreement with them). I’m not sure how enforceable this rule is, but I guess that is why it is called the Code of Ethics. An ethical person is ethical just to be ethical, not to try to stay out of trouble.
Showing Instructions. Agents are not allowed to show the home other than in accordance with the showing instructions of the listing agent/seller. For example, that means if the listing agent wants buyers to take shoes off, the listing agent needs to show that in their instructions on the MLS, and the buyer’s agent needs to ensure that their buyers and they themselves comply.
Sharing Information. The most important part of Article 3 is simply the broad requirement to cooperate when it is in the best interest of your client, the seller. Why wouldn’t an agent do that anyway? An unethical listing agent might not cooperate with another agent so that the other agent has a harder time selling the listing. Why wouldn’t the listing agent want the buyer’s agent to sell their listing? Possibly because they want to sell it themselves, to one of their own buyers, and double end the transaction. This is why Realtor® boards often have harsh punishments for listing agents if they list incorrect directions to the property, for example. Nefarious agents might want buyer’s agents to literally get lost, meaning no one sees the property except for the listing agent’s own clients.
For that reason, agents are also not allowed to misrepresent whether the home is available for being shown or not.
I hope that was interesting! Much of the article pertains more to the behind the scenes, but obviously will affect buyers and sellers alike if agents are not acting responsibly.
Next time will be Article 4, an ethical obligation that is the #1 reason real estate investors don’t become Realtors®.
Questions about specific circumstances? Or would you like more info on buying and selling in Central Texas? Please give me a shout at my contact info below!
Brian E Adams, REALTOR®, GRI
StarPointe Realty Central Texas LLC
Licensed in the State of Texas