Walking the Line: Article 16 – Part 2

“REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with clients”

Last month we started the discussion regarding Article 16 of the Realtors Code of Ethics by highlighting Examples 1 and 2.  We thought we would continue for this month as it seems these questions continue to come up.  Take a read and remember we should- always do the right thing.

Article 16 Checklist

• What evidence is there of an exclusive representation or exclusive brokerage relationship agreement between the REALTOR® and their client?
• What service did Respondent provide, or offer to provide, the client that was covered by the exclusive representation or exclusive brokerage relationship agreement?
• What evidence is there that Respondent’s offer to provide services was not part of Respondent’s non-targeted general marketing efforts (“farming”)?

Example 3: Solicitation of Expired Listing

• A property was exclusively listed with REALTOR® A who advertised it widely and invited cooperation from other REALTORS®. The property was not sold during the term of REALTOR® A’s listing, although both REALTOR® A and REALTOR® B, a cooperating broker, had shown the property to prospects

• Sometime after the expiration of REALTOR® A’s listing, newspaper advertisements appeared indicating that the property was exclusively listed with REALTOR® B. Shortly thereafter, the property was sold by REALTOR® B.

• REALTOR® A confirmed that it was listed with REALTOR® B and then charged REALTOR® B in having failed to respect his exclusive agency status with the client by soliciting the listing.

• REALTOR® A’s specific charge was that REALTOR® B knew that the client had originally listed the property with him, REALTOR® A, because he had discussed the property with REALTOR® B during the term of the original listing contract; that during the term of REALTOR® A’s listing, REALTOR® B had shown the property to the same individual who had now purchased the property through REALTOR® B; and that with this knowledge REALTOR® B’s action in soliciting the listing, even after it had expired, was a violation of Article 16.

• REALTOR® A told the Hearing Panel that when he had asked for an extension of the original exclusive listing, the client told him that because of a family problem he intended to take the property off the market for a few months, but would consider relisting at a later date.
• REALTOR® B conceded that he had known of REALTOR® A’s exclusive listing at the time the listing contract was current; that he had known the term of the listing contract and, hence, knew when it expired; and that he had shown the property to the individual who eventually purchased it. However, he explained, he had no continued contact with the prospect to whom he had originally shown the property.

• After the expiration date of REALTOR® A’s listing, REALTOR® B was approached by the individual to whom he had originally shown the property and who was still actively interested in purchasing a home. In reviewing the purchaser’s stated requirements and reviewing the market, the property in question seemed to correspond more closely than any other available properties. Knowing that the original listing with REALTOR® A had expired some time ago, REALTOR® B simply called the owner to ask if the property had been re-listed with REALTOR® A. Upon learning that REALTOR® A’s exclusive listing had not been extended, REALTOR® B told the owner of his prospective buyer, solicited the listing, and obtained it.

• REALTOR® B said he saw nothing unethical in having solicited the listing when it was no longer exclusively listed with another broker and felt that REALTOR® A was without grounds for complaint.

Did REALTOR® B violate Article 16?

1. Yes
2.  No

• It was not the intent of Article 16 to provide any extended or continuing claim to a client by a REALTOR® following the expiration of a listing agreement between the client and the REALTOR®.

• REALTOR® A had not been successful in his efforts to sell the client’s property and neither the property owner nor other REALTORS® should be foreclosed from entering into a new listing agreement to sell the property.

Example 4: Refusal to Disclose Nature and Status of Listing

• REALTOR® A noticed the deteriorated condition of a “For Sale” sign posted on an unimproved site bearing the name of REALTOR® B and remembered it had been there for a long period of time. REALTOR® A decided to call REALTOR® B to determine the status of the property.

• In response to the question “Do you have an exclusive listing for that property?”, REALTOR® B replied that he was not obligated to disclose the nature, status, or type of listing. After more conversation, REALTOR® A stated his intention to contact the property owners for this information.

• REALTOR® B warned REALTOR® A not to “cross his sign” and refused to discuss the matter further.

• A few days later, REALTOR® B had a conversation with the property owners and learned of their decision to list the property with REALTOR® A when their current listing with REALTOR® B expired.

• REALTOR® B filed a complaint against REALTOR® A, alleging an Article 16 violation.

• At the hearing, REALTOR® B claimed: “Not only did REALTOR® A fail to respect my agency with the property owners by contacting them directly, but he violated Article 16 by taking the opportunity to relist the property away from me!”

• REALTOR® A defended his actions, stating he had contacted the property owners only after REALTOR® B’s refusal to divulge the nature and status of the listing.

Did REALTOR® A violate Article 16?

1.  Yes
2.  No

Standard of Practice 16-4

REALTORS® shall not solicit a listing which is currently listed exclusively with another broker. However, if the listing broker, when asked by the REALTOR®, refuses to disclose the expiration date and nature of such listing; i.e., an exclusive right to sell, an exclusive agency, open listing, or other form of contractual agreement between the listing broker and the client, the REALTOR® may contact the owner to secure such information and may discuss the terms upon which the REALTOR® might take a future listing or, alternatively, may take a listing to become effective upon expiration of any existing exclusive listing.

Did REALTOR® A violate Article 16?

• REALTOR® B’s refusal to disclose the nature and status of his listing had freed REALTOR® A to contact the property owners.

• Article 16 does require a REALTOR® to respect the agency of another REALTOR®. But, in order to respect the listing broker’s agency, the REALTOR® must be able to determine if a listing really exists.

• Once the REALTOR® secures information on the type and duration of the listing, Standard of Practice 16-4 also permits the REALTOR® to discuss the terms of a future listing or to enter into a listing that becomes effective upon the expiration of the current listing.

• REALTOR® B could have barred REALTOR® A’s contact with the sellers by simply providing him with the requested information.

Standard of Practice 16-18

REALTORS® shall not use information obtained from listing brokers through offers to cooperate made through multiple listing services or through other offers of cooperation to refer listing brokers’ clients to other brokers or to create buyer/tenant relationships with listing brokers’ clients, unless such use is authorized by listing brokers.

Remember the importance of “Paying Attention to Details”. If you have any questions please talk with your manager or contact Linda Kaneko at Linda.Kaneko@selectgroupre.com or Ron at Ron.Hoy@CBSelectRe.com.

 

Information provided by the National Association of Realtors® (NAR).

  What would YOU like to see in the next edition of Risk Management? Let us know.