BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Code of Ethics – Duty to Inquire
BOTTOM LINE: REALTORS® must ask prospective buyers, sellers, landlords or tenants whether they have an exclusive agreement with another broker for the same type of service prior to providing substantive services to them.
If the party has signed such an exclusive agreement for the same type of service with another broker/agent, then that Realtor® can only provide such services with the approval of the other broker/agent or at the direction of the principal.
Code of Ethics Standard of Practice 16-13: “Before providing substantive services (such as writing a purchase offer or presenting a CMA) to prospects, REALTORS® shall ask prospects whether they are a party to any exclusive representation agreement. REALTORS® shall not knowingly provide substantive services concerning a prospective transaction to prospects who are parties to exclusive representation agreements, except with the consent of the prospects’ exclusive representatives or at the direction of prospects.”
PRACTICE TIPS:
1. An “exclusive” agreement for this purpose would be either a listing agreement or a written buyer representation agreement.
1. SELLERS: Paragraphs 3F(1) and (2) of the CAR Residential Listing Agreement (form RLA) asks the seller whether to declare whether seller has a listing agreement with someone else, and whether the seller is obligated to compensate any other broker. When taking a listing, go over these questions with seller and write “none” in those Paragraphs if seller so indicates. This will meet your duty to inquire with respect to sellers.
2. BUYERS: For buyers, when first starting to work with a buyer, be sure to ask if they have signed any exclusive representation agreements with any other agent. [For example, see CAR forms Buyer Representation Exclusive (BRE) and Buyer Representation Non-Exclusive (BRNE).]
3. BUYERS: If the buyer indicates that they have signed such an agreement, but may not recall if it is exclusive or not, ask to see a copy of the agreement. If in doubt as to whether you can proceed, consult with your manager. Make a note of buyer’s answer in your communication log so as to document your compliance with the Code of Ethics.
Do not forward to Sellers or Buyers. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2016 11/11/2016