Professional Standards

PATHWAYS TO PROFESSIONALISM

 

 

While the Code of Ethics and Standards of Practice of the National Association establishes objective, enforceable ethical standards governing the professional conduct of REALTORS®, it does not address issues of courtesy or etiquette.  Based on input from many sources, the Professional Conduct Working Group of the Professional Standards Committee developed the following list of professional courtesies for use by REALTORS®.

 

 

I.          RESPECT FORTHE PUBLIC

 

  1. Follow the “Golden Rule” – Do unto others as you would have them do unto you.
  2. Respond promptly to inquiries and requests for information.
  3. Schedule appointments and showings as far in advance as possible.
  4. Call if you are delayed or must cancel an appointment or showing.
  5. If a prospective buyer decides not to view an occupied home, promptly explain the situation to the listing broker or the occupant.
  6. Communicate with all parties in a timely fashion.
  7. When entering a property, ensure that unexpected situations, such as pets, are handled appropriately.
  8. Leave your business card. Do not leave behind business cards that contain advertisement.
  9. Never criticize property in the presence of the occupant.
  10. Inform occupants that you are leaving after showings.
  11. When showing an occupied home, always ring the doorbell or knock—and announce yourself loudly—before entering.  Knock and announce yourself loudly before entering any closed room.
  12. Present a professional appearance at all times; dress appropriately and drive a clean car.
  13. If occupants are home during showings, ask their permission before using the telephone or bathroom.
  14. Encourage the clients of other brokers to direct questions to their agent or representative.
  15. Communicate clearly; don’t use jargon or slang that may not be readily understood.
  16. Be aware of and respect cultural differences.
  17. Show courtesy and respect to everyone.
  18. Be aware of—and meet—all deadlines.
  19. Promise only what you can deliver—and keep your promises.
  20. Identify your REALTOR® and your professional status in contacts with the public.
  21. Do not tell people what you think—tell them what you know.

 

 

II.  RESPECTFOR PROPERTY

 

1.     Be responsible for everyone you allow to enter listed property.

2.     Never allow buyers to enter listed property unaccompanied. Never give out a lock box combination.

3.     When showing property, keep all members of the group together.

4.     Never allow unaccompanied access to property without permission.

5.     Enter property only with permission even if you have a lockbox key or combination.  Alert the listing agent immediately if the lock box does not open or malfunctions.

6.     When the occupant is absent, leave the property as you found it (lights, heating, cooling, drapes, etc.).  If you think something is amiss (e.g. vandalism) contact the listing broker immediately.

7.     Be considerate of the seller’s property. Do not allow anyone to eat, drink, smoke, dispose of trash, use bathing or sleeping facilities, or bring pets.  Leave the house as you found it unless instructed otherwise.

8.     Use sidewalks; if weather is bad, take off shoes and boots inside property.  Consider the use of shoe covers in inclement weather.

9.     Politely remind parents to keep track of their children’s activities as children can wander unoccupied, or handle the sellers’ personal property.

 

 

III.  RESPECTFOR PEERS

 

1.     Identify your REALTOR® and professional status in all contacts with other REALTORS®.

2.     Respond to other agents’ calls, faxes, and e-mails promptly and courteously.

3.     Be aware that large electronic files with attachments or lengthy faxes may be a burden on recipients.

4.     Notify the listing broker if there appears to be inaccurate information on the listing.

5.     Share important information about a property, including the presence of pets; security systems; and whether sellers will be present during the showing.

6.     Show courtesy, trust and respect to other real estate professionals.

7.     Avoid the inappropriate use of endearments or other denigrating language.

8.     Do not prospect at other REALTORS® open houses or similar events.

9.     Return keys promptly.

10.  Promptly provide showing reports to the listing agent.

11.  Carefully replace keys in the lockbox after showings.

12. To be successful in the business, mutual respect is essential.

13.  Real estate is a reputation business.  What you do today may affect your reputation—and business—for years to come.

 

 

 

 

 

 

 Arbitration Guidelines

 

 

A key element in the practice of real estate is the contract.  Experienced practitioners quickly become conversant with the elements of contract formation.  Inquiry, invitation, offer, counter-offer, contingency, waiver, acceptance, rejection, execution, breach, rescission, reformation, and other words of art become integral parts of the broker's vocabulary.

 

Given the significant degree to which Article 3's mandate for cooperation, coupled with everyday practicality, feasibility and expediency, make cooperative transactions a fact of life, it quickly becomes apparent that in virtually every real estate transaction there are actually several contracts which come into play.  Setting aside ancillary but still important contracts for things such as mortgages, appraisals, inspections, title insurance, etc., in a typical residential transaction (and the same will be true in many commercial transactions as well) there are at least three (and often four) contracts involved and each, while established independently of the others, soon appears to be inextricably intertwined with the others.

 

First, there is the listing contract between the seller and the listing broker.  This contract creates the relationship between these parties, establishes the duties of each and the terms under which the listing broker will be deemed to have earned a commission, and frequently will authorize the listing broker to cooperate with or compensate (or both) cooperating brokers who may be subagents, buyer agents, or who may be acting in some other capacity.

 

Second, there is the contract between the listing broker and cooperating brokers.  While this may be created through an offer published through a multiple listing service or through some other method of formalized cooperative effort, it need not be.  Unlike the bilateral listing contract (where generally the seller agrees to pay a commission in return for the listing broker's production of a ready, willing and able purchaser) the contract between the listing broker and the cooperating broker is unilateral in nature.  This simply means that the listing broker determines the terms and conditions of the offer to potential cooperating brokers (and this offer may vary as to different potential cooperating brokers or as to cooperating brokers in different categories).  This type of contract differs from a bilateral contract also in that there is no contract formed between the listing broker and the potential cooperating brokers upon receipt of the listing broker's offer.  The contract is formed only when accepted by the cooperating broker, and acceptance only occurs through performance, that is, through production of a purchaser pursuant to the terms and conditions previously established by the listing broker.

 

Third, there is the purchase contract sometimes referred to as the purchase and sale agreement.  This bilateral contract between the seller and the buyer establishes their respective promises and obligations to each other, which may also impact on third parties.  The fact that someone other than the seller or buyer is referenced in the purchase contract does not make them a party to that contract though it may create rights or entitlements which may be enforceable against a party (the buyer or seller).

 

Fourth, there may be a buyer broker agreement in effect between the purchaser and a broker.  Similar in many ways to the listing contract, this bilateral contract establishes the duties of the purchaser and the broker as well as the terms and conditions of the broker's compensation.

 

  

These contracts are similar in that they are created through offer and acceptance.  They vary in that acceptance of a bilateral contract is through a reciprocal promise, e.g., the purchaser's promise to pay the agreed price in return for the seller's promise to convey good title; while acceptance of a unilateral contract is through performance, e.g., in producing (or procuring) a ready, willing and able purchaser.

 

Each of these contracts is subject to similar hazards in formation and afterward.  The maker's (offer’s) offer in any of these scenarios may be accepted or rejected.  The intended recipient of the offer (or offer) may counter-offer.  There may be questions as to whether a contract was formed, e.g., was there an offer, was it accepted, was the acceptance on the terms and conditions specified by the maker of the offer or was the "acceptance" actually a counter-offer (which, by definition, rejects the first offer).  A contract, once formed, may be breached.  These and other questions of contract formation arise on a daily basis.  There are several methods by which contractual questions (or "issues" or "disputes") are resolved.  These include civil lawsuits, arbitration, and mediation.

 

Boards and Associations of REALTORS® provide arbitration to resolve contractual issues and questions that arise between members, between members and their clients and, in some cases, between parties to a transaction brought about through the efforts of REALTORS®.  Disputes arising out of any of the above-referenced contractual relationships may be arbitrated and the rules and procedures of Boards and Associations of REALTORS® require that certain types of disputes must be arbitrated if either party so requests (information on "mandatory" and "voluntary" arbitration is found elsewhere in this Manual.)

 

While issues between REALTORS® and their clients, e.g. listing broker/seller (or landlord) or buyer broker/buyer (or tenant), are subject to mandatory arbitration (at the client's request), and issues between sellers and buyers may be arbitrated at their mutual agreement, in many cases such issues are resolved in the courts or in other alternative dispute resolution forums (which may also be administered by Boards or Associations of REALTORS®).  The majority of arbitration hearings conducted by Boards and Associations involve questions of contracts between REALTORS®, most frequently between listing and cooperating brokers.  These generally involve questions of procuring cause where the panel is called on to determine which of the contesting parties is entitled to the funds in dispute.  While awards are generally for the full amount in question (which may be required by state law), in exceptional cases, awards may be split between the parties (again, except where prohibited by state law). Splitawards are the exception rather than the rule and should be utilized only when hearing panels determine that the transaction would have resulted only through the combined efforts of both parties.  It should also be considered that questions of representation and entitlement to compensation are separate issues.

 

In the mid-1970's, the NATIONAL ASSOCIATION OF REALTORS® established the ARBITRATION GUIDELINES to assist Boards and Associations in reaching fair and equitable decisions in arbitration; to prevent the establishment of any one, single rule or standard by which arbitrable issues would be decided; and to ensure that arbitrable questions would be decided by knowledgeable panels taking into careful consideration all relevant facts and circumstances.

 

The ARBITRATION GUIDELINES have served the industry well for nearly two decades.  But, as broker-to-broker cooperation has increasingly involved contracts between listing brokers and buyer brokers and between listing brokers and brokers acting in non-agency capacities, the time came to update the GUIDELINES so they remained relevant and useful.  It is to this end that the following is intended.

 

PROCURING CAUSE

 

Black's Law Dictionary, Fifth Edition, defines procuring cause as follows:

 

            "The proximate cause; the cause originating a series of events, which, without break in their continuity, result in the accomplishment of the prime object. The inducing cause; the direct or proximate cause.  Substantially synonymous with 'efficient cause'.

 

            A broker will be regarded as the 'procuring cause' of a sale, so as to be entitled to commission, if his efforts are the foundation on which the negotiations resulting in a sale are begun.  A cause originating a series of events which without break in their continuity result in accomplishment of prime objective of the employment of the broker who is producing a purchaser ready, willing and able to buy real estate on the owner's terms.  Mohamed v. Robbins, 23Ariz. App. 195, 531 p.2d 928, 930.

 

            See also Producing cause; Proximate cause."

 

While a number of definitions of procuring cause exist, and a myriad of factors may ultimately enter into any determination of procuring cause, for purposes of arbitration conducted by Boards and Associations of REALTORS®, procuring cause can be readily understood as the uninterrupted series of causal events which results in the successful transaction.  Or, in other words, what "caused" the successful transaction to come about.  Many REALTORS®, executive officers, lawyers and others have tried, albeit unsuccessfully, to develop a single, comprehensive template that could be used in all procuring cause disputes to determine entitlement to the sought-after award without the need for a comprehensive analysis of all relevant details of the underlying transaction.  Such efforts, while well-intentioned, were doomed to failure in view of the fact that there is no "typical" real estate transaction any more than there is "typical" real estate or a "typical" REALTOR®.  In light of the unique nature of real property and real estate transactions, and acknowledging that fair and equitable decisions could be reached only with a comprehensive understanding of the events that led to the transaction, the National Association's Board of Directors, in 1973, adopted Official Interpretation 31 of Article 1, Section 2 of the Bylaws.  Subsequently amended in 1977, Interpretation 31 establishes that:

 

            "A Board rule or a rule of a Multiple Listing Service owned by, operated by or affiliated with a Board, which establishes, limits or restricts the REALTOR® in his relations with a potential purchaser, affecting recognition periods or purporting to predetermine entitlement to any award in arbitration, is an inequitable limitation on its membership"

 

The explanation of Interpretation 31 goes on to provide, in part:

 

            ...[T]he Board or its MLS may not establish a rule or regulation which purports to predetermine entitlement to any awards in a real estate transaction.  If controversy arises as to entitlement to any awards, it shall be determined by a hearing in arbitration on the merits of all ascertainable facts in the context of the specific case of controversy."

  

FACTORS FOR CONSIDERATION BY ARBITRATION HEARING PANELS

 

The following "Factors" are recommended for consideration by hearing panels convened to arbitrate disputes between brokers, or between brokers and their clients or their customers.  This list is not all-inclusive nor can it be. Not every factor will be applicable in every instance.  The purpose is to guide panels as to facts, issues and relevant questions that may aid them in reaching fair, equitable and reasoned decisions.

 

FACTOR #1: NO PREDETERMINED RULE OF ENTITLEMENT

Every arbitration hearing is considered in light of all of the relevant facts and circumstances as presented by the parties and their witnesses.  "Rules of thumb", prior decisions by other panels in other matters, and other predeterminants are to be disregarded. Procuring cause shall be the primary determining factor in entitlement to compensation.  Agency relationships, in and of themselves, do not determine entitlement to compensation.  The agency relationship with the client and entitlement to compensation are separate issues.  A relationship with the client, or lack of one, should only be considered in accordance with the guidelines established to assist panel members in determining procuring cause.

 

FACTOR #2: ARBITRABILITY AND APPROPRIATE PARTIES

While primarily the responsibility of the Grievance Committee, arbitration hearing panels may consider questions of whether an arbitrable issue actually exists, and whether the parties named are appropriate to arbitration.  A detailed discussion of these questions can be found in Appendix I to Part 10, ARBITRABLE ISSUES.

 

FACTOR #3: RELEVANCE AND ADMISSIBILITY

Frequently, Hearing Panels are asked to rule on questions of admissibility and relevancy.  While state law, if applicable, controls, the general rule is that anything the Hearing Panel believes may assist it in reaching a fair, equitable, and knowledgeable decision is admissible.

 

Arbitration Hearing Panels are called on to resolve contractual questions, not to determine whether the law or the Code of Ethics has been violated.  An otherwise substantiated award cannot be withheld solely on the basis that the Hearing Panel looks with disfavor on the potential recipient’s manner of doing business or even that the panel believes that unethical conduct may have occurred.  To prevent any appearance of bias, Arbitration Hearing Panels shall make no referrals of ethical concerns to the Grievance Committee.  This is based on the premise that the fundamental right and primary responsibility to bring potentially unethical conduct to the attention of the Grievance Committee rests with the parties and others with firsthand knowledge.  At the same time, evidence or testimony is not inadmissible simply because it relates to potentially unethical conduct.  While an award (or failure to make a deserved award) cannot be used to “punish” a perceived  “wrongdoer,” it is equally true that Hearing Panels are entitled to (and fairness requires that they) consider all relevant evidence and testimony so that they will have a clear understanding of what transpired before determining entitlement to any award. (Amended 11/94)

 

FACTOR #4: COMMUNICATION AND CONTACT - ABANDONMENT AND ESTRANGEMENT

 

Many arbitrable disputes will turn on the relationship (or lack thereof) between a broker (often a cooperating broker) and a prospective purchaser.  Panels will consider whether, under the circumstances and in accord with local custom and practice, the broker made reasonable efforts to develop and maintain an ongoing relationship with the purchaser.  Panels will want to determine, in cases where two cooperating brokers have competing claims against a listing broker, whether the first cooperating broker actively maintained ongoing contact with the purchaser or, alternatively, whether the broker's inactivity, or perceived inactivity, may have caused the purchaser to reasonably conclude that the broker had lost interest or disengaged from the transaction (abandonment).  In other instances, a purchaser, despite reasonable efforts by the broker to maintain ongoing contact, may seek assistance from another broker.  The panel will want to consider why the purchaser was estranged from the first broker.  In still other instances, there may be no question that there was an ongoing relationship between the broker and the purchaser; the issue then becomes whether the broker engaged in conduct which caused the purchaser to terminate the relationship (estrangement).  This can be caused, among other things, by words or actions.  Panels will want to consider whether such conduct caused a break in the series of events leading to the transaction and whether the successful transaction was actually brought about through the initiation of a separate, subsequent series of events by the second cooperating broker.

 

FACTOR #5: CONFORMITY WITH STATE LAW

The procedures by which arbitration requests are received, hearings are conducted, and awards are made must be in strict conformity with the law.  In such matters, the advice of Board legal counsel should be followed.

 

FACTOR #6: CONSIDERATION OF THE ENTIRE COURSE OF EVENTS

The standard of proof in Board-conducted arbitration is a preponderance of the evidence and the initial burden of proof rests with the party requesting arbitration (see Professional Standards Policy Statement 26).  This does not, however, preclude panel members from asking questions of the parties or witnesses to confirm their understanding of testimony presented or to ensure that panel members have a clear understanding of the events that led to the transaction and to the request for arbitration.  Since each transaction is unique, it is impossible to develop a comprehensive list of all issues or question that panel members may want to consider in a particular hearing.  Panel members are advised to consider the following which are representative of the issues and questions frequently involved in arbitration hearings.

 

The nature and status of the transaction

1.     What was the nature of the transaction?  Was there a residential or commercial sale/lease?

2.     Is or was the matter the subject of litigation involving the same parties and issues as the arbitration?

 

The nature, status and terms of the listing agreement

1.     What was the nature of the listing or other agreement: exclusive right to see, exclusive agency, open or some other form of agreement?

2.     Was the listing agreement in writing?  If not, is the listing agreement enforceable?

3.     Was the listing agreement effect at the time the sales contract was executed?

4.     Was the property listed subject to a management agreement?

 

5.     Were the broker’s actions in accordance with the terms and conditions of the listing agreement?

            a. Were all conditions of the listing agreement met?

            b. Did the final terms of the sale meet those specified in the listing agreement?

            c. Did the transaction close? (Refer to Appendix I to Part Ten, Arbitrable Issues)

  

The nature, status and terms of the offer to compensate

1.     Was an offer of cooperation and compensation made in writing?  If not, how was it communicated?

2.     Is the claimant a party to whom the listing broker’s offer of compensation was extended?

3.     Were the broker’s actions in accordance with the terms and conditions of the offer of cooperation and compensation (If any)?

        a. Were all conditions of the agreement met?

 

Roles and relationships of the parties

1.     Who was the listing broker?

2.     Who was the cooperating broker or brokers?

3.     Were any of the parties acting as subagents?  As buyer brokers?  In some other capacity?

4.     Did any of the cooperation brokers have an agreement, written or otherwise, to act as agent or in some other capacity on behalf of any of the parties?

5.     Were any of the brokers (including the listing broker) acting as a principal in the transaction?

6.     What were the brokers’ relationships with respect to the seller, the purchaser, the listing broker, and any other cooperation brokers involved in the transaction?

        a.  Was the party to whom the property was sold represented by a party with whom the broker had previously dealt?

        b. Is the primary shareholder of the buyer-corporation a party with whom the broker had previously dealt?

        c.  Was a prior prospect a vital link to the buyer?

7.     Are all appropriate parties to the matter joined?

 

Initial contact with the purchaser

1.     Who first introduced the purchaser or tenant to the property?

2.     When was the first introduction made?

        a.  Was the introduction made when the buyer had a specific need for that type of prepay?

        b. Was the introduction instrumental in creation the desire to purchase?

        c.  Did the buyer know about the property before the broker contacted him?  Did he know it was for sale?

        d. Were there previous dealings between the buyer and the seller?

        e.  Did the buyer find the property on his own?

3.     How was the first introduction made?

        a.  Was the property introduces as an open house?

        b. What subsequent efforts were made by the broker after the open house? (Refer to Factor #1)

        c.  Was the introduction made to a different representative of the buyer?

        d. Was the “introduction” merely a mention that the property was listed?

        e.  What property was first introduced?

 

Conduct of the brokers

1.     Were all required disclosures complied with?    

2.     Was there a faithful exercise of the duties a broker owes to his client/principal?

3.     If more than one cooperating broker was involved, was either (or both) aware of the other’s role in the transaction?

4.     Did the broker who made the initial introduction to the property engage in conduct (or fail to take some action) which caused the purchaser or tenant to utilize the services of another broker? (Refer to Factor #4)

5.     Did the cooperating broker (or second cooperating broker) initiate a separate series of events, unrelated to and not dependent on any other broker’s efforts, which led to the successful transaction - that is, did the broker perform services which assisted the buyer in making his decision to purchase? (Refer to Factor #4)

        a.  Did the broker make preparations to show the property to the buyer?

        b. Did the broker make continued efforts after showing the property?

        c.  Did the broker remove an impediment to the sale?

        d. Did the broker make a proposal upon which the final transaction was based?

        e.  Did the broker motivate the buyer to purchase?

6.     How do the efforts of one broker compare to the efforts of another?

        a.  What was the relative amount of effort by one broker compared to another?

        b. What was the relative success or failure of negotiations conducted by on broker compared to the other?

7.     If more than one cooperating broker was involved, how and when did the second cooperating broker enter the transaction?

 

Continuity and breaks in continuity (abandonment & estrangement)

1.     What was the length of time between the broker’s efforts and the final sales agreement?

2.     Did the original introduction of the purchaser or tenant to the property start an uninterrupted series of events leading to the sale or lease, or was the series of events hindered or interrupted in any way?

        a. Did the buyer terminate the relationship with the broker?  Why?  (Refer to Factor #4)

        b. Did negotiations break down?

3.     If there was an interruption or break in the original series of events, how was it caused, and by whom?

        a.  Did the seller change the listing agreement from an open listing to an exclusive listing agreement with another broker?

        b. Did the purchaser’s motive for purchasing change?

        c.  Was there interference in the series of events from any outside or intervening cause or party?

4.     Did the broker who made the initial introduction to the property maintain contact with the purchaser or tenant, or could the broker’s inaction have reasonably been viewed by the buyer or tenant as a withdrawal from the transaction?

5.     Was the entry of any cooperating broker into the transaction an intrusion into an existing relationship between the purchaser and another broker, or was it the result of abandonment or estrangement of the purchaser, or at the request of the purchaser?

 

Conduct of the buyer

1.     Did the buyer make the decision to buy independent of the broker’s efforts/information?

2.     Did the buyer negotiate without any aid from the broker?

3.     Did the buyer seek to freeze out the broker?

        a.  Did the buyer seek another broker in order to get a lower price?

        b. Did the buyer express the desire not to deal with the broker and refuse to negotiate through him?

        c.  Did the contract provide that no brokers or certain brokers had been involved?

  

Conduct of the seller

1.     Did the seller act in bad faith evident from the fact that the difference between the original bid submitted and the final sales price equaled the broker’s commission?

        b. Was there bad faith evident from the fact that a sale to a third party was a straw transaction (one in which a non-involved party posed as the buyer) which was designed to avoid paying commission?

        c.  Did the seller freeze out the broker to avoid a commission dispute or to avoid paying a commission at all?

2.     Was there bad faith evident from the fact that the seller told the broker he wouldn’t sell on certain terms, but did so via another broker or via the buyer directly?

 

Leasing transaction

1.     Did the cooperating broker have a tenant representation agreement?

2.     Was the cooperating broker working with the “authorized” staff member of the tenant company?

3.     Did the cooperating broker prepare a tenant needs analysis?

4.     Did the cooperating broker prepare a market analysis of available properties?

5.     Did the cooperating broker prepare a tour book showing alternative properties and conduct a tour?

6.     Did the cooperating broker show the tenant the property lease?

7.     Did the cooperating broker issue a request for proposal on behalf of the tenant for the property leased?

8.     Did the cooperating broker take an active part in the lease negotiations?

9.     Did the cooperating broker obtain the tenant’s signature on the lease document?

10.   Did the tenant work with more than one broker and if so, why?

 

Other information

Is there any other information that would assist the Hearing Panel in having a full, clear understanding of the transaction giving rise to the arbitration request or in reaching a fair and equitable resolution of the matter?

 

These questions are typical, but not all-inclusive, of the questions that may assist hearing panels in understanding the issues before them.  The objective of a panel is to carefully and impartially weigh and analyze the whole course of conduct of the parties and render a reasoned peer judgment with respect to the issues and questions presented and to the request for award.

  

                                    SAMPLE FACT SITUATION ANALYSIS

 

The National Association's Professional Standards Committee has consistently taken the position that arbitration awards should not include findings of fact or rationale for the arbitrators' award.  Among the reasons for this are the fact that arbitration awards are not appealable on the merits but generally only on the limited procedural bases established in the governing state arbitration statute; that the issues considered by hearing panels are often myriad and complex and the reasoning for an award may be equally complex and difficult to reduce to writing; and that the inclusion of written findings of fact or rationale (or both) would conceivably result in attempts to use such detail as "precedent" in subsequent hearings which might or might not involve similar facts.  The end result might be elimination of the careful consideration of the entire course of events and conduct contemplated by these procedures and establishment of local, differing arbitration "templates" or predeterminants of entitlement inconsistent with these procedures and Interpretation 31.

 

Weighed against these concerns, however, was the desire to provide some model or sample applications of the factors, questions and issues set forth in these Arbitration Guidelines.  The following "fact situations" and "analyses" are provided for informational purposes and are not intended to carry precedential weight in any hearing.

 

Fact Situation #1

Listing broker L placed a listing in MLS and offered cooperation and compensation to subagents and to buyer agents.  Broker Z, not a Participant in the MLS, called to arrange an appointment to show the property to a prospective purchaser.  There was no discussion of compensation.  Broker Z presented Broker L with a signed purchase agreement, which was accepted by the seller.  Subsequently, Broker Z requested arbitration with Broker L claiming to be the procuring cause of sale.

 

Analysis

While Broker Z may have been the procuring cause of sale, Broker L's offer of compensation and cooperation was made only to members of the MLS.  Broker L never offered cooperation and compensation to Broker Z nor had Broker Z requested compensation at any time prior to instituting the arbitration request.  There was no contractual relationship between them nor any issue to arbitrate.

 

Fact Situation #2

Same as #1 except Broker Z is the buyer's agent.

 

Analysis

Same result since there was no contractual relationship between Broker L and Broker Z nor any issue to arbitrate.

 

Fact Situation #3

Broker L placed a listing in the MLS and offered cooperation and compensation to subagents and to buyer agents.  Broker S (a subagent) showed the property to Buyer #1 on Sunday and again on Tuesday.  On Wednesday, Broker A (a subagent) wrote an offer to purchase on behalf of Buyer #1 which was presented to the seller by Broker L and which was accepted.  At closing, subagency compensation is paid to Broker A.  Broker S subsequently filed an arbitration request against Broker A claiming to be the procuring cause of sale.

 

 

Analysis

Broker S's claim could have been brought against Broker A or against Broker L (the listing broker). who had promised to compensate the procuring cause of sale, thus arguably creating a contractual relationship between Broker L and Broker S.

 

Fact Situation #4

Same as #3 Broker S filed the arbitration request against Broker L (the listing broker).

 

Analysis

This is an arbitrable matter since Broker L promised to compensate the procuring cause of sale.  Broker L, to avoid the possibility of having to pay two cooperating brokers in the same transaction, should join Broker A in arbitration so that all competing claims can be resolved in a single hearing.  The hearing panel will consider, among other things, why Buyer #1 made the offer to purchase through Broker A instead of Broker S.  If it is determined that Broker S initiated a series of events which were unbroken in their continuity and which resulted in the sale, Broker S will likely prevail.

 

Fact Situation #5

Same as #3 except Broker L offered cooperation and compensation only to subagents.  Broker B (a buyer agent) requested permission to show the property to Buyer #1, wrote an offer which was accepted, and subsequently claimed to be the procuring cause of sale.

 

Analysis

Since Broker L did not make an offer of compensation and cooperation to buyer brokers, there was no contractual relationship between Broker L and Broker B and no contractual issue to resolve. If on the other hand, Broker L had offered compensation to Buyer Brokers either through MLS or otherwise, and had  paid Broker A, then arbitration could have been conducted between Broker B and Broker A pursuant to standard of practice 17-4.  Alternatively, arbitration could occur between Broker B and Broker L.  

 

Fact Situation #6

Listing Broker L placed a listing in MLS and made an offer of cooperation and compensation to subagents and to buyer agents.  Broker S (a subagent) showed the property to Buyer #1 who appeared uninterested.  Broker S made no effort to further contact Buyer #1.  Six weeks later, Broker B (a buyer broker) wrote an offer on the property on behalf of Buyer #1, presented it to Broker L, and it was accepted.  Broker S subsequently filed for arbitration against Broker L claiming to be the procuring cause.  Broker L joined Broker B in the request so that all competing claims could be resolved in one hearing.

 

Analysis

The hearing panel will consider Broker S's initial introduction of the buyer to the property, the period of time between Broker S's last contact with the buyer and the time that Broker B wrote the offer, and the reason Buyer #1 did not ask Broker S to write the offer.  Given the length of time between Broker S's last contact with the buyer, the fact that Broker S had made no subsequent effort to contact the buyer, and the length of time that transpired before the offer was written, abandonment of the buyer may have occurred.  If this is the case, the hearing panel may conclude that Broker B instituted a second, separate series of events that was directly responsible for the successful transaction.

 

 

 

Fact Situation #7

Same as #6 except that Broker S (a subagent) showed Buyer #1 the property several times, most recently two days before the successful offer to purchase was written by Broker B (a buyer broker).  At the arbitration hearing, Buyer #1 testified she was not dissatisfied in any way with Broker S but simply decided that "I needed a buyer agent to be sure that I got the best deal."

 

Analysis

The hearing panel should consider Broker S's initial introduction of the buyer to the property; that Broker S had remained in contact with the buyer on an on-going basis; and whether Broker S's efforts were primarily responsible for bringing about the successful transaction.  Unless abandonment or estrangement can be demonstrated, Broker S will likely prevail.  Agency relationships are not synonymous with or determinative of procuring cause.  Representation and entitlement to compensation are separate issues.

 

Fact Situation #8

Similar to #6 except Buyer #1 asked Broker S for a comparative market analysis as the basis for making a purchase offer.  Broker S reminded Buyer #1 that Broker S had clearly disclosed his status as subagent and that he could not counsel Buyer #1 as to the property's market value.  Broker B based his claim to entitlement on the grounds that he had provided Buyer #1 with information that Broker S could not or would not provide.

 

Analysis

The hearing panel should consider Broker S's initial introduction of the buyer to the property; that Broker S had made early and timely disclosure of his status as a subagent; whether adequate alternative market information was available to enable Buyer #1 to make an informed purchase decision; and whether Broker S's inability to provide a comparative market analysis of the property had clearly broken the chain of events leading to the sale.  If the panel determines that the buyer did not have cause to leave Broker S for Broker B, they may conclude that the series of events initiated by Broker S remained unbroken and Broker S will likely prevail.

 

Fact Situation #9

Similar to #6 except Broker S made no disclosure of his status as subagent (or its implications) until faced with Buyer #1's request for a comparative market analysis.

 

Analysis

The hearing panel should consider Broker S's initial introduction of the buyer to the property; Broker S's failure to clearly disclose his agency status on a timely basis; whether adequate alternative market information was available to enable Buyer #1 to make an informed purchase decision; and whether Broker S's belated disclosure of his agency status (and its implications) clearly broke the chain of events leading to the sale.  If the panel determines that Broker S's failure to disclose his agency status was a reasonable basis for Buyer #1's decision to engage the services of Broker B, they may conclude that the series of events initiated by Broker S had been broken and Broker B will likely prevail.