StraightTalk is a great place to start learning how living the code can help improve your business, but it’s no legal substitutue for the Code of Ethics.
Thoughts on Article 16
Working with other REALTORS®
Don’t try to steal clients from other brokers. This and disagreements over money are perhaps the biggest source of conflict between REALTORS®.
The best way to build your business over time is to treat all people honestly.
Doing or saying anything that interferes with the relationship other brokers and agents have with their clients will, over time, poison your own business. Go to any city in America and the REALTORS® in that town can tell you who has a reputation for unfairly poaching clients. You don’t want that reputation because it will kill your business over time.
That doesn’t mean you can’t compete for business. Be aggressive. Be innovative. As long as what you do is ethical. Article 16 also does not prohibit disagreements over things like commissions, fees and other forms of payment.
Article 16 does not keep you from making general statements about your services or availability. For instance, you are allowed to send a postcard to everyone in the area where you work or to all members of a professional group, even those people that might be already working with another REALTOR®.
Mostly, this article recognizes two types of solicitations as unethical:
First, don’t call or contact personally anyone with a “For Sale” sign in his or her yard or listed on MLS. If you know they have a REALTOR® already, don’t call and ask for their business.
Second, don’t send any kind of written solicitation, unless it’s part of a broader general campaign, to anyone you’ve identified through a compilation of listings, “For Sale” or “For Rent” signs. Article 3 and MLS listing rules are specific here. If you know someone is working with another REALTOR®, don’t try to take their business until any legal agreement between them officially ends.
This article has been clarified over time. For instance, it doesn’t mean you can’t contact a prospect who is working with another REALTOR® to offer other real estate services unrelated to the service their official broker/agent is providing. For example, you could offer property management services to someone even if another broker/agent is providing brokerage services. You can also offer the same service for a different property.
You must be careful though. You cannot use information you get from MLS or any other offer of cooperation to target the clients of other REALTORS®, even for services that are not unethical.
As you can imagine, there have been a number of conflicts on this subject. The Code attempts to draw the line clearly between right and wrong so that everyone knows where they stand. Here’s another example. It’s bad business to ask a property owner for a listing if they have the property listed with another broker. If the other broker, however, refuses to discuss the nature of the listing with you (exclusive right to sell, open listing, etc.) or when the agreement expires, it’s OK to call the client and get the information directly. It’s even OK to discuss at that time listing the property with you once the seller’s current agreement expires.
The same holds true for buyer/tenant agreements. If the broker refuses to discuss the nature of their exclusive buyer/tenant agreement with you, then you can contact the buyer/tenant to get the information directly. And you may talk about doing business together (creating a new buyer/tenant agreement) once their current agreement expires.
So what happens if a client who is working with another REALTOR® calls you? As long as you did not initiate the conversation, it’s OK to talk with the client about creating an agreement to work together. You can even enter an agreement that would take effect when their existing contract with the other broker expired.
Remember, just because you’ve worked with someone in an exclusive agreement in the past, does not keep other REALTORS® from trying to get their business in the future. Every deal, every transaction is unique and everyone starts from scratch. That alone is a powerful reason to treat people the way you want to be treated. If a prospect appreciates the way you work for them and the way you treat them, they are far more likely to work with you again the next time around, or refer a friend to you.
The exclusive agreement rules go both ways. Just because you have an agreement with a seller doesn’t keep other REALTORS® from negotiating similar agreements for the day yours expires, as long as they do it within the rules, and are not simply poaching your clients using unethical means.
Any time you agree to represent a new client, make a reasonable effort to determine if they have an existing agreement to receive the same services with another REALTOR®.
When you represent a client in a transaction—it doesn’t matter if you work for the buyer, the seller, the landlord or the tenant—make sure everyone involved in any potential deal knows the exact nature of your relationship with your client. Again, it doesn’t matter if you are a buyer/tenant representative, a seller/landlord representative or broker. Tell them at your first contact and then follow it up in writing before you close any deal or sign any lease. If you represent a buyer/tenant on a property that is unlisted, it’s ok to ask for anticipated compensation from the seller/landlord at your first contact.
If a client has an exclusive agreement with another REALTOR®—it doesn’t matter what kind of relationship—always deal directly with the representative or broker on any issue concerning the property. Never deal directly with the client unless you have permission from the client’s representative or broker. The only exception to this rule is if the client contacts you directly first.
REALTORS® are obligated to ask whether prospective clients are subject to an exclusive agreement with another REALTOR®. If such an agreement exists your dealings should be conducted with the other REALTORS® unless the clients have approached you or the other REALTORS® consent to your direct dealings with the clients.
Now suppose you meet a seller/landlord or buyer/tenant who has no exclusive agreement with any representative or broker. You are free to enter into a contractual relationship with this person, but you can’t knowingly obligate them to pay more than one commission unless they agree to pay it. This is where being clear helps avoid problems. Make sure your prospect knows what commissions they will pay and to whom. Be clear.
As a REALTOR® in a cooperative transaction, you pay the cooperating REALTOR® (principle broker) only. Don’t offer to compensate any of the sales licensees who work for or are associated with other REALTORS® unless you have the other broker’s permission.
It is not just bad form but also bad business to use an offer to purchase/lease to try to get a listing broker to change the compensation he/she is offering. Don’t dangle an offer to bump your commission by another percentage point. Also don’t try to extend a listing broker’s offer of cooperation/compensation to other brokers unless the listing broker gives you permission.
For goodness’ sake, don’t put a “For Sale” sign in someone’s yard without their permission. That’s not good.
Don’t use any information you receive from a listing broker’s offer to cooperate to poach their clients or to refer their clients to other brokers. Unless, of course, you have the listing broker’s permission.
And one last thing: if you leave your firm, don’t try to get your existing clients to cancel any agreements they might have with your old firm. Wait until their agreements end before you ask for their business. Remember that the firm, not the agent, owns the contract. Respect that.