StraightTalk is a great place to start learning how living the code can help improve your business, but it’s no legal substitute for the Code of Ethics.
Thoughts on Article 3
Cooperation is good business
Your client’s interests come first, unless they want to do something illegal of course. The Code, however, strongly encourages you to cooperate with other brokers/agents. It uses the word “shall,” which we interpret to mean “must.” Most REALTORS® get the competitive part of the business; not enough REALTORS® understand how cooperating with other agents will actually help your long-term business. The reality is, in your career, you’ll work with the same brokers/agents over and over again. Having a reputation for cooperation will help you close more deals over the long term. It’s important to note that cooperation does not obligate you to share commissions, fees, or to otherwise compensate another broker. (Amended 1/95)
Standard of Practice 3-1
The REALTOR® representing the seller/landlord defines the terms of any “offer to cooperate.” And just because you have an offer to cooperate, don’t assume it includes an offer of compensation. That has to be spelled out separately! Before you agree to the terms of an offer to cooperate, make sure you have an understanding how, when and how much you will get paid!
Standard of Practice 3-2
Sometimes circumstances change after you make an offer of compensation, and you have to amend the offer. Just make sure you amend the offer BEFORE the other REALTOR® brings you an offer to purchase or lease the property.
Standard of Practice 3-3
Standard of Practice 3-2 does not prevent the listing broker and cooperating broker from entering into an agreement to change cooperative compensation. If you both agree to a change in the offer of compensation, you are certainly able to make that change.
Standard of Practice 3-4
If you are a listing broker, you have an obligation to disclose any dual or variable rate commission arrangements. (That’s an arrangement where you pay one commission if your firm is the primary cause of the sale and another if the cooperating broker/agent’s firm is the primary cause of the sale.) You must, as soon as is practical, disclose this kind of arrangement to potential cooperating brokers; you also have to tell them the difference between those two commission structures. If the cooperating broker represents a buyer/tenant, they have an obligation to tell their client about the variable rate commission before the client makes an offer to purchase or lease.
Standard of Practice 3-5
If you are a subagent, make sure the principal agent knows all the facts before and after you execute a purchase or lease agreement.
Standard of Practice 3-6
As a REALTOR®, you have to disclose any accepted offer, including offers with unresolved contingencies, to any broker seeking cooperation.
Standard of Practice 3-7
When you ask another REALTOR® for information about a property under a management or listing agreement, you have to tell that REALTOR® about your REALTOR® status and whether your interest is personal or on the behalf of a client. If you are working for a client, you have to tell the other REALTOR® about your representational status.
Standard of Practice 3-8
Another common sense amendment: don’t misrepresent the availability of access to show or inspect a listed property.
Next: Disclose. Disclose. Disclose
Terms to Know:
Before we begin, there are several terms that appear in the Code of Ethics that could use a little clarification:
Client is anyone that you or your firm has a formal agreement to work with. It could be an agency relationship or you could be providing a non-contracted service.
Customer is a party to a real estate transaction who receives information, services or some other benefit from you, but doesn’t have a contract with you or your firm.
Prospect is a buyer, seller, tenant or landlord with whom you or your firm has no contract. An agent is anyone with a real estate license (though not necessarily a REALTOR®) acting in an agency relationship as defined by Virginia law.
Broker is someone with a real estate license (including brokers and sales associates) acting in an agency relationship as defined by state law or regulation; and “broker” means a real estate licensee (including brokers and sales associates) acting as an agent or in a legally recognized non-agency capacity.
REALTOR® is someone who has earned his/her real estate license and also earned the right to use the title. REALTORS® serve many roles in different real estate transactions. For our purposes, we mean the term to be all inclusive, whether the REALTOR® represents a buyer, seller, tenant or landlord. Whether they provide contracted services or provide a service without a contract.