Understanding the Realtor® Code of Ethics – Article 3: Cooperating & Compensation

This is third in a series of posts describing what the Code of Ethics are and what they mean to you – the buyer or seller. A Realtor® is a member of the National Association of Realtors® (NAR) – the world’s largest professional association, and who is bound by a strict Code of Ethics.

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.

Realtors® are obligated to cooperate with other brokers in the sale of a property. However, “cooperating” does not necessarily mean sharing commissions, or “compensation.” See, Seller’s establish the compensation with their listing agent. It must be expressly written if and how a cooperating agent (the one who brings the buyer) will get compensated. As a Realtor® it is our duty to understand the offered compensation before beginning efforts to accept the offer of compensation.”

This article also means:
– A Realtor® cannot change the compensation midway through a transaction without written acceptance from all parties.
– If a Realtor® has a variable rate commission agreement with the seller, it must be disclosed to any interested parties. In the Pikes Peak MLS (Colorado Springs) there is a box to check if there is a variable rate commission agreement.

For example: Realtor® Randy lists Seller Sam’s house for x% commission. Seller Sam has agreed to half of the commission to go to the buyers’ agent or transaction broker that brings the buyer. However, if Realtor® Randy is the one who brings the buyer, she has agreed to lower the total commission from x% to y%. This is called a variable rate commission- the commission rate varies, depending on whether or not the listing agent works “both sides” of the deal.
Why does this need to be disclosed? Well, here is something to consider: Realtor® Randy brings an offer to Seller Sam, from her buyer, Brian. At the same time, Realtor® Ron brings an offer from Buyer Belinda. The offer, itself, is identical to the one from Buyer Brian. However, if Seller Sam accepts the offer from Buyer Brian, he will be saving money on the commission, so Buyer Brian’s offer is actually better. Now, if Seller Sam gives Realtor® Randy permission to disclose the presence of multiple offers, and Realtor® Ron knows that there is a variable rate commission, Buyer Belinda could have the option of structuring an offer that would be competitive to Buyer Brian’s- even with the variable rate commission. Ultimately, this could be advantageous to Seller Sam.

– A Realtor® is bound to disclose the presence of any accepted offer(s) -regardless of contingencies- to any other agent and buyers who may be interested in the property. Please note: Any non-accepted offers need only to be disclosed at the discretion of the seller.
Example: Realtor® Randy lists Seller Sam’s house. Realtor® Russ brings an offer from Buyer Butch, and Seller Sam accepts it. At the inspection, it looks like the deal may fall apart, but they are still engaged in negotiations. At this time, Realtor® Rebecca calls Realtor® Randy and tells Randy that she has a client, Buyer Brandy, who is very interested in the home and wants to write an offer. Even though it looks like the deal with Buyer Butch may fall apart, Realtor® Randy must tell Realtor® Rebecca that there is already an accepted offer.

– If a Realtor® is “seeking information” about a property on behalf of a client, they must disclose HOW they are representing them. Are they acting as a Transaction Broker? Are they a Buyers’ Agent? This professional relationship must be disclosed.

– A Realtor® shall NOT misrepresent the availability of access to show or inspect a property. Basically, a Realtor® cannot lie to people about when a property can or cannot be shown or inspected.
Here is, yet another, example… yay!: Realtor® Randy has Seller Sally’s condo listed. (He already sold Sam’s house.) Sally agrees to have the home available to be shown anytime between 9am and 7pm every day. At 3pm, one day, Realtor® Randy gets a call from potential buyers, Brooke and Bill. They want to see the property at 4pm the next day. Realtor® Randy knows that he is unavailable to show the home at that time. He is NOT allowed to lie and say that the property is not available to show. He must tell them that he is unavailable to show it to them. He may offer to show them the condo at a different time, or refer them to a different agent to show them the condo at the original time they requested.
Why does this matter? Realtors® need to look out for the best interest of their clients. What if Buyers Brook and Bill were only in town for a few hours and could only see the condo at that time? Lying about the availability of the property could’ve cost the Seller (Sally) a potential sale- should the buyers have wanted to make an offer.

For more information on The Realtor® Code of Ethics, please check out:
Understanding the Realtor® Code of Ethics … Article 1
Understanding the Code of Ethics -Article 2: Disclosure
Or, visit the National Association of Realtors Website.
Posted By: Springs Realty Scoop – Colorado Springs Real Estate


About Mariana

I am a Mom, Wife, Real Estate Agent Trainer and Mortgage Lender. Find me at http://www.marianawagner.com
This entry was posted in Buyer Info., Realtor® Code of Ethics, Seller Info.. Bookmark the permalink.

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