August 8th - 2012

Respect the client relationships of other brokerages

Do unto others as you would have them do unto you.

Do unto others as you would have them do unto you.

It’s called the Golden Rule, and it’s one of the first life lessons many of us are taught. Yet it’s something that can be forgotten in the course of business.

As a REALTOR® looking to expand your client base, remember to be careful when you approach potential new clients to make sure that they are not currently in a client relationship with another brokerage.

Although it may be tempting to talk to consumers who are unhappy with their current REALTOR®, interfering in the relationship between a brokerage and its clients can have serious consequences. Conversely, make sure that your own clients understand their obligations before they sign an agreement and focus on providing quality service to them.

Keeping these points in mind can go a long way toward avoiding a tangled situation, says Margaret Gourlay, a Toronto broker. “Because real estate is a competitive industry with sizeable incomes at stake, problems of this nature unfortunately do occur,” she says.

An OREA instructor with 37 years of experience in the field, Gourlay says it is crucial for REALTORS® to respect the client relationships of other brokerages -- not just to avoid legal or financial consequences, but also to establish and maintain your own reputation.

“Other REALTORS® in your area need to know they can rely on your ethical behaviour,” says Gourlay. “This is common courtesy but it’s also the key to developing a professional profile.”

Image of "respect" definition in dictionary “Respect the client relationships of other brokerages” is the newest topic posted to OREApedia, a source of information for real estate professionals at www.orea.com. Look in the Resources section on the home page for OREApedia and enter through the Members section. You can scroll alphabetically by topic down to “R” for respect.

The long-term consequences of this type of error can be a ruined reputation, Gourlay cautions. “In a field where word of mouth is crucial, your credibility is often at stake. If people become suspicious of you, they won’t recommend you. The benefit of building a viable real estate practice outweighs everything else in this situation.”

In turn, educating your own clients is vital to ensure that they don’t unintentionally sign agreements with other brokerages. Your role is to make sure they understand the contractual obligations of both sides. (See the June 2011 REALTOR® EDGE article, “Buyer Representation Agreements: Make sure buyers understand what they’re signing.”) Although this may seem like common sense, RECO reports that its most common complaint is from consumers who did not understand the Buyer Representation Agreement they signed.

Keep your explanations simple, Gourlay advises. “Consumers don’t want a career in real estate,” she says. “You just need to explain the type of services your brokerage can offer and whether they want to be treated as a client or customer. Then explain the form, make sure you confirm that they understand what you’ve explained and that they grasp all issues around commission and other obligations.”

To avoid complications, she recommends that brokers and salespeople document the relationship early, before starting to show properties. She also suggests making the initial agreement short-term, for example, for two weeks or a month. “Listen well and do a good job. If you provide good service, they’ll want to keep working with you.”

If you as a REALTOR® are approached by a consumer unhappy with their existing agreement, suggest that they raise the issues first with their current salesperson or the broker of record, Gourlay advises. That brokerage has the relationship with the client and should get a chance to fix the problem.

If consumers have concerns about the validity of the agreement itself, they should be advised to seek legal advice. “In the end, the people will respect you and, if they like you, they may want to work with you in the future.”

Brokerages need to respect contracts and understand REBBA 2002 and its regulations as well as agency law, since interfering with other relationships means running the risk of being taken to arbitration or court, or being subjected to a complaint to RECO.

Consumers who unknowingly sign agreements with two different brokerages could also be subjected to lawsuits, as the brokerages seek to collect commission. The written documents are crucial and all parties must uphold the terms, including the terms of the holdover period if the property sells during that that period.

“Go by the dates, and what’s written in the contract. The consumers may not understand what they’re signing, so the onus is on us as REALTORS® to ensure that they aren’t already in a contractual agreement with someone else.”

Interference with another brokerage’s client could violate section 7 of the REBBA Code of Ethics, which requires registrants to obtain written consent from the existing brokerage before communicating directly with its client. In addition, section 7(2) states that “if a broker or salesperson knows or ought to know that a buyer or seller is a party to an agreement in connection with a trade in real estate with a brokerage other than the brokerage that employs the broker or salesperson, the broker or salesperson shall not induce the buyer or seller to break the agreement.”

If you are uncertain about whether a seller can be contacted directly, refer to the MLS® listing for clear instructions, OREA advises. If that contains no clear authority, contact the listing brokerage to obtain written consent.

In addition, RECO advises registrants always to check with buyers or sellers during initial discussions to learn whether they are working with someone else and whether they have signed a listing agreement or a representation agreement. Never take any direct or indirect actions to lure a client from another brokerage, both RECO and OREA advise.

If a client is interested in buying a property that was previously listed, make absolutely certain that the listing has expired before you approach the sellers and that the seller has agreed to be contacted by other brokerages after expiry. If any doubt exists, contact the listing brokerage.

Because agreements are with the brokerage and not the salesperson, section 7 does not apply in conflicts between two REALTORS® in the same brokerage. For such internal brokerage disputes, look to your employment and independent contractor agreements, your brokerage office policies, and your broker of record or manager for guidance.

“Remember that we serve the public,” says Gourlay. “If you want to build a long-standing practice, give professional service, build a good reputation, and create an environment where people are pleased with your work and proud to do business with you.”

For more information, check out the new topic, “Respect client relationships of other brokerages” posted in OREApedia at www.orea.com.

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