The REALTOR® Code of Ethics | Article 3 Cooperation and Compensation

 
 
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by Sarah Stelmok

Article 3 is a multifaceted Code

First, this Code states that we will cooperate with other REALTORS® and REALTOR® firms, but cooperation doesn’t guarantee compensation. In essence, it places the responsibility to seek out cooperation terms on the customer’s representative, traditionally, a buyer’s agent. This must be done BEFORE a REALTOR® starts the cooperation process. So, BEFORE we show a home, agents need to verify that cooperation and compensation applies. It also states that cooperation will only be extended as long as it is in the client’s best interest. This allows clients to exclude specific customers, real estate agents, appraisers, home inspector’s, etc from being allowed into their home; or, allowed to submit an offer. Exclusions should be put in writing and attached to the Listing Agreement.

For the most part, cooperation and compensation are offered through MLS systems. However, if your Broker is not a member of the MLS service where the offer of cooperation is made, then compensation is not guaranteed. Compensation agreements need to be established, in writing, prior to showing properties, if you are not a member of the listing’s MLS.  Changes of compensation can occur, as long as both the listing brokerage and buying brokerage agree to the change. This agreement should be put in writing and signed by the agents involved in the transaction. If there is a change in compensation before an offer is submitted, the listing agent has a duty to report the change prior to an agent submitting an offer. If a listing agent has accepted a variable rate commission structure, they must disclose this to other agents prior to offer submission. Listing agents are also required to disclose existence of offers, including those with unresolved contingencies, to any REALTOR® seeking cooperation. However, you can not lie about the existence of offers in hopes of driving up the price.

Showing properties is one of the main components of cooperation. When agents are seeking access to a property, they are required to disclose if they are looking for themselves or for a client or customer. Most agents forget that they must disclose their representational status. If there is no Buyer’s Agency Agreement signed, then that buyer may only be a customer, not a client. Different levels of representation require different fiduciary duties. Cooperation and compensation may be dependent on client level representation. Listing agents can not misrepresent the availability of a property, this includes access for inspections and appraisals. REALTORS® also agree to not access properties except in ways approved by the seller and listing brokerage. Failure to abide by showing instructions can result in suspension of lockbox access.

As with almost of the Articles in the REALTOR® Code of Ethics, honesty is a key element. The right to know all pertinent facts regarding cooperation, representation, commission, and access remain a top priority in achieving the ultimate goal of promoting the best interests of those who use our services. As in sports, there are rules and standards in place to allow for a more even playing field. Failure to abide by these rules and regulations leads to unfair advantage, discrimination, and harm to the very people we are changed with protecting.

See below for the full Article 3 of the REALTOR Code of Ethics

Article 3 (Case Interpretations for Article 3)

REALTORS® shall cooperate with other brokers except when cooperation is not in the client’s best interest. The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise compensate another broker. (Amended 1/95) [listen]

  • Standard of Practice 3-1

REALTORS®, acting as exclusive agents or brokers of sellers/ landlords, establish the terms and conditions of offers to cooperate. Unless expressly indicated in offers to cooperate, cooperating brokers may not assume that the offer of cooperation includes an offer of compensation. Terms of compensation, if any, shall be ascertained by cooperating brokers before beginning efforts to accept the offer of cooperation. (Amended 1/99)

  • Standard of Practice 3-2

Any change in compensation offered for cooperative services must be communicated to the other REALTOR® prior to the time that REALTOR®
submits an offer to purchase/lease the property. After a REALTOR® has submitted an offer to purchase or lease property, the listing broker may
not attempt to unilaterally modify the offered compensation with respect to that cooperative transaction. (Amended 1/14)

  • Standard of Practice 3-3

 Standard of Practice 3-2 does not preclude the listing broker and cooperating broker from entering into an agreement to change cooperative compensation. (Adopted 1/94)

  • Standard of Practice 3-4

REALTORS®, acting as listing brokers, have an affirmative obligation to disclose the existence of dual or variable rate commission arrangements (i.e., listings where one amount of commission is payable if the listing broker’s firm is the procuring cause of sale/lease and a different amount of commission is payable if the sale/lease results through the efforts of the seller/ landlord or a cooperating broker). The listing broker shall, as soon as practical, disclose the existence of such arrangements to potential cooperating brokers and shall, in response to inquiries from cooperating brokers, disclose the differential that would result in a cooperative transaction or in a sale/lease that results through the efforts of the seller/landlord. If the cooperating broker is a buyer/tenant representative, the buyer/tenant representative must disclose such information to their client before the client makes an offer to purchase or lease. (Amended 1/02)

  • Standard of Practice 3-5

 It is the obligation of subagents to promptly disclose all pertinent facts to the principal’s agent prior to as well as after a purchase or lease agreement is executed. (Amended 1/93)

  • Standard of Practice 3-6

REALTORS® shall disclose the existence of accepted offers, including offers with unresolved contingencies, to any broker seeking cooperation. (Adopted 5/86, Amended 1/04)

  • Standard of Practice 3-7

When seeking information from another REALTOR® concerning property under a management or listing agreement, REALTORS® shall disclose their REALTOR® status and whether their interest is personal or on behalf of a client and, if on behalf of a client, their relationship with the client. (Amended 1/11)

  • Standard of Practice 3-8

REALTORS® shall not misrepresent the availability of access to show or inspect a listed property. (Amended 11/87)

  • Standard of Practice 3-9

REALTORS® shall not provide access to listed property on terms other than those established by the owner or the listing broker. (Adopted 1/10)

  • Standard of Practice 3-10

The duty to cooperate established in Article 3 relates to the obligation to share information on listed property, and to make property available to other brokers for showing to prospective purchasers/tenants when it is in the best interests of sellers/landlords. (Adopted 1/11)

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