Monday
July 28, 2014

Brokers Must Verify Compensation Terms

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Brokers Must Verify Compensation Terms

Article 3 of the Code of Ethics does not inherently guarantee payments for working with listing brokers.

Question: What does Article 3 of the NAR Code of Ethics mean when it talks about cooperation not including compensation? Are we required to speak with the listing broker to verify cooperative payment?

Answer: In some cases, yes. Article 3 of the Code sets out a unique obligation in business industries by mandating “cooperation” between competitors. “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.” The second sentence explains that, while the Code mandates “cooperation,” it doesn’t require compensation as part of the obligation to cooperate. Standard of Practice 3-10 says the duty to cooperate “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.” The last sentence of Standard of Practice 3-1 says, “Terms of compensation, if any, shall be ascertained by cooperating brokers before beginning efforts to accept the offer of cooperation.”

Taken together, the listing broker must share information on listings with other brokers and must make listings available to show by other brokers, but cooperating brokers must “ascertain” if they are going to be paid by the listing broker before they begin efforts to cooperate. If the property is listed in an MLS, the cooperating broker would simply look at the listing in the MLS to see what compensation is offered. If the property isn’t published in an MLS or the cooperating broker doesn’t belong to the MLS in which it’s listed, then the cooperating broker must contact the listing broker to find out the terms of compensation. By these provisions, the Code has, for a long time, expressed that cooperating brokers are responsible for finding out whether and how much they’re going to be paid.

HAVE A DILEMMA?

Send your ethics questions to ethics@realtors.org.

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