Members often ask the Hotline whether a REALTOR^® has acted ethically in a transaction, which begs the question: How do we, as REALTORS^®, determine what is ethical? Do customers and clients judge what is ethical differently? 

REALTORS^® are required to conduct themselves in compliance with Wisconsin license law and the REALTOR^® Code of Ethics, to which REALTORS^® agree to be bound as members. Clients and customers may also judge based upon their individual senses of morality, which varies from person to person and from situation to situation. While morality is not regulated here on earth, REALTORS^® would be prudent to consider how the parties view their behavior and conduct themselves accordingly.

The following Hotline questions and answers are based on recent calls regarding ethics.

Other submitted offers

Before an offer is accepted, does a listing broker need to disclose the existence of other offers to other potential buyers or brokers working with other buyers?

License law and the Code of Ethics regulate the sharing of information about pending offers on a property. Wis. Admin. Code § RL 24.12(1) states, in part, “A licensee may, but is not required to, disclose information known by the licensee regarding the existence of other offers on the property, the fact that a seller has accepted another offer, that the offer is subject to contingencies and that the offer is subject to a clause requiring removal of certain contingencies upon the occurrence of an event such as receipt, acceptance or conditional acceptance of another offer.”

Standard of Practice 1-15 provides, “REALTORS^®, in response to inquiries from buyers or cooperating brokers shall, with the sellers’ approval, divulge the existence of offers on the property. Where disclosure is authorized, REALTORS^® shall also disclose whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker. (Adopted 1/03, Amended 1/06)” Therefore, with the seller’s approval, the broker shall disclose information about other offers. When a property is listed, REALTORS^® should discuss with sellers whether they want the existence of submitted offers disclosed to buyers, and obtain the seller’s written authorization in the listing contract (or an amendment thereto) specifying whether the disclosure is authorized only when the broker is asked, or whether the broker should volunteer the information.

Absent a seller’s directive ordering or prohibiting the listing broker’s disclosure of the existence of submitted offers, REALTORS^® still have the discretion to choose whether to disclose the existence of submitted offers per § RL 24.12.

Disclosing accepted offers

An agent representing a buyer found a property in the MLS and called to schedule a showing. The buyer’s agent contacted the listing agent a second time with more questions and a third time to let them know that the buyer was writing an offer. After the buyer submitted the offer, the listing agent said the offer should have been written as secondary because there was already an accepted offer. Has the listing agent violated the Code of Ethics by not disclosing the accepted offer? Does it matter if the accepted offer is subject to sale or has a bump clause?

The Code of Ethics, specifically Standard of Practice 3-6, provides REALTORS^® must disclose the existence of accepted offers to brokers seeking cooperation. This obligation to disclose includes offers that are subject to contingencies, like a bump clause. Therefore, unless the seller has indicated that this information is confidential, per Wis. Stat. § 452.133(1)(d), the broker would disclose according to the Code of Ethics. Any confidentiality directive should be in writing in the listing contract (or an amendment thereto).

Client responsibility for buyer agency fee

The buyer’s agent has a buyer agency agreement calling for a 2.4-percent success fee. After looking at many houses, the buyers found one they liked. After the offer was made, the buyer’s agent noticed that the listing agent offered a buyer agency fee of 2.0 percent in the MLS. Do the buyers owe the other .4 percent?

The buyer’s broker should review the compensation provisions of the 2008 WB-36 Buyer Agency/Tenant Representation Agreement. The buyer is obligated to pay the broker’s compensation unless it is offset by any amounts received from the owner or the owner’s agent. Therefore, unless the agent has represented that the buyers will have no out-of-pocket costs, they will be responsible for the remainder of the commission.

When entering into a buyer agency agreement, the possibility of the buyers owing the buyer’s agent’s fee should be addressed as a material fact under Wis. Stat. §452.133(2)(b). In addition, REALTORS^® are required by the Code of Ethics, Standard of Practice 1-13, to advise potential buyer clients about:

Providing service to other brokers' clients

A buyer saw the sign in front of the property and e-mailed the listing agent. During the showing the next day, the agent discovered that the potential buyer had a buyer agency agreement with another company. The buyer claimed his buyer’s agent didn’t tell them about the house – they found it themselves – and asked the listing agent to write an offer. Is this a violation of Article 16?

Article 16 of the Code of Ethics provides that REALTORS^® may not interfere with the exclusive brokerage relationships of other REALTORS^®. However, if the buyer initiates the contact, the listing agent may assist the buyer. Standard of Practice 16-13 states, “All dealings concerning property exclusively listed, or with buyer/tenants who are subject to an exclusive agreement shall be carried on with the client’s agent or broker, and not with the client, except with the consent of the client’s agent or broker or except where such dealings are initiated by the client.”

However, before providing substantive services to the buyer, like writing an offer, REALTORS^® must ask the buyer if the buyer has a buyer agency agreement and if they want help from the REALTOR^®. It is prudent to have the buyer consult an attorney with any questions regarding the buyer’s obligations under the buyer agency agreement.

For more information, the agent may review the September 2004 Legal Update, “Buyer Agency Practice,” online at www.wra.org/lu0509.

Taking future listings

The seller has a listing but wants to list with a different broker in the future. Can the REALTOR^® do a CMA and list the property for the seller?

The general proposition of Article 16 of the Code of Ethics prohibits REALTORS^® from soliciting another REALTOR^®’s seller. A REALTOR^® may discuss the terms upon which the seller might enter into a future listing, and enter into that listing (which can become effective upon the expiration of a current listing), if the discussion is initiated by the seller. A REALTOR^® may not directly or indirectly initiate such a conversation. Therefore, whether the activity of the REALTOR^® is a violation of the Code of Ethics will be dependent upon who made the contact.

Seller payment of buyer's broker's fee

A buyer found an advertisement for a home for sale in an old real estate magazine. The buyer’s broker determined the listing had expired, so the broker went to talk directly to the seller. Is the broker procuring cause? Is it ethical to ask the FSBO seller to pay the buyer agency fee?

The WB-36 Buyer Agency/Tenant Representation Agreement gives the broker agency authority to provide brokerage services in a transaction in which a seller does not have a listing. The broker may contact the seller directly, give the seller a Broker Disclosure to Customers, present the offer directly to the seller and negotiate the offer for the buyer. If negotiations result in a sale, the buyer’s agent should expect to be paid by the buyer pursuant to the buyer agency agreement. There is no procuring cause issue because the property is not listed and is not in the MLS.

A buyer’s broker may ethically suggest or recommend that the buyer ask the seller to pay some or all of the buyer’s broker’s fee pursuant to Article 16 of the Code of Ethics and National Association of REALTORS^® Case Interpretation #16-17. The buyer may condition the offer upon the seller paying the buyer’s broker’s fee on behalf of the buyer, as a seller’s expense, at closing. Wis. Admin. Code § RL 24.05(1) provides that the buyer’s broker must have the prior written consent of the buyer and seller to collect the fee from the seller because the seller is not the buyer’s broker’s client. The WB-36 Buyer Agency Agreement must also authorize the buyer’s broker to accept compensation from the owner/seller.

Tracy Rucka is a Staff Attorney for the WRA.