In the last post, I had five scenarios, which tested your basic knowledge on the NAR Code of Ethics. The first scenario was:
Agent Jim has been showing properties to his friend Jerry. Jerry does not know if he wants to buy a home or not. Since Jerry is a friend, Agent Jim does not ask him to sign a Buyer Agency Agreement. Jerry calls Agent Jim one day, all excited because he has just purchase a home. Jim is shocked and asks what agent wrote the offer and why Jerry chose her. Agent Jane sold me the property. She is my neighbor and we began to talk one day. She asked if I wanted her help and asked me to sign a buyer agency agreement. I liked her and decided to use her services. Agent Jim is furious at Agent Jane and files an ethic complaint against Agent Jane. Is Agent Jane guilty of an ethics violation?
What do you think?
The answer to whether Agent Jane is guilty of an ethics violation is “No.” First let’s begin with what the Code of Ethics says:
Realtors® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other Realtors® have with clients. (Amended 1/04)
This is article 16 of the Code of Ethics. An agent cannot seek out a person who is under an exclusive representation agreement. A non-exclusive agency relationship is not being referred to in this article
One needs to be able to answer, “How do I establish an exclusive agency relationship?” To answer this question with clarity, you will need to know your state law. In Pennsylvania, the answer is crystal clear and I include the actual state law code:
§ 35.281. Putting contracts, commitments and agreements in writing.
(a) All contracts, commitments and agreements between a broker, or a licensee employed by the broker, and a principal or a consumer who is required to pay a fee, commission or other valuable consideration shall be in writing and contain the information specified in § 35.331 (relating to written agreements generally).
(b) The following are exceptions to subsection (a):
(1) Open listing agreements or nonexclusive buyer agency agreements may be oral if the seller/buyer or landlord/tenant is provided with a written memorandum stating the terms of the agreement.
(2) Transaction licensees or subagents cooperating with listing brokers are not required to obtain a written agreement from the seller/landlord.
(3) Transaction licensees or subagents who provide services to the buyer/tenant but are paid by the seller/landlord or listing broker shall provide, and have signed, a written disclosure statement describing the nature of the services to be performed and containing the information required by section 608 of the act (63 P. S. § 455.608).
(c) A licensee may perform services before an agreement is signed, but the licensee is not entitled to recover a fee, commission or other valuable consideration in the absence of a signed agreement.
In order to establish an exclusive agency relationship in Pennsylvania, it must be in writing. Since Agent Jim did not ask his friend Jerry to sign a Buyer Agency Agreement, he did not have an exclusive agency relationship and therefore Agent Jane did not violate the Code of Ethics.
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