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REALTOR® Emeritus |  | Risk management Agency Disclosure | | ||
|  Three Lines of Defense Against Risk Keeping Risks Under Control Controlling Transaction Risks Agency Disclosure Avoiding Antitrust Risks Minimizing Liability from Contracts Fair Housing Risks Controlling Personnel Risks Communications Policies to Minimize Risks Insuring Against Risks More Resources: Controlling Business Risks Code of Ethics: Controlling Business Risks | 2 Disclosure Tests: You Be the Judge Case Study 1: Accepting a Commission From Buyer and Seller Facts: A buyer engaged a broker to find a commercial property. The parties agreed that if the broker found a property that fit the buyer’s specifications and price range, he would pay the broker a finder's fee. Two weeks later, the broker told the buyer that a seller had just listed a property with him that met all the buyer's specifications except that the listed price was a bit higher than the buyer wanted to pay. The buyer inspected the property and liked it but wouldn't compromise on his original price. Three days later, the broker called the buyer to say that the seller had agreed to the buyer's price. The sale was made and the broker collected a commission from his client, the seller, as well as a finder's fee from the buyer, which was not disclosed to the seller. The seller learned about the finder's fee a few weeks later and filed a complaint with the local board of REALTORS®, charging the broker with duplicity and unprofessional conduct. The complaint noted that the broker had actually been the agent of the buyer while misrepresenting himself as the agent of the seller. The broker argued that he hadn't accepted the seller's listing until after he had agreed to help the buyer find a property and that the price paid for the property was fair. What do you think? Findings: A hearing panel of the board's professional standards committee concluded that the REALTOR® had violated Article 7 of the Code of Ethics. His efforts to represent both parties in the transaction and the fact that he intended to be compensated by both, should have been fully disclosed in advance to both parties. Case adapted from the 2001 Code of Ethics and Arbitration Manual, NATIONAL ASSOCIATION OF REALTORS®, 2001. Case Study 2: Dual Agency Facts: The Olsen ranch was listed for sale as an open listing. Vail Associates Real Estate Inc. found a buyer who wanted not just that property, but the nearby Rickstrew ranch as well. He asked Vail to find out whether it was available for purchase. Owner Rickstrew refused to deal with Vail and negotiated directly with the buyer instead. The buyer agreed to purchase the Rickstrew ranch contingent on his purchase of the Olsen ranch. Soon after the Olsen sale closed, the buyer closed on the Rickstrew ranch. When the Olsens learned of the transaction, they filed suit, claiming that Vail had engaged in undisclosed dual agency. What do you think? Findings: In Olsen v. Vail Associates Real Estate, Inc., the trial court and the court of appeals in Colorado both ruled in favor of Vail Associates. They found that the company's limited contact with the buyer in connection with the Rickstrew ranch didn't rise to the level of agency representation and was done merely to further the sale of the Olsen ranch. Case adapted from Don’t Risk It: A Broker’s Guide to Risk Management, NATIONAL ASSOCIATION OF REALTORS® , 2000. Available from NAR by calling 800/874-6500. Other Forms of Disclosure > | |