Feb. 10, 2006 - Case #16-14: Dealings Initiated by Another Broker Client

(Adopted May, 1999.)

REALTORŪ X, a residential broker, had recently listed a home. REALTORŪ Xs marketing campaign included open houses on several consecutive weekends.

One Sunday afternoon Buyer B came to the open house. REALTORŪ X introduced herself to Buyer B and asked whether Buyer B was working with another broker. Buyer B responded that he was, in fact, exclusively represented but went on to add that he was quite familiar with the property as it had been previously owned by a close personal friend. REALTORŪ X told Buyer B that she would be happy to show Buyer B through the home and answer any questions he might have, but added that she represented the seller and not Buyer B.

After viewing the home, Buyer B indicated that he was seriously interested in the property and intended to discuss a possible purchase offer with his buyer representative. REALTORŪ X responded that there were several other buyers interested in the property and that it would likely sell quickly. I can't tell you what to do, but if it were me, I would make an offer today, REALTORŪ X told Buyer B, You can go back and discuss this with your broker if you like or I can help you write a purchase contract. Its your choice. With REALTORŪ Xs words in mind, Buyer B decided to make an offer. REALTORŪ X assisted Buyer B in filling out a standard form purchase contract which was accepted by the seller later that day.

REALTORŪ X was subsequently charged with violating Article 16 for dealing and negotiating with a party who had an exclusive relationship with another REALTORŪ.

At the hearing, REALTORŪ X defended her actions noting that she had told Buyer B that she was the sellers exclusive agent and, as such, would not and could not represent Buyer Bs interests. She pointed out that Buyer B had asked for her help in writing a purchase offer and had not sought the counsel and assistance of his exclusive representative. She concluded her defense noting that Standard of Practice 16-13 authorizes dealings with the client of another broker when those dealings are initiated by the client.

The Hearing Panel disagreed with REALTORŪ Xs reasoning. They concluded that REALTORŪ Xs inducement of Buyer B by emphasizing that the property might sell quickly (which might well have been true), coupled with her offer to prepare a purchase contract on Buyer Bs behalf, constituted an initiation of dealings on the property by REALTORŪ X, not by Buyer B. As a result, REALTORŪ X was found in violation of Article 16.

Feb. 10, 2006 - Case #12-17: Use of Deceptive Domain Name/URL (Uniform Resource Locator)

(Adopted May, 2001.)

REALTORŪ X, a principal broker in the firm XYZ, was technologically savvy and constantly looking for ways to use the Internet to promote his firm and drive additional traffic to his Web site.

Being an early adapter to the Internet, he had registered, but not used, domain names that incorporated or played on the names of many of his competitors and their firms, including ABC, REALTORSŪ.

REALTORŪ X and his information technology staff concluded that one way to drive traffic to the firms website would be to take advantage of the search engines commonly used by potential buyers and sellers. They realized that when potential buyers or sellers searched on key words like real estate or REALTORSŪ or on similar words, lists of domain names would appear, and that when consumers searched the Internet for ABC, REALTORSŪ, one of the domain names that might appear would be REALTORŪ Xs domain name, abcREALTORS.com.

REALTORŪ X decided to take advantage of the domain names that he had previously registered, and pointed several that used, in various ways, the names of his competitors, including abcREALTORs.com, to his site.

In a matter of days, REALTORŪ X learned that he had been charged with a violation of Article 12 of the Code of Ethics by REALTORŪ A, the owner of ABC, REALTORSŪ , alleging that his (REALTORŪ Xs) use of the domain name abcREALTORS.com presented a false picture to potential buyers and sellers and others on the Internet.

At the hearing, REALTORŪ X defended himself indicating that, in his opinion, use of a domain name was not advertising or a representation to the public but simply a convenient way for Internet users to find relevant websites. Moreover, When websurfers reach my home page, there is no question that it is my site since I clearly show XYZs name and our status as REALTORSŪ, he continued. These complaints are just a lot of sour grapes from dinosaurs who arent keeping up and who dont realize that on the Internet its every man for himself.

The Hearing Panel disagreed with REALTORŪ Xs justification, indicating that while his use of a domain name that employed another firms name might not be precluded by law or regulation, it did not comply with the Codes higher duty to present a true picture.

REALTORŪ X was found in violation of Article 12, presenting an untrue picture in his representation to the public.

Feb. 10, 2006 - Case #10-4: Use of Choose Your Neighbor Marketing Letters

(Adopted November, 1987.)

REALTORŪ A listed a property in a new subdivision. At the instruction of his client, Seller X, REALTORŪ A did not file information on the listing with his Boards MLS, did not place a For Sale sign on the property and did not advertise the property in the local newspaper. Seller X had told REALTORŪ A that he wanted the sale handled quietly, with the new purchasers being people who would fit into the neighborhoodpeople with the same socioeconomic background as the other residents of the subdivision.

Based on his conversation with Seller X, REALTORŪ As only marketing effort was mailing a letter to the other residents of the subdivision, inviting them . . . to play a part in the decision of who your next neighbor will be. If you know of someone who you would like to live in the neighborhood, please let them know of the availability of this home, or call me and I will be happy to contact them and arrange a private showing.

REALTORŪ As marketing strategy came to the attention of REALTORŪ B, whose mother lived in the subdivision. REALTORŪ B filed a complaint charging REALTORŪ A with a violation of Article 10 of the Code of Ethics.

At the hearing, REALTORŪ B told the Hearing Panel of receiving a copy of the marketing letter from his mother, who had recently moved to the subdivision. REALTORŪ B advised the panel that he had checked the Boards MLS for information on the property, had driven past the house to look for a For Sale sign and had scanned the Sunday real estate section of the local newspaper for information on the property. Finding no mention of the property in either the MLS or the newspaper and noting the absence of a sign on the property, REALTORŪ B concluded that REALTORŪ As marketing strategy was to limit access to the property to individuals preselected by the current residents. In my mind, said REALTORŪ B, this could only mean one thing. REALTORŪ A was deliberately discriminating against home seekers from other areas, or those with different backgrounds, who would never have the opportunity to learn about the houses availability. Obviously, REALTORŪ A was directing all of his marketing energies into finding purchasers who would not disrupt the ethnic and economic character of the neighborhood.

REALTORŪ A defended his actions by advising the panel that he was acting on Seller Xs instructions. Seller X appeared as a witness for REALTORŪ A and confirmed this fact, adding that he and the other residents of his block had an informal agreement that they would try to find suitable purchasers for their homes if they ever decided to sell. Seller X felt that by broadening the marketing campaign to include all residents of the subdivision he had increased the chances of finding such potential purchasers.

The Hearing Panel found REALTORŪ A in violation of Article 10 of the Code of Ethics. In their decision, the panel advised REALTORŪ A that no instruction from a client could absolve a REALTORŪ from the obligation to market properties without regard to race, color, religion, sex, handicap, familial status, or country of national origin, as expressed in Article 10. There was no doubt, in the panels opinion, that the exclusive use of Choose Your Neighbor letters to market the property was designed to circumvent the requirements of Article 10.

Feb. 10, 2006 - Case #6-4: Acceptance of Rebates from Contractors

(Revised Case #16-4 May, 1988. Transferred to Article 6 November, 1994.)

REALTORŪ A, who managed a 30-year-old apartment building for Client B, proposed a complete modernization plan for the building, obtained Client Bs approval, and carried out the work. Shortly after completion of the work, Client B filed a complaint with the Board of REALTORSŪ charging REALTORŪ A with unethical conduct for receiving rebates or kickbacks from the contractors who did the work.

At the hearing, Client B presented written statements from the contractors to substantiate his charges.

REALTORŪ A defended himself by stating that he had carried out all work involving the preparation of specifications, solicitation of bids, negotiations with the contractors, scheduling work, and supervising the improvement program; that he had presented all bids to the owner who had authorized acceptance of the most favorable bids; and that he and Client B had agreed on an appropriate fee for this service.

REALTORŪ A also presented comparative data to show that Client B had received good value for his money.

After all of the contracts were signed and the work was under way, REALTORŪ A found that his fee was inadequate for the time the work required; that he needed additional compensation but didnt want to add to his clients costs; and that when he explained his predicament to the contractors and asked for moderate rebates, they agreed.

Questioning by panel members revealed that the contractors felt that since they were being asked for rebates by the man who would supervise their work, they felt that they had no choice but to agree.

The Hearing Panel concluded that REALTORŪ A was in violation of Article 6 of the Code of Ethics and that if he had miscalculated his fee with Client B, his only legitimate recourse would have been to renegotiate this fee with Client B.

Feb. 10, 2006 - Case #3-8: REALTORŪ Obligation to Disclose Dual Commission Arrangements

(Deleted Case #9-25 May, 1988. Revised and reinstated November, 1988 and subsequently revised May, 1989. Reaffirmed April, 1991. Transferred to Article 3 November, 1994. Revised November, 2001.)

REALTORSŪ A and B were members of the same Board and Participants in the Multiple Listing Service. REALTORŪ A, cooperating with REALTORŪ B on REALTORŪ Bs listing, presented an offer to purchase signed by buyers offering the listed price, and a check for earnest money. The only contingency was a mortgage contingency, and REALTORŪ A shared with REALTORŪ B qualifying information about the buyers indicating there should be no problem securing a mortgage. The following day, REALTORŪ B returned the offer to REALTORŪ A with REJECTED written on it and initialed by the seller, and explained that the seller had accepted another offer secured by one of REALTORŪ Bs sales associates. REALTORŪ A inquired about the sellers reason for rejecting the full price offer with only a mortgage contingency, and what had caused the seller to accept the other offer. REALTORŪ B responded that he did not know, but with equal offers, he supposed the seller would favor the offer secured by the listing broker.

Later, REALTORŪ A met the seller at a social event. The seller thanked him for his efforts in connection with the recent sale of the sellers home. The seller hoped REALTORŪ A understood there was nothing personal in his decision, adding that the money he saved through his special agreement with REALTORŪ B had been the deciding factor. When REALTORŪ A asked about the special agreement, the seller explained he had signed a listing agreement for the sale of his property which authorized the submission of the listing to the Multiple Listing Service and specified a certain amount of compensation. However, the seller stated that he had also signed an addendum to the listing agreement specifying that if REALTORŪ B sold the listing through his own office, a percentage of the agreed compensation would be discounted to the sellers credit, resulting in a lower commission payable by the seller.

REALTORŪ A filed a written complaint with the Board of REALTORSŪ against REALTORŪ B, alleging a violation of Article 3. After its review of the complaint, the Grievance Committee requested that an ethics hearing be arranged.

REALTORŪ A, in restating his complaint to the Hearing Panel, said that REALTORŪ Bs failure to disclose the actual terms and conditions of the compensation offered through the Board MLS resulted in concealment and misrepresentation of pertinent facts to REALTORŪ A and to the prospective buyers served by REALTORŪ A who had, in good faith, offered to purchase the property at the listed price with only a mortgage contingency. REALTORŪ A told the Hearing Panel that if he had known the facts which were not disclosed by REALTORŪ B, he could have fully and accurately informed the buyers who could have taken those facts into consideration when making their offer. As it was, said REALTORŪ A, the buyers acting in good faith were deceived by facts unknown to them because they were unknown to REALTORŪ A. Further, REALTORŪ A said that REALTORŪ Bs failure to fully disclose the true terms and conditions relating to compensation made it impossible to have a responsible relationship with REALTORŪ B and make proper value judgments as to accepting the offer of compensation.

REALTORŪ B stated that it was his business what he charged and the Board or MLS could not regulate his charges for his services. If he wished to establish a dual commission charge by agreement with his client, that was his right, and there was no need or right of the Board or MLS to interfere.

The Hearing Panel agreed that it was REALTORŪ Bs right to establish his fees and charges as he saw fit, and that the Board or MLS could not and would not interfere. However, the Hearing Panel noted that his complete freedom to establish charges for his services did not relieve him of his obligation to fully disclose the real terms and conditions of the compensation offered to the other Participants of the Multiple Listing Service, and did not justify his failure to disclose the dual commission arrangement. In the case of a dual commission arrangement, the listing broker must disclose not only the existence of the special arrangement but also must disclose, in response to an inquiry from a potential cooperating broker, the differential that would result in the total commission in a cooperative transaction. The Hearing Panel concluded that by submitting a listing to the MLS indicating that he was offering a certain amount of compensation to cooperating brokers while other relevant terms and conditions were not disclosed to the other MLS Participants, he had concealed and misrepresented real facts and was in violation of Article 3 of the Code of Ethics.

Feb. 9, 2006 - Case #2-19: Deceptive Information in MLS Compilations

(Adopted May, 2004.)

REALTORŪ R searched the MLS compilation of current listings on behalf of his client, Dr. Z, who had recently completed his residency and was returning home to take a position on the staff of the community hospital. REALTORŪ Rs search returned several listings that satisfied Dr. Zs requirements, including a two-story residence listed with REALTORŪ B that showed, in the Remarks section of the property data form Pay your mortgage with rent from the apartment upstairs.

REALTORŪ R attached the listings hed identified to an e-mail message that he sent to Dr. Z. A day later, REALTORŪ R received a call from Dr. Z who told him there was something about REALTORŪ Bs listing that struck him as odd. That house is in the neighborhood I grew up in, said Dr. Z, I also remember our neighbors having a problem with the Building Department when they added a kitchen on the second floor so their grandmother could have her own apartment.

REALTORŪ R assured Dr. Z that he would make the necessary inquiries and get back to him promptly. His call to the Building Department confirmed Dr. Zs suspicion that the home was zoned single family.

Feeling embarrassed and misled by REALTORŪ Bs apparent misrepresentation, REALTORŪ R filed a complaint with the local association of REALTORŪ alleging misrepresentation on the part of REALTORŪ B for publishing inaccurate information in the MLS.

At the hearing convened to consider REALTORŪ Rs complaint, REALTORŪ B acknowledged the seller had told him that the conversion had been made to code but without the necessary permits, and the apartment had never been rented. I assumed the new owners could get a variance from the Building Department, he said.

The Hearing Panel did not agree with REALTORŪ Bs defense or rationale and concluded that showing a single family home as having income-producing potential from an upstairs apartment which had never been rented was a misrepresentation that violated Article 2.