The Code of Ethics sets forth standards of business practice for REALTORS®. The Articles are the broad statements of ethical principals and the Standards of Practice support and interpret the Articles. The Code of Ethics is designed to protect the buying and selling public and enhances the integrity of the real estate industry. The Code of Ethics embodies the high standards of performance and professionalism to which REALTORS® subscribe. A copy of the Code of Ethics, complete with the Standards of Practice, can be viewed at www.wra.org/codeofethics.
Article 2
Prior to writing an offer, the cooperating broker verified what property was included and excluded. The broker specifically asked about the water softener and the listing agent said it was included, so the offer included the water softener. Just before closing the listing agent called, stating that the water softener was a rental and that she was sending an amendment excluding it from the contract. The buyer wants the water softener. Who is responsible to provide a water softener?
It appears that the listing agent misrepresented the ownership of the water softener and that the buyer relied upon this when the offer was drafted and accepted. Article 2 of the Code of Ethics provides that REALTORS® are to avoid exaggeration, misrepresentation and concealment of pertinent facts about the property or the transaction.
The parties and brokers may try to negotiate a resolution to this situation. In some transactions the brokers may kick in to buy the water softener or other items if the seller refuses to abide by his or her contractual obligations. If the parties cannot reach resolution, the buyer’s contract is with the seller, so that is whom they would pursue for the water softener.
Article 6
Is there any problem with a real estate licensee participating in loan brokering on a limited basis?
Wisconsin real estate licensees working as both a real estate agent and a loan originator in a transaction should remember that prior written consent from the buyer and seller is required under both Wis. Admin. Code § RL 24.05(1) and Article 6 of the Code of Ethics when a fee is received from a mortgage banker or mortgage broker in addition to the real estate commission.
Article 6 of the Code of Ethics states that “REALTORS® shall not accept any commission, rebate, or profit on expenditures made for their client, without the client’s knowledge and consent.” When recommending real estate products or services (e.g., homeowner’s insurance, warranty programs, mortgage financing, title insurance, etc.), REALTORS® shall disclose to the client or customer to whom the recommendation is made any financial benefits or fees, other than real estate referral fees, the REALTOR® or REALTOR®’s firm may receive as a direct result of such recommendation. (Amended 1/99)”
§ RL 24.05(1) provides that “A licensee acting as an agent in a real estate or business opportunity transaction may not accept any fee or compensation related to the transaction from any person, other than the licensee’s client, without prior written consent from all parties to the transaction.”
Another area to consider is whether the licensee and mortgage banker or mortgage broker are complying with RESPA regulations and making proper RESPA disclosures. RESPA Section 8 requires fees paid to be reasonably related to the value of goods furnished or services actually performed. In addition, if an affiliated business relationship is present, RESPA requires additional disclosures. More information concerning the mortgage banking licensing requirements may be found at: www.wdfi.org/fi/mortbank/mbfaqs.htm. Also see the article at www.wra.org/mortgagearticle.
Article 11
Can a licensed salesperson perform an appraisal and charge a fee for it?
A non-appraiser real estate licensee may perform an appraisal in a non-federally related transaction, subject to certain conditions. A “non-federally related transaction” includes “any real estate related transaction which is performed at the request of or on behalf of the owner of real estate or performed pursuant to court order.” If a licensed or certified appraiser is not required by law, the real estate licensee may proceed, such as in an appraisal for an estate or for insurance purposes. Article 11 also requires such services to conform to the standards of practice and competence which are expected in the real estate discipline in which they engage. In addition, Standard of Practice 11-1 requires the following information be contained in such an appraisal. The licensee must clearly disclose to the consumer that the licensee holds a real estate and not an appraisal credential. The licensee should also review office policy to determine if policy allows for such activity. As a REALTOR®, the licensee will need to perform the work competently and must meet the Article 11 Code of Ethics requirements. The service also will be subject to § RL 24.03(2)(a), which states: “Licensees shall not provide services which the licensee is not competent to provide unless the licensee engages the assistance of one who is competent. Any person engaged to provide such assistance shall be identified and that person’s contribution shall be described.”
Standard of Practice 11-1
When REALTORS® prepare opinions of real property value or price, other than in pursuit of a listing or to assist a potential purchaser in formulating a purchase offer, such opinions shall include the following:
1) Identification of the subject property
2) Date prepared
3) Defined value or price
4) Limiting conditions, including statements of purpose(s) and intended user(s)
5) Any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants
6) Basis for the opinion, including applicable market data
7) If the opinion is not an appraisal, a statement to that effect (Amended 1/01)
Article 16
A REALTOR® from another company contacted the seller of a listed property and is telling her that he has investors that want to buy the property. Does the listing broker have any recourse?
Article 16 of the Code of Ethics provides, “REALTORS® shall not engage in any practice or take any action inconsistent with the agency or other exclusive relationship recognized by law that other REALTORS® have with clients. (Amended 1/98)” The direct, uninvited contact with the seller appears to be a blatant violation of the Code of Ethics. The listing broker may contact the local association to file an ethics complaint. Standard of Practice 16-3 provides, in part, “Article 16 is intended to recognize as unethical two basic types of solicitations: First, telephone or personal solicitations of property owners who have been identified by a real estate sign, multiple listing compilation, or other information service as having exclusively listed their property with another REALTOR®: and Second, mail or other forms of written solicitations of prospects whose properties are exclusively listed with another REALTOR® when such solicitations are not part of a general mailing but are directed specifically to property owners identified through compilations of current listings, “for sale” or “for rent” signs, or other sources of information required by Article 3 and Multiple Listing Service rules to be made available to other REALTORS® under offers of subagency or cooperation. (Amended 1/04)”
A broker sends out mass mailing letters to homeowners in a neighborhood. The letter has a disclaimer on the bottom that states: “Please disregard this letter if your property is already listed with another real estate company.” Is the disclaimer required?
Article 16 does not preclude REALTORS® from making general announcements to prospective clients describing their services and the terms of their availability even though some recipients may have entered into agency agreements or other exclusive relationships with another REALTOR®. (See Standards of Practice 16-6 above.) Standard of Practice 16-3 provides that a general telephone canvass, general mailing or distribution addressed to all prospective clients in a given geographical area or in a given profession, business, club, or organization, or other classification or group is deemed “general.” Brokers may include the disclaimer language but the Code of Ethics does not require this.
Article 17
Is there a duty to use REALTOR® mediation and arbitration for commission disputes? What about referral fees?
As provided in Article 17, REALTOR® membership includes the duty to arbitrate contractual and certain non-contractual disputes between REALTORS® associated with different firms arising out of their relationships as members. Disputes include both commission issues as well as referral fee agreements. Local associations are required to provide mediation and arbitration services; however, participation in mediation is voluntary. To minimize referral agreement disputes, members may refer to Legal Update 02.01, “Non MLS Offers of Compensation,” at www.wra.org/LU0201 for techniques to negotiate and document referral fees. In addition, Legal Update 02.04, “What is Procuring Cause?” contains arbitration guidelines and procuring cause analysis.
Tracy Rucka is a Staff Attorney for the WRA.