It's the Rule

Commissions, Contingencies and Complaints – oh my!.
by: President & CEO Terese (Terry) Penza, CAE, RCE, e-Pro

March 2005

Commission, rates and fees
When talking to someone or the press and you are asked what is the going commission rate in the area the proper answer is "my companies fees are ____". I would like to remind you we do not fix, control, recommend, suggest or maintain commission rates, splits or fees. Saying the usual fee, the going rate, a rule, etc could be construed that there are fixed commissions, rates or fees in this area and that is just not correct! What can be the consequences? The Justice department could start an investigation or file a suit against the association and it's members, huge fines, etc.

Case #3-10: Disclose Accepted Offers with Unresolved Contingencies (Adopted May, 2004.)
REALTOR® A listed Seller S's house and placed the listing in the local association's MLS. Within a matter of days, REALTOR® X procured a full price offer from Buyer B. The offer specified that Buyer B's offer was contingent on the sale of Buyer B's current home. Seller S, anxious to sell, accepted Buyer B's offer but instructed REALTOR® A to continue marketing the property in hope that an offer that was not contingent on the sale of an existing home would be made.

A week later, REALTOR® Q, another cooperating broker working with an out-of-state transferee on a company-paid visit, contacted REALTOR® A to arrange a showing of Seller S's house for Buyer T. REALTOR® A contacted Seller S to advise him of the showing and then called REALTOR® Q to confirm that he and Buyer T could visit the property that evening. REALTOR® A said nothing about the previously-accepted purchase offer.

REALTOR® Q showed the property to Buyer T that evening and Buyer T signed a purchase offer for the full listed price. REALTOR® Q left the purchase offer at REALTOR® A's office.

REALTOR® A informed Seller S about this second offer. At Seller S's instruction, Buyer B was informed of the second offer, and Buyer B waived the contingency in his purchase offer. REALTOR® A then informed REALTOR® Q that Seller S and Buyer B intended to close on their contract and the property was not available for purchase by Buyer T.

REALTOR® Q, believing that REALTOR® A's failure to disclose the existence of the accepted offer between Seller S and Buyer B at the time REALTOR® Q contacted REALTOR® A was in violation of Article 3 of the Code of Ethics, as interpreted by Standard of Practice 3-6, filed an ethics complaint with the association of REALTOR®.

At the hearing called to consider the complaint, REALTOR® A defended his actions noting that while Buyer B's offer had been accepted by Seller S, it had been contingent on the sale of Buyer B's current home. It was possible that Buyer B, if faced with a second offer, could have elected to withdraw from the contract. REALTOR® A argued that continuing to market the property and not making other brokers aware that the property was under contract promoted his client's best interests by continuing to attract potential buyers.

The Hearing Panel disagreed with REALTOR® A's justification, pointing to the specific wording of Standard of Practice 3-6 which requires disclosure of accepted offers, including those with unresolved contingencies. REALTOR® A was found in violation of Article 3. (Source: NAR)

The following message comes to NSBAR from Laura Paz:
Dear Terry,
I just wanted to let you know that Steve helped me today with a problem that i have spent hours and hours with comcast and pc access. I couldn't email listings from PCAccess and spent 2 frustrating days trying to do something. Coincidentally, since I was at a seminar yesterday, I spoke with Michael and Steve. Michael gave me another PC Access to download and Steve walked me through it today and it's working again!! Steve and your tech crew is worth every penny I spend on my dues!! Thanks, Laura Paz

Georgia Real Estate Commission conducted a survey on why the public filed complaints. Here is what they found:
Question: Why did you decide to file this complaint?
- Broker wouldn’t return my phone calls
- Didn’t address us as Mr. and Mrs.
- Stopped by unannounced
- Don’t know why she waited X days to present our offer
- Showed up in a running suit – dressed inappropriately
- Talked down to me
- Late for every appointment
- Turned me over to someone else for everything
- Didn’t explain what that meant
- Rude about everything
- Wasted our time showing houses we had no interest in
- Never could reach her
- Never seemed to care about the problem
Source: Georgia Real Estate Commission, 1999

IAR Legal Hot line topics
- Top ten topics for 2004 of the IAR legal hotline
- Agency
- Contracts to purchase
- Advertising
- Listing agreements
- Escrow accounts
- License law – scope
- License law - Business practices
- Disclosure – defects
- Commission disputes
- License law - corporate structure

For your information you might want to view the licensing departments frequently asked questions http://www.obre.state.il.us/REALEST/REFAQ.ht