Code Words-July/August

‘Harmonious teamwork’ through adherence to the Code 
Article 3 outlines cooperation, compensation requirements for successful transactions

By Michele Di Donato
Vice President Risk Management

 

Article 3 requires that Realtors® 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.

Cooperation
Article 3 obligates Realtors® to cooperate with their competitors on mutually agreed upon terms when it is in the best interest of the clients. This obligation promotes harmonious teamwork by competitors, which benefits buyers/tenants and sellers/lessors. Through cooperation, brokers are able to enhance their ability to serve the needs of prospective purchasers and tenants.

Under certain circumstances, a Realtor® may legitimately withhold cooperation when it is not in the client’s best interest or when the Realtor® is acting as a principal. However, be prepared to justify your position if you are charged with an arbitrary refusal to cooperate. Unless you have a valid reason for believing that cooperation would not further the best interests of your client or the client instructs you to withhold cooperation, you must cooperate in the sale of listed property.

Compensation
Standard of Practice (SOP) 3-2 of the Code states that “to be effective, any change in compensation must be communicated to the other Realtor® prior to the time that Realtor® submits an offer to purchase/lease the property.” This change in compensation includes offers of bonuses in the MLS. However, SOP 3-3 goes on to say that SOP 3-2 “does not preclude the listing broker and cooperating broker from entering into an agreement to change cooperative compensation.” (emphasis added). The bottom line, and what all Realtors® should understand, is that a change in compensation after the cooperating broker produces an offer to purchase can occur only if both Realtors® agree to the change.

Realtors® have a duty to promptly communicate any change in the amount of compensation being offered before the cooperating broker produces an offer to purchase. Changing the buyer agent’s commission in CMLS after an offer has been made is a violation of Article 3.

Listing brokers must also disclose the existence of dual- or variable-rate commission arrangements and can do so by entering “yes” in the “Variable Rate Commission” field in the MLS system. The Realtor® must also indicate, in response to an inquiry from a cooperating broker, any difference in total commission or compensation that would result from a cooperative transaction, or from a sale resulting through the efforts of the seller or listing broker. If the cooperating brokerage represents the buyer, the cooperating brokerage must disclose such information to his/her client before the client makes an offer to purchase.