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REAL ETHICS by Steve Stazel | September 2009 | Index of all Real Ethics columns
Clarifying rules on co-op compensations
Can you as the selling broker negotiate a different compensation with the listing broker than what the listing broker has published in the MLS?
Standard of Practice 3-1 states that “REALTORS®, acting as exclusive agents or brokers of sellers/landlords, establish the terms and conditions of offers to cooperate. Unless expressly indicated in offers to cooperate, cooperating brokers may not assume that the offer of cooperation includes an offer of compensation. Terms of compensation, if any, shall be ascertained by cooperating brokers before beginning efforts to accept the offer of cooperation.”
The above paragraph may need to be discussed. There is a difference between the words “cooperation” and “compensation”. Cooperation means the listing broker will accept offers from other brokers. By putting the listing in MLS, an offer of “cooperation” is made. Compensation means the listing broker will pay an amount of money to whoever is the procuring cause—usually the broker who brings the offer.
When we submit our listings to the MLS, we are offering “cooperation” to all other members of the MLS. On the MLS input sheet is a field for the listing broker to indicate the “compensation” being offered. If you should ever show a property which is not in your MLS or affiliated MLSs, be sure you obtain, in writing and prior to showing the property, how much “compensation” you will receive.
Remember the last sentence of Standard of Practice 3-1 (referenced earlier) which states, in my opinion, that a selling broker may contact a listing broker to negotiate a higher (or lower) co-op compensation. This must be done prior to showing the property (before beginning efforts to accept the offer of cooperation).
When the co-op compensation is listed in the MLS, there is no need to insert the co-op compensation into the contract. If a co-op compensation is entered into the contract, it may be a violation of Standard of Practice 16-16, which states that “REALTORS®, acting as subagents or buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker’s offer of compensation to subagents or buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing broker’s agreement to modify the offer of compensation.”
Each month, the Aurora Outlook features RealEthics, a column by Steve Stazel devoted to explaining Code of Ethics issues for members. The comments stated in this article are those of the author and do not necessarily represent the views of the National Association of REALTORS®, the Colorado Association of REALTORS® or the Aurora Association of REALTORS®. Ultimately, a hearing panel of the Professional Standards Committee determines whether a violation of the Code of Ethics has occurred on a case-by-case basis. These comments should not serve as the foundation of any ethics complaint, arbitration request or response.
If you have an ethical concern or an issue you would like
to see addressed, please call Stazel at (303) 773-3333 or e-mail him at
stazels@msn.com. The comments of this article reflect the understanding and
opinions of the author and do not represent an official expression of policy by the National Association
of REALTORSŪ.
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