Real Estate Ethics

I’m developing a thought-provoking topic for discussion on Real Estate Ethics. The idea is to present scenarios that fall into a moral grey area, where there are no clear right or wrong answers.

The goal is to spark debate and ultimately develop a set of Codes of Conduct for Real Estate Brokers.

Here’s the first scenario:

Broker 1 contacted Broker 2 for listings in a specific building. Broker 2 provided his listings with details (including unit numbers). Broker 1 then shared these listings with a client, who didn’t find any of them appealing and didn’t visit any of the properties.

A year later, Broker 1 had a similar request from a different client, again looking for a unit in the same building. This time, Broker 1 reached out to Broker 3, with whom he had built a close relationship after a previous transaction. One of Broker 3’s listings caught the client’s eye, and they ended up purchasing the unit.

Weeks later, Broker 2 learned about the sale and claimed that he was entitled to half of the commission because he had originally offered that unit to Broker 1 a year earlier.

Dilemma: Is Broker 2 justified in demanding a share of the commission that Broker 3 earned?

Poll results

A significant 87% responded with a resounding "NO," indicating that Broker 2 is not entitled to the commission.

Before diving in, it's important to emphasize that there's no definitive right or wrong answer here. It's about understanding where you stand on the issue and communicating that clearly to your counterparts.

Personally, I also vote "No."

Here are some issues with Broker 2's approach of sharing unit details, including the unit number:

Broker 2 assumes that Broker 1 will remember all the unit numbers and their respective listings indefinitely.

What if three years pass—should Broker 1 still route the deal through Broker 2? What about after ten years? And if Broker 1 initially received hundreds of listings, should they be expected to remember which listing belongs to which broker?

What if Broker 1 didn't request listings from Broker 2, but Broker 2 sent them anyway? Does that obligate Broker 1 to route the deal through Broker 2?

What do the major players do?

A similar situation occurs in the pre-selling market. When developers launch projects, brokers "register" their clients by submitting their names to management.

Some developers impose a time limit (e.g., one month) for tagging specific clients to brokers. I've seen brokers who submit a large number of names to management, hoping those clients might be interested in the project.

Other developers follow a straightforward rule: "Whoever shows the property to the client first."

Key takeaway:

At the end of the day, you decide who you want to work with. If your stance on the matter is "No," and you know a particular broker would say "Yes," then don't request listings from that person.

Conversely, the listing broker could choose to withhold unit numbers until the prospective buyer shows genuine interest in viewing the unit.

If all else fails, let the party paying the commission (the seller) determine who should receive it.

Just my two cents.