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July 2006
Mediation - The Alternative for “Win-Win”
Bruce H. Aydt, ABR, ABRM, CRB, SRS
© Copyright, 2001
Mediation is a process that is part of the broad field known as “alternative dispute resolution,” or “ADR.” Included in that broad field are several different processes, including binding arbitration and non-binding arbitration. The “alternative” in the name “alternative dispute resolution” refers to an alternative to litigation. In the REALTOR® context, the organization has long recognized and preferred ADR in that arbitration has been an obligation of membership since the Code of Ethics was adopted in 1913.. However, mediation as an additional tool in the ADR process is relatively more recent than arbitration.
The type of arbitration used in the REALTOR® organization for the most part is binding arbitration. In other words, the member is obligated to arbitrate disputes with other REALTORS® under the terms of Article 17 of the Code of Ethics, the Code of Ethics and Arbitration Manual and the local Board’s membership duties. On the other hand, for the parties, mediation is a completely voluntary tool that seeks a resolution of the dispute before the parties go to a binding arbitration hearing.
Essentially, mediation might be called “assisted negotiation” where the mediator assists the parties to a resolution of their dispute. This is the concept that forms the basis for mediation’s “win-win” perspective. Other forms of conflict resolution usually have a “winner” and a “loser.” In a lawsuit, there is a winner and a loser. In an arbitration, there is a winner and a loser. In a mediation, both parties have the opportunity to “win.” In litigation and arbitration, there is a “decider,” whether it is judge, jury or arbitrator, who is NOT one of the parties. In mediation, the “deciders” are the parties themselves, NOT the mediator. The mediator’s job is to assist the parties to come to their own resolution, not to decide the merits of the case and/or make any recommendations. As a completely voluntary process, the parties are always in control of their own destinies. If, at any time, one of the parties wants to stop the process or feels that an impasse has been reached, that party may just “quit” and leave the matter to the next phase, which, in the REALTOR® context, is a binding arbitration hearing. The association may choose to offer mediation before or after the case has been reviewed by the Grievance Committee or at both times.
In a REALTOR® mediation (as in most others), a certain protocol is usually followed. At the mediation session, the mediator proceeds through several steps or “stages” to assist the parties in resolving their dispute. Generally, they are listed in the following loose order – mediator’s opening statement, parties’ statements (or “storytelling”), cross talk (or “clarifications and responses”), generating options, working out agreement and writing up agreement. Not every mediation has every phase and there is no set time limit to each stage. There is no requirement that the mediation proceed in a “linear” fashion. The stages may overlap and/or intertwine. The mediator has the choice to vary any procedure she or he believes is in the best interest of achieving resolution. However, certain aspects remain constant. These constants include the confidentiality of the session, the neutrality of the mediator, and the fact that matters discussed in a mediation cannot be used later in an arbitration hearing. A brief description of each stage is next. (This description presumes that the dispute is a procuring cause dispute concerning a commission.)
Mediator’s Opening Statement: The mediator will begin the mediation session by introducing him/herself and the parties. She will then tell the parties about how a mediation works, its confidentiality aspects and give a brief description of the stages and protocols. The mediator will ask the parties to sign the NAR mediation agreement if they have not yet done so.
Parties’ Statements (or “Storytelling”): The mediator will invite one of the parties to begin by “telling their story” - that is, to present their side of the facts and explain why they believe they are entitled to the commission. After they have completed telling their story, the mediator will ask the other party to tell their story. Usually, no questions are being asked between the parties at this time. This stage is simply an opportunity for all parties, including the mediator, to get as complete a picture as possible of the facts.
Crosstalk (or “Clarifications and Responses”): This stage is the one in which the parties ask each other questions to clarify any facts which the parties told during storytelling. The mediator may ask questions as well. The parties being asked the questions may respond and clarify their answers.
Generating Options: It is this phase that the work of hopeful agreement begins. The mediator can handle this process in any way he sees fit, whether asking the parties whether there had been prior offers or asking whether the parties have any new understandings after hearing the stories and responses or asking whether the parties have any ideas about a fair resolution of the case. It is possible that the mediator may want to give the parties a short break before moving into this stage to allow them to talk among themselves and/or reflect upon what they have heard. This technique is often helpful if either or both sides are comprised of both broker and agent or agents. It allows the broker and agent(s) to discuss any new understandings they may have and to assess or reassess their thoughts about settlement. Ideally, the mediator and the parties would generate a list of possible choices for settlement. Many times, however, the mediator chooses to go to the next stage.
Working Out Agreements: This can be the hard work of negotiation. The mediator’s role here is to keep the parties talking about options and assist them in resolving their own dispute. The mediator generally should not comment about the merits of the case or her prediction of the outcome in arbitration. However, the mediator may comment on parts of the respective cases, pointing out how certain facts may fit into the procuring cause factors that panels use, so that the parties may consider this in their decision to settle. Hopefully, this stage ends in an agreement of the parties to resolve the dispute. If there is no resolution, the mediator or the parties will make a decision to end the mediation session. It is possible to agree to continue the matter to another mediation session. If the mediation ends without agreement, the parties will proceed to a binding arbitration hearing.
Writing Up Agreements: If the parties work out an agreement in the previous stage, the mediator will ask the parties to propose appropriate language that reflects the agreement they have reached. The NAR Code of Ethics and Arbitration manual has the appropriate form for the written agreement. When the parties sign the written agreement and make the appropriate payments called for in the agreement, the arbitration is not held and the deposits of the parties are returned.
If the parties successfully complete a mediation with an agreement, both can walk away as “winners.” While it is true that both may not have “won” a complete “victory,” the result is only their decision and not that of a third party. This alone is a “victory”. Mediation may resolve up to 75% or 80% of the cases filed. It can and often does result in a more satisfying decision for both parties. It also allows the parties to each preserve future business relationships without the rancor and bad feeling which often can prevail after a lawsuit or arbitration hearing. These intangible factors are icing on the “cake” of the resolution of the agreement and truly make the mediation the “Win-Win Alternative.”
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Understanding Compensation and Serving the Client:
Procuring Cause Concepts
Bruce H. Aydt, ABR, ABRM, CRB, SRS
© Copyright, 2004-2006
General Legal Definition: Black’s Law Dictionary, Fifth Edition:
‘ “The proximate cause; the cause originating a series of events which, without a 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.”
‘ Within this definition, the second phrase aptly summarizes the basic concept of procuring cause: “the cause originating a series of events which, without a break in their continuity, result in the accomplishment of the prime object.” In the REALTOR® system, the “prime object” is a sale or lease of property.
“Arbitration Guidelines (Suggested Factors for Consideration by a Hearing Panel in Arbitration)”, Appendix II to Part Ten of the National Association of REALTORS® Code of Ethics and Arbitration Manual (CEAM)
‘ The NAR CEAM covers procuring cause extensively in the Arbitration Guidelines.
‘ The Guidelines set out six “Factors” for panels to consider, as follows:
1. Factor #1: No predetermined rule of entitlement
Associations may not have a predetermined rule of entitlement to commission in a procuring cause case, whether written, unwritten or simply “understood.” For example, before approximately 1970, some associations declared by “policy” that the “Threshold Rule” (first person to show the property) was the determining factor in a procuring cause dispute. Today, an Association may not have such a rule.
2. Factor #2: Arbitrability and appropriate parties
This factor discusses what disputes are appropriate for arbitration and the necessary parties. Since the Grievance Committee generally disposes of these issues, it is unlikely that issues about these matters will come up at a hearing.
3. Factor #3: Relevance and admissibility
This factor confirms the standard for admission of evidence as previously discussed.
4. Factor #4: Communication and contact – abandonment and estrangement
Abandonment and estrangement are two critical issues often brought up in procuring cause cases. They will be discussed in more detail below.
5. Factor #5: Conformity with state law
This factor deals with the basic nature of arbitration matters as relying on underlying state law, primarily the concepts of the Uniform Arbitration Act as adopted in various states.
6. Factor #6: Consideration of the entire course of events (“The Questions”)
This factor is related to Factor #1. Not only is there no predetermined rule of entitlement in a procuring cause case, the panel is directed to look at all of the facts and circumstances in the case and NOT decide the case on the basis of any one factor. To that end, the Arbitration Guidelines include a detailed series of questions that the panel can ask and consider in its disposition of the case.
You should review the Arbitration Guidelines before you sit as a panel member in an arbitration case. They are attached to these Tips.
Summary of General Procuring Cause Concepts
‘ Uninterrupted series of events
÷ The concept of the “uninterrupted series of events” might be likened to an “unbroken chain of events.” A chain has links. Think of the basic nature of procuring cause as a chain in which no links have been broken.
÷ Links in the chain might be broken in a number of ways. If a link is broken, then the person starting the chain in which the link was broken will not be the procuring cause of the sale. Two of the important ways a link may be broken are abandonment and estrangement.
‘ Abandonment
÷ Abandonment is characterized by some lack of contact by the agent with the buyer for some period of time. The panel decides whether the conduct constitutes abandonment. There is no set period of time of lack of contact that is considered abandonment. The panel decides whether the lack of contact by the agent for the period of time in the case before them constitutes abandonment.
‘ Estrangement
÷ Estrangement has a very specific focus. If a buyer says only that he/she “prefers” to work with Agent A rather than Agent B, this statement of “preference,” is not automatically conclusive proof of estrangement. While a buyer may choose to work with any agent, the buyer’s choice of agent is not necessarily determinative of which person claiming the commission is to be paid.
÷ Estrangement focuses on the conduct or lack of conduct of Agent B that “caused the purchaser to terminate the relationship.” The key question is “what did Agent B do or fail to do that pushed the buyer to Agent A?”
Common Misconceptions about Procuring Cause
‘ Through the years, several misconceptions about procuring cause have developed and often continue to be cited as the “rule” in deciding these cases. Remember, no one rule determines the case. The following three misconceptions are sometimes cited by parties in an arbitration hearing as being the “trump card” for their position. They are NOT a “trump card!”
‘ The Threshold Rule
This “rule” might be loosely defined as bringing the buyer “across the threshold” of the property. It also might be known as the “first showing rule.” Parties who are not familiar with the procuring cause guidelines will sometimes overemphasize who showed the property first as being dispositive of the case. Alternatively, parties sometimes argue that, because the opposing party didn’t show the property, the opposing party should not be entitled to the commission. While showing is an important fact, whether a party did or did not show the property, and/or whether a party was first to show the property, are not the deciding facts in the case.
‘ The Contract Rule
This “rule” argues that the person who writes the successful offer to purchase automatically is entitled to the commission. Like the Threshold Rule, such is not the case.
‘ The Agency Rule
The “Agency Rule” is usually presented as the person who has an agency agreement (usually exclusive) with the buyer is entitled to the commission. The Arbitration Guidelines are very specific that “agency relationships, in and of themselves, do not determine entitlement to compensation.” While an important fact to be considered, the existence of an agency agreement with the buyer is one of many facts to be considered. The key learning in this area is that the commission in dispute in a REALTOR® association arbitration is based on the contract between the listing broker and the cooperating broker. The buyer agency agreement is a completely separate contract between the buyer and buyer’s agent and does not control the conduct of the listing broker, who is NOT a party to the buyer agency agreement. It is possible that a buyer’s agent may not be entitled to the commission in dispute in the procuring cause arbitration and still be paid a commission under the terms of the agency agreement that has been entered into by the buyer.
How Many Procuring Causes are there??
‘ The short answer to this question is “one.”
‘ The question and answer is intended to focus on the fact that arbitration hearing panels should not generally split awards between the parties. In general, the panel should award the commission on an “all or nothing” basis.
‘ The CEAM does permit a panel to split an award between the parties if the panel decides that the transaction would have occurred only because of the efforts of both parties.
Code Violations, License Law Violations and Procuring Cause
An issue that arises in arbitration hearings is whether possible violations of the Code of Ethics, the license law, the agency disclosure laws/rules of a state or other violations of law can be used in determining entitlement to the commission.
Factor #3 of the Arbitration Guidelines states:
“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. . . . 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.”
A panel member should NOT make a decision to award the commission to a party based primarily on the fact that the other party potentially violated the Code. An example of this is a potential violation of Article 16, Standard of Practice 16-13. Standard of Practice 16-13 requires that, before providing a substantive service such as writing a purchase offer, the REALTOR® must ask the prospect whether the prospect has an exclusive representation agreement with another REALTOR®. Assume a panel member votes to award a commission to REALTOR® B on the basis of this logic: “REALTOR® A forgot to ask whether the buyer had a buyer agency agreement with another REALTOR® and therefore I will not award the commission to REALTOR® A but give it to REALTOR® B.” This reasoning is flawed. The panel member should NOT refuse to award the commission to REALTOR® A primarily on the basis of REALTOR® A’s failure to ask “the question.”
A similar situation arises with agency disclosure rules. For example, assume REALTOR® A forgot to give a disclosure about dual agency that is required law. It is incorrect for a panel member to vote to refuse to award the commission to REALTOR® A primarily because they failed to give a proper agency disclosure. However, it is possible that REALTOR® A’s failure to give a proper agency disclosure may have caused the prospect to terminate their relationship with REALTOR® A and seek out REALTOR® B, with whom they wrote a purchase offer. If this is the case, REALTOR® A’s conduct might be seen as an estrangement of the prospect and thus the panel member may decide not to award the commission to REALTOR® A because of the estrangement and NOT because of the potential violation of the agency disclosure laws/regulations. |
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The Seller Counseling Session - The Key to Listing Success
By Adorna Carroll
© 2006, Adorna Carroll
An integral part of the listing presentation is a seller counseling session, which focuses not only on your marketing capabilities, but also on the necessary legal disclosures, contractual expectations, agency relationships, cooperating relationships, office policies and procedures, and the in-depth knowledge you can impart – all things that differentiate your service package from your competition.
The purpose of the session is to thoroughly review the marketing and sales process with the seller, review what can and cannot be done for them, establish realistic expectations on the part of the agent and the seller, disclose all legal agency relationships, including fiduciary duties, and review all legal documents.
In outlining to the seller what can and cannot be done, it is important to convey that although you can provide options, alternatives and ramifications to actions, you are not in a position to tell the seller what to do. This may be a departure from days past when this was considered part of the service. The legal ramifications are immense and no responsible practitioner would consider this part of their duties today.
When discussing with the potential seller what the practitioner can and cannot do, you should discuss how fair housing laws apply, the importance of disclosing material facts and the property condition disclosure statement, Megan’s Law issues, disclosure of rebates from third-party business relationships, and client fees that are in excess of the commission.
It is vitally important to explain your company’s office policy on agency relationships when discussing options with the prospective seller. All listing agreements should have conceptual agreement, depending on the office policy of the firm, regarding the availability of various agency relationships, the possibility of dual representation, designated agency representation and permission for the firm to represent more than one buyer client. These issues need to be addressed in advance so that practitioners and seller clients comprehend how agents will act in these scenarios. The parties involved should also understand that informed consent forms will be used in the transaction to memorialize the understanding and agreement of the parties for the modification and/or reaffirmation of fiduciary duties.
It is equally important to explain, during the counseling session, your company’s office policy on compensation and cooperation. Both the National Association of REALTORS® Code of Ethics and your fiduciary duties as agent require you to inform the client not only what the total compensation will be, but how it will be split, the amount that is offered to different cooperating firms and how much will be allocated for the listing firm. In markets where there are subagents and buyer agents participating in the transaction, the compensation might be different and this must be disclosed.
In addition, if compensation is offered to subagents of the seller, it is required by law and the Code of Ethics to inform the seller of the possibility of vicarious liability so that the seller realizes that they are accepting financial responsibility for anything that the subagent says or does on which the buyer relies, even though this information may not be correct. The disclosure of this potential of vicarious liability should be in writing for the protection of the agent and the broker.
If compensation offered to the buyer’s agent is less than the amount reflected in writing on the agreement between the buyer and agent, the listing agent is obligated by the Code of Ethics and lawful disclosure to identify the ramifications of that action and to point out that a clause may appear in the conditions of sale for a “seller-funded rebate” from the seller to the buyer to satisfy the terms of the buyer’s contract. If an office policy does not allow for compensation to certain types of cooperating agents, such as subagents or buyer agents, then the firm is obligated to make that clear prior to the listing agreement being signed.
Two more complex issues that need to be reviewed during the seller counseling session are the seller’s authorization of multiple offers to competing agents and an authorized statement to cooperating agents explaining why the property is being sold. On REALTOR®.org, there is extensive information regarding multiple offers and how they should be handled. The caveat to remember is that only the seller has the right to determine if the existence of multiple offers should be disclosed to competing agents – this is not an agent’s right to determine. Having this authorization in writing is crucial for the protection of all parties. In addition, every buyer wants to know why the seller is selling – having a neutral statement will protect the seller’s confidentiality and negotiating position.
In the “legal” arena, the seller counseling session should include an overview of the laws regarding the presentation of offers (even if they are lower than the seller wants to see or not accompanied by a pre-qualification or pre-approval letter), the timeliness of presentations, the mechanics of contracts versus binding binders and non-binding binders or intent letters, and the counteroffer process. The pros and cons of contingencies should also be discussed. It is important for an agent to take into consideration the current economic conditions when outlining the upside and downside of “as is” clauses; inspection contingencies; hubbard (kick-out) clauses, etc. with the potential seller. Always be careful not to give legal advice and refer the seller to their attorney when the discussion involves their legal rights and liabilities rather than how the transaction works.
Practically, the seller counseling session should provide a road map for the activities that will occur throughout the marketing and sales process including the handling of offers. It should also define the partnership that is required between the seller and the listing agent to accomplish the primary objective of selling the property with terms and conditions acceptable to the seller. Showing procedures, safety precautions, property condition expectations, lockboxes, signs, advertising and Internet display issues need to be outlined.
Another key area the agent should counsel the seller on is the inspection process. Sellers often have the misconception that they, or the listing agent, should be at the inspection. The agent should point out that not only is this counterproductive to the negotiating phase and protection of seller confidentiality, but it has resulted in lawsuits and out of court settlements for listing firms. The liability can easily be shifted by allowing the buyer agent and his or her client to monitor the inspection process, then issue their request, written report and corresponding repair quotes, if applicable, and allow the seller to act on them at that time. The inspection phase is always an opportunity to renegotiate. Clients should be made aware that the statistical probability of having to do so will vary according to the economic landscape of the marketplace.
The seller counseling session is a unique opportunity for skilled practitioners to differentiate themselves from their competitors.
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What our students say ...
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Here's what students from a recent course are saying about the top seller designation course in the industry:
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When it comes to seller representation, if you think you know it all, take this course and discover just how little you actually know.
Terry Davis
Singing River Realty
Pascagoula, MS
This course will create a great legacy of agents that are prepared to combat events with an out-of-the-box approach. …a new way of thinking.
Adorna Carroll is one of the most knowledgeable and entertaining real estate instructors I’ve had in 12 years in this business. It was the best investment I’ve ever made in a continuing education course.
Ken Crill
Re/Max First Choice
Oxford, MS
The SRS course challenges many of our “customary” real estate practices. The course should be required for all agents and has provided me with several ideas that will strengthen my seller representation skills.
Susan Barnes
Prudential Gardner REALTORS
Ocean Springs, MS
The course exceeded my expectations. Far beyond a refresher – extremely applicable for today’s real estate transactions and beyond.
Doug Merritt
Paul Green & Associates
Natchez, MS
The course exceeded my expectations. I highly recommend this course and attaining the designation to anyone in today’s real estate business who is a producing broker or agent.
Bob Leigh
Broker/owner
Bob Leigh & Associates REALTORS
Southhaven, MS
Expect to be impressed! Two days full of powerful information.
Natalie Savell
Prudential Gateway
Jackson, MS
I feel privileged to be in the first SRS class in Mississippi. Adorna is a very informative, motivational and exciting instructor. I can’t wait for other of her courses. I am empowered now to better represent my sellers.
Patricia Austin
Prudential Gardner Realty
Ocean Springs, MS
Reminded me that “Just because we’ve always done it that way” does not make it right!
Mary Mills
Re/MAX Alliance
Jackson, MS
We forget how critical it is to have an informed and cooperative seller. I feel better prepared to truly position my seller, and me, for a quick, easy sale for the best price. The seller representation class should be required before a “For Sale” sign is placed on any property.
Debbie Nettles
ERA Town & Campus Realty
Starkville, MS
Adorn Carroll is truly one of the most outstanding trainers I’ve experienced in the last 20 years. Not only was the course content worth much more than I paid for the course, Adorna’s communication style is witty, energetic and engaging.
Janie Harris
Prudential Gateway
Jackson, MS
For almost 30 years I have been attending CE courses at conventions and seminars. This one is the most exciting and educational classes I have ever attended.
Carole Johnson
Bob Leigh and Associates
Southaven, MS 38672
The course presented good, common sense 21st century information and advice. If you are doing business in this market, you need to have the benefit of this course and Adorna’s no nonsense approach.. This will challenge your conceptions about doing business
Bill Hetrick
Re/MAX Alliance
Jackson, MS
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Seller Representative Specialist * SRS Council, LLP * 2784 Samuel Drive * O'Fallon, MO 63368
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Calendar of Courses
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Here we'll list SRS - Seller Representative Specialist courses coming to a state and location near you. We will continue to schedule and update courses for the next couple of months. We'll update this page frequently, so check back often to stay up to date.
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2006-2007 Designation Courses
SRS - Seller Representative Specialist
Location of course: Columbia Board of Realtors
Street Address: 2309 I-70 Drive, NW
City, State, Zip Code: Columbia, MO
Partnering Association/Entity: Columbia Board of Realtors
Instructor: Adorna Carroll
Student registration method: http://www.cbormls.com
July 17 & 18, 2006 - Montrose, CO
Location of course: Montrose Association of REALTORS®
Street Address: 125 Merchant Drive
City, State, Zip Code: Montrose, Co 81401
Student Course Cost: $275
Student registration method: Manual
Number of CE Credits: 16
State of CE Approval: Colorado
State applicable equivalency credits: none
(GRI credits, Broker prep credits, etc.)
Partnering Association/Entity: Montrose Association of REALTORS®
Contact Person’s Name: Tori Chriestenson
Contact’s phone number: 970-249-6213
Contact’s email address: mar@gwe.net
July 24 & 25, 2006 - Cape Cod, Massachusetts
Cape & Islands Assn of REALTORS | | | | |
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