With the Legal Hotline, the weekly Legal Hottips email update and monthly Legal Update publications, the Wisconsin REALTORS® Association addresses many concerns for its members — including questions about ethics. This information provides all of us with a better understanding of some of the problems that can affect the way we do business. Issues involving the REALTOR® Code of Ethics can arise in the practice of real estate — and on occasion, these issues either don’t rise to the level of someone feeling the need to contact the WRA for insight, or these issues simply aren’t recognized by the agent(s) as possible problems under the Code of Ethics. As a managing broker of a large office, I have the opportunity to review many files each month and to observe the day-to-day activities of agents, and it seems that some of the same dubious behaviors have a tendency to repeat. Sometimes we all need a reminder on what is considered acceptable conduct.
One of the ironic scenarios I observe is when some agents clearly see the potential ethical issues when someone else does something questionable, yet have difficulty recognizing when they do the same thing themselves. For example, when an agent loses a possible listing to a competing company, I occasionally hear them complain that the other agent behaved unethically by intentionally overstating the property value to the seller and essentially “bought” the listing. However in many cases, the complaining agent also has listings that sit on the market for the simple reason of being overpriced. Did they acquire these listings the same way? … Probably not, but that question can always be raised when a property eventually sells for a sum considerably less than its original list price.
I think the lesson here is two-fold: first, don’t deliberately mislead the owner as to market value when attempting to secure a listing; and second, don’t be too quick to judge another when you’ve lost a possible listing to a competitor. Opinions of value can legitimately differ, and ultimately the seller sets the list price.
Another ethical issue that comes up more often than it should is when a listing agent has not informed other potential purchasers and the purchasers’ agents that a property has other offers. Wisconsin license law allows a listing agent to make the following disclosures to a potential purchaser:
- Whether the property has an offer.
- Whether that offer has been accepted.
- Whether the offer has contingencies (but never the nature of the contingencies).
- Whether there is a bump clause (but not the length of such bump period).
Our REALTOR® Code of Ethics says that we shall, with the sellers’ approval, disclose the existence of offers, and shall disclose the existence of accepted offers, even those with unresolved contingencies, to any cooperating broker. Further, many MLSs will require such disclosure as part of their rules.
Too often, the disclosure of secondary offers is ignored, sometimes with extremely frustrating results. Imagine an agent working with a buyer from another city who checks for availability of a local listing, is told the property is available, the buyer travels many miles to view the property, writes an offer, and is then advised that not only is there another offer but that the property is closing in a few days. This not only upsets the buyer (and the agent), but makes our entire industry look bad. The listing agent may defend this situation and say that the decision to avoid disclosure of other offers is in the seller’s best interest (at the seller's instruction) because disclosure may discourage some buyers, and the agent has a duty to market a property up to closing. However, certain disclosures are ethically required, and we always have a duty to treat all parties to a transaction fairly, honestly and in good faith.
Other ethical situations we need to be careful to avoid are:
- Forgetting and/or failing to disclose a relationship — either family or business — an agent may have with a party, or forgetting to disclose a personal interest in a property.
- Misrepresenting the availability of a property because the listing agent may have a buyer for it.
- Making or repeating false or misleading statements about other agents or their business practices.
- Soliciting listings from sellers currently listed with another broker — including leaving marketing materials after a local showing.
- And marketing on Craigslist and other websites without full disclosure of licensee status.
The Code of Ethics helps to create a strong, positive, professional environment for all of us in this business, and sometimes questions do come up as to what’s the ethical thing to do. If you are unsure how to proceed, you should always talk with your broker. When I first started in real estate, my broker told me that whenever faced with a difficult decision, one should always first ask, “what would I want to happen if the situation were reversed?” Over 25 years later, that’s still good advice. And if you can honestly answer that question, you’re probably headed the right direction.
Keeping Accepted Offers Confidential: Another Perspective
A seller may legally direct the listing agent not to disclose that there is an accepted offer on the seller’s property under Wis. Admin. Code § REEB 24.12(1). All agents owe a duty of confidentiality to the parties under Wis. Stat. § 452.133(1)(d). The agent is asked to further the seller’s strategy by not revealing that there is an accepted offer. Because state law trumps the Code of Ethics, this agent is within the law. This strategy, however, likely puts the listing agent in violation of an MLS rule that requires the listing status be changed once there is an accepted offer. This MLS violation may potentially result in fines or other penalties.
The controversy that is created when the existence of an accepted offer is not disclosed has two sides. This article expresses the issue through the eyes of cooperating agents. Others believe that it is essential to honor the seller’s wishes to keep accepted offers confidential.
Consequently, the WRA’s Public Policy Committee has assigned a task force to examine this conundrum. Any questions or comments may be shared with Cori Lamont at coril@wra.org.
Michael Sewell is a committee member of the WRA’s Professional Standards Work Group and the Professional Standards Hearing Panel. Sewell is a practicing broker in Green Bay, Wis., with Coldwell Banker The Real Estate Group.