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How do you use the term client? Are you guilty of an ethics violation?

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Real Estate Agent with Keller Williams Elite RM423455

Do you understand the difference between a client and a customer? This seems like a fairly simple question and it is quite understandable, but I realize how loosely many real estate agents use the term client. Below is the actual quote from the NAR Code of Ethics:

As used in this Code of Ethics, client means the person(s) or entity(ies) with whom a Realtor® or a Realtor®’s firm has an agency or legally recognized non-agency relationship; “customer” means a party to a real estate transaction who receives information, services, or benefits but has no contractual relationship with the Realtor® or the Realtor®’s firm; “prospect” means a purchaser, seller, tenant, or landlord who is not subject to a representation relationship with the Realtor® or Realtor®’s firm;


In order to refer to a person as a client, you must have a written contractual How do you use the term client? Are you guilty of an ethics violations?agreement. Many of you, my fellow real estate agents, eschew buyer agency agreements. If you do not use a BAA, when you call another agent to inquire about a property or give feedback, how do you explain the relationship you have with your customer to the other agent? If you claim your customer is a client, you are in fact guilty of a violation of the code of ethics because you have just misrepresented your relationship to the other agent.

Some time ago, there was a featured article here on Active Rain. The main point of this post was centered around a call placed to this agent. The caller was looking for an agent with the same name and the agent told this caller, she was not the same person and she should continue to look for the other agent. Many commenters commended this agent/writer for not poaching another agent’s client.

I found it unfortunate that folks used this term, “client,” so loosely. The only time I am working with a client is when I have a written contract. The caller who placed this call had not worked with the other agent for several years. The caller was not a client of the other agent with the same name. There was absolutely nothing wrong with the way the featured article author handled this situation. But it would have also been ethically acceptable to seek to do business with the caller on the other end.

Know that someone you did business with last week and no longer has a business relationship with you, is not a client. A past client? “Yes.” But not a current client and therefore is fair game for any licensed real estate agent to seek as a current “client.” Do you use the term, “client,” correctly? If you choose not to do business in this manner, no problem, but do not seek to label me as a client poacher, if I do.

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Living in Lancaster Group

 

An agent who places your interests as his first priority. 
Cal Yoder

Your Homes for Sale in Lancaster Agent

Keller Williams Realty Lancaster

1630 Manheim Pike

Lancaster, PA 17601

Office Phone: 717-735-1145

Cell Phone: 717-413-0744

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Show All Comments Sort:
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

many times when writing I use "buyer" or "seller" because I think consumers don't know the difference between client and customer.  And I am careful not step on the relationship even if it is implied because in my state a buyer can claim improper representation even when that relationship was "implied" and not in writing...  so I generally just ask if someone is "working with another agent" and if the answer is yes I leave it go and send them back to their agent.

Mar 17, 2012 08:08 AM
Cal Yoder
Keller Williams Elite - Lititz, PA
Homes For Sale in Lancaster PA - 717.413.0744

Tammy, excellent comments. I like how you use buyer or seller. A good way to not step on toes with other agents. My comments were meant mostly for speaking to other agents. I would be interested to hear more about your state laws. So you have "implied agency?" How does that correspond with buyer agency or subagency? In other words, if you have not signed a buyer agency with a "consumer" and show them a home, does implied agency create a subagency with the seller? We do not have implied agency in PA and therefore I can show all levels of buyers a property without creating subagency. We have a specific question at the beginning of our Buyer Agency Contract in which we ask the prospect/consumer whether he or she is working with another ageny or has a written agreement. If the person answers that he or she does, then thank them and invite them to be in contact with their agent. If he or she says, "No," then we have complied with the code of ethics and we are free to ask them to sign an agreement.

Cal

Mar 17, 2012 08:36 AM
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

 If a buyer purchases a home from you, but saw the home previously with another agent, you may find yourself in a procuring cause action.

Usually a Consumer Notice is executed between the customer and the agent upon meeting. While the Consumer Notice is not a contract it establishes when an agent had a substantive conversation with a potential buyer/seller. It can also be used to support the record of a showing.  The Consumer Notice is a legal document and any RE Board of dispute will rely on it to establish date and contact.

Tammy is referring to "implied agency" which in Pa is a demonstration of intent but lacking a written agreement.  When you read the grounds for Procuring Cause you will see one of the criteria is the movement of the parties. 

Agent A had a prior and uninterrupted stream of contact and correspondence with a buyer but did not have a Buyers Agency signed. (The key the board will look at is the uninterrupted steam of contact prior to Agent B).

Agent B meets buyer, determines they are unsigned and proceeds to sign them up and show them properties.  Agent B takes them to a property they saw with Agent A and writes a contract.  The first agent has grounds for Procuring Cause.  I can tell you first hand I lost that case even though I could demonstrate I was simultaneously communicating with the buyer at the same time Agent A was.

In law including Real Estate Law the intent and movement of the parties can override the written contract.  Agent B can be perceived to have inferred with the previous established relationship Agent A had with the buyer - written or not.

The Buyers Agency does not protect you from a claim by a prior agent.  Read the article Jim Goldsmith wrote when addressing the so called Door Step Rule and Procuring Cause.  He notes there is not a line, a paragraph or a page which fully sets forth the rule of Procuring Cause.

http://www.caldwellkearns.com/CM/Articles/Doorstep-Registration.asp

Mar 17, 2012 08:42 PM
Cal Yoder
Keller Williams Elite - Lititz, PA
Homes For Sale in Lancaster PA - 717.413.0744

Bonnie, excellent comments. that is a great explanation. Our mls does not observe procuring cause. I wrote some time ago that I think procuring cause needs to go away. It does not serve the consumer. If I am in an area where Procuring Cause is observed and a situation arises which you have described and agent A wins the commission in a dispute, agent B with the signed contract now has the ability to sue the client in order to receive the commission.

I like selling in the Lancaster-Lebanon MLS because the key is getting a signed BAA. It is much clearer.

Cal

Mar 17, 2012 10:25 PM
Todd Clark - Retired
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

Great post and this is something that I try to explain to all my buyer's agents. They need to understand the difference between a prospect, a client or a customer that you want a a client.

 

Mar 18, 2012 04:03 AM
Kristin Hamilton CA REALTOR
Berkshire Hathaway California Realty - Beaumont, CA
(909) 557-6966- Specialize 55+ Communties Banning

Hi Cal,

Great article and I was right when I guessed the answer while beginning to read your post. In CA, even with a Buyer-Broker agreement, a buyer has the right to move on to another agent if she/he wants to. I have known friends who received a letter from the buyers stating they did not wish them to represent them anymore. And then they would buy the house with another agent who happens to be a shark in this area. I am sure it was the other agents idea to steal the buyer but if they send the letter, it is perfectly legal. Probably more expensive to fight it out in court and bottom line if the buyers have a problem with the agent, they have a legal right to move on.

Mar 19, 2012 03:36 PM
Brian Madigan
RE/MAX West Realty Inc., Brokerage (Toronto) - Toronto, ON
LL.B., Broker

Cal,

Good post.

In Ontario, a client is an agency arrangement only. Customer status is non-agency.

Interesting distinction.

Brian

Mar 28, 2012 11:47 AM