Case Interpretations Related to Article 3

Case #3-1: Rules of MLS May Not Circumvent Code

(Revised Case #22-1 May, 1988. Transferred to Article 3 November, 1994. Revised May, 2017.)

REALTOR® A complained to his Association of REALTORS® that procedures in the Association’s Multiple Listing Service permitted REALTORS® participating in the Service to evade their obligations under Article 3 of the Code of Ethics. His specific complaint was that, as exclusive agent of Client B, he had filed the client’s property in the Multiple Listing Service. Other REALTORS® participating in the Multiple Listing Service had contacted Client B directly to make appointments to show the property and to transmit offers to purchase it, without his, REALTOR® A’s, knowledge or consent. When he objected to this conduct, the officers of the Multiple Listing Service had cited the MLS rule that held that placing property in the Service had the effect of listing the property with the MLS, and authorized the MLS to refer it to other Participants as subagents, who were then free to transmit offers directly to the client. REALTOR® A’s complaint emphasized that his objection was primarily to the rule of the Multiple Listing Service.

The complaint was referred to the Directors of the Association of REALTORS® which asked the Chairperson of the Association’s Multiple Listing Committee to attend a special Directors’ meeting on the subject. At the meeting, it was pointed out that the contested rule of the Multiple Listing Service, which had not been submitted to the Board of Directors for approval, was in conflict with Article 3 of the Code of Ethics, and with the nature and purpose of the MLS itself, since the MLS did not provide brokerage services and could not function as an agent of sellers. The Multiple Listing Service was directed to rescind all procedural rules that permitted the Service or any of its Participants to intrude upon the agency status of any REALTOR® holding an exclusive listing.

Case #3-2: Assumed Consent for Direct Contact

(Reaffirmed Case #22-2 May, 1988. Transferred to Article 3 November, 1994. Transferred to Article 16 as Case #16-18, November, 2001.)

Case #3-3: Arbitrary Refusal to Cooperate

(Revised Case #22-3 May, 1988. Transferred to Article 3 November, 1994. Deleted November, 2001.)

Case #3-4: Cooperation Not Mandatory

(Reaffirmed Case #22-4 May, 1988. Transferred to Article 3 November, 1994. Revised May, 2017.)

Client A called on REALTOR® B to list a small commercial property. In stipulating the price at which he wished to list the property, Client A explained that he was aware that it was a relatively low price, but he wanted a quick sale and, he added, a higher price could benefit very little at that time because of certain tax considerations. He told REALTOR® B that a number of prospective buyers had spoken to him about the property within the past year. He gave their names to REALTOR® B and said he felt sure that among them there would be a ready buyer at the price. He told REALTOR® B that he wanted the property submitted to them first.

The next day, REALTOR® C, who had unsuccessfully solicited the listing and learned that the property was listed exclusively with REALTOR® B, called REALTOR® B to ask that he be accepted as a cooperating broker. REALTOR® B told REALTOR® C that because of unusual circumstances the best service to his client did not require cooperation; that a prospective buyer was at that time seriously considering the property; and that under the circumstances he preferred not to invite cooperation.

REALTOR® C complained to the Association of REALTORS® charging REALTOR® B with a violation of Article 3 by refusing to cooperate. Pursuant to the complaint a hearing was scheduled before a Hearing Panel of the Association’s Professional Standards Committee.

During the hearing, REALTOR® B outlined fully the circumstances under which the property had been listed by him, and maintained that the interest of Client A would not be advanced by acceptance of cooperation by REALTOR® C.

The panel concluded that REALTOR® B’s reasons for not accepting cooperation in this instance were valid and that his action did not constitute a violation of Article 3.

Case #3-5: Refusal to Extend Cooperation in Sale of New Homes

(Reaffirmed Case #22-5 May, 1988. Transferred to Article 3 November, 1994. Revised November, 2001. Revised May, 2017.)

REALTOR® A, who operated a brokerage business in many areas of the city, was also a home builder. For the homes he built, he maintained a separate sales force and consistently refused to permit other REALTORS® to show his new homes.

This practice came to the attention of an officer of the Association of REALTORS® who made a complaint which was referred to the Professional Standards Committee by the Grievance Committee.

At the hearing, the Hearing Panel asked REALTOR® A to answer charges that his policy violated Article 3 of the Code of Ethics.

REALTOR® A’s defense was that Article 3 requires REALTORS® to cooperate with other brokers “except when cooperation is not in the client’s best interest.” He contended that in selling his own new homes there was no client; that he was not acting in the capacity of a broker, but as owner-seller; and that, under the circumstances, Article 3 did not apply to his marketing the houses he built.

The Hearing Panel concluded REALTOR® A’s defense was valid; that he was a principal; that Article 3 permitted him, as the builder-owner, to decide what marketing procedure would be in his best interest; and that although other REALTORS® might disagree with his decision, he was not in violation of Article 3.

Case #3-6: Arbitrary Refusal to Extend Cooperation

(Reaffirmed Case #22-6 May, 1988. Transferred to Article 3 November, 1994. Deleted November, 2001.)

Case #3-7: Time at Which Modification to Offer of Compensation is Communicated is a Determining Factor

(Revised Case #22-7 May, 1988. Transferred to Article 3 November, 1994. Cross-reference Case #2-14. Revised November, 2001. Revised May, 2017, Deleted effective June 5, 2025.)

Case #3-8: REALTOR®’s Obligation to Disclose Dual Commission Arrangements

(Deleted Case #9-25 May, 1988. Revised and reinstated November, 1988 and subsequently revised May, 1989. Reaffirmed April, 1991. Transferred to Article 3 November, 1994. Revised November, 2001. Revised May, 2017, Deleted effective June 5, 2025.)

Case #3-9: REALTOR®’s Obligation to Disclose True Nature of Listing Agreement

(Adopted as Case #9-32 April, 1992. Transferred to Article 3 November, 1994. Revised May, 2017, Deleted November, 2025.)

Case #3-10: Disclose Accepted Offers with Unresolved Contingencies

(Adopted May, 2004. Revised May, 2017.)

REALTOR® A listed Seller S’s house and entered the listing in the MLS. Within a matter of days, REALTOR® X procured a full price offer from Buyer B. The offer specified that Buyer B’s offer was contingent on the sale of Buyer B’s current home. Seller S, anxious to sell, accepted Buyer B’s offer but instructed REALTOR® A to continue marketing the property in hope that an offer that was not contingent on the sale of an existing home would be made.

A week later, REALTOR® Q, another cooperating broker working with an out-of-state transferee on a company-paid visit, contacted REALTOR® A to arrange a showing of Seller S’s house for Buyer

T. REALTOR® A contacted Seller S to advise him of the showing and then called REALTOR® Q to confirm that he and Buyer T could visit the property that evening. REALTOR® A said nothing about the previously-accepted purchase offer.

REALTOR® Q showed the property to Buyer T that evening and Buyer T signed a purchase offer for the full listed price. REALTOR® Q sent the purchase offer to REALTOR® A.

REALTOR® A informed Seller S about this second offer. At Seller S’s instruction, Buyer B was informed of the second offer, and Buyer B waived the contingency in his purchase offer. REALTOR® A then informed REALTOR® Q that Seller S and Buyer B intended to close on their contract and the property was not available for purchase by Buyer T.

REALTOR® Q, believing that REALTOR® A’s failure to disclose the existence of the accepted offer between Seller S and Buyer B at the time REALTOR® Q contacted REALTOR® A was in violation of Article 3 of the Code of Ethics, as interpreted by Standard of Practice 3-6, filed an ethics complaint with the association of REALTORS^®.

At the hearing called to consider the complaint, REALTOR® A defended his actions noting that while Buyer B’s offer had been accepted by Seller S, it had been contingent on the sale of Buyer B’s current home. It was possible that Buyer B, if faced with a second offer, could have elected to withdraw from the contract. REALTOR® A argued that continuing to market the property and not making other brokers aware that the property was under contract promoted his client’s best interests by continuing to attract potential buyers.

The Hearing Panel disagreed with REALTOR® A’s justification, pointing to the specific wording of Standard of Practice 3-6 which requires disclosure of accepted offers, including those with unresolved contingencies. REALTOR® A was found in violation of Article 3.

 Case #3-11: Confidentiality of Cooperating REALTOR®’s Participation  

(Revised Case #21-5 May, 1988. Transferred to Article 16 November, 1994. Revised and transferred to Article 3 November, 2018.)

When Client A listed his home for sale with REALTOR® B, he explained that he wanted the sale handled without advertising and without attracting any more attention than was absolutely necessary. He said he understood that he would have to have some contacts with prospective buyers and possibly with other REALTORS®, but that he did not want the property filed with the MLS, advertised, or in any way publicly announced as being on the market. He asked REALTOR® B to impress the same restrictions on any other REALTORS® who might become involved in the transaction.  

REALTOR® B, having reason to think that REALTOR® C was in touch with prospective buyers to whom the property would appeal, approached REALTOR® C to invite his cooperation, and explained fully the Client’s instructions. REALTOR® B required REALTOR® C to sign a confidentiality agreement that specified the terms and conditions of REALTOR® B’s offer to cooperate. REALTOR® B discussed the matter with no other REALTOR® and refrained from any kind of advertising of the property. But a few days later, REALTOR® B learned that REALTOR® D was discussing the property with prospective buyers, knew that REALTOR® C was working on it, knew the price at which the property had been listed, and other details about it. Questioning revealed that REALTOR® C had told REALTOR® D that he was working on the sale of the property.

On the basis of the information from REALTOR® D, REALTOR® B charged REALTOR® C with unethical conduct in a complaint to the Association of REALTORS®, specifying that REALTOR® C’s breach of the terms of his confidentiality agreement with REALTOR® B violated Article 3.

The complaint was referred to the Association’s Professional Standards Committee, a hearing was scheduled, and REALTOR® C was directed to answer the charge of unethical conduct in violation of Article 3.

At the hearing, REALTOR® B detailed the instructions of the client and the fact that REALTOR® C was required to sign a confidentiality agreement as a condition of REALTOR® B inviting his coopera- tion. REALTOR® D told the Hearing Panel that REALTOR® C had discussed the listing with him. REALTOR ® C defended himself against the charge of violating Article 3 by saying that while he had discussed the matter briefly with REALTOR® D, he had not violated the terms of his confidentiality agreement so egregiously as to warrant finding him in violation of the Code.

At the conclusion of the hearing, the panel held that REALTOR® B’s complaint was valid; that Standard of Practice 3-1 allowed REALTORS®, acting as exclusive agents or brokers of sellers/ landlords, to establish the terms and conditions of offers to cooperate. The panel noted that the terms of the confidential- ity agreement between REALTOR® B and REALTOR® C were clear, and that REALTOR® C’s discussion of the matter with REALTOR® D violated the terms of the agreement and REALTOR® B’s offer to cooperate. The panel therefore found REALTOR® C in violation of Article 3.

Case #3-12: Confidentiality of Cooperating REALTOR®’s Participation

(Adopted November, 2018.)

When Client A listed his home for sale with REALTOR® B, he explained that he wanted the sale handled without advertising and without attracting any more attention than was absolutely necessary. He said he understood that he would have to have some contacts with prospective buyers and possibly with other REALTORS®, but that he did not want the property filed with the MLS, advertised, or in any way publicly announced as being on the market. He asked REALTOR® B to impress the same restrictions on any other REALTORS® who might become involved in the transaction.

REALTOR® B, having reason to think that REALTOR® C was in touch with prospective buyers to whom the property would appeal, approached REALTOR® C to invite his cooperation, and explained fully the client’s instructions. REALTOR® B discussed the matter with no other REALTOR® and refrained from any kind of advertising of the property. But a few days later, REALTOR® B learned that REALTOR® D was discussing the property with prospective buyers, knew that REALTOR® C was working on it, knew the price at which the property had been listed, and other details about it.

On the basis of this information, REALTOR® B charged REALTOR® C with unethical conduct in a complaint to the Association of REALTORS®, alleging REALTOR® C had violated Article 3 by breaching the terms of the conditions of REALTOR® B’s offer to cooperate.

The complaint was referred to the Association’s Professional Standards Committee, a hearing was scheduled, and REALTOR® C was directed to answer the charge of unethical conduct in violation of Article 3.

At the hearing, REALTOR® B detailed the instructions of the client as a condition of REALTOR® B inviting his cooperation. REALTOR® C defended himself against the charge of violating Article 3 by saying that he had not discussed the property directly with REALTOR® D; and that his clients and REALTOR® D’s clients were close friends. REALTOR® C’s clients testified that they didn’t know the seller was so secretive about the property, so didn’t see the harm in mentioning it to REALTOR® D’s clients as they knew the home would be a perfect fit for them. Further testimony from REALTOR® D confirmed that he had learned about the property from his clients, and not from REALTOR® C directly.

At the conclusion of the hearing, the panel agreed with REALTOR® B that Standard of Practice 3-1 allowed REALTORS®, acting as exclusive agents or brokers of sellers/landlords, to establish the terms and conditions of offers to cooperate. The panel also noted that REALTOR® C had not violated the terms and conditions of REALTOR® B’s offer to cooperate; rather, it was his clients, who were not subject to confidentiality as a condition of the offer to cooperate, that had spoken to REALTOR® D’s clients about the home. The panel, therefore, did not find REALTOR® C in violation of Article 3.

Case #3-13 Timing of Commission Negotiations

(Adopted November, 2019. Revised and effective June 5, 2025.)

REALTOR® A signs a listing agreement with Seller B for the sale of her home. The home is priced at $1,000,000.

REALTOR® C sees the listing and knows it would be a perfect fit for her buyers, but unfortunately it’s out of their price range. She discusses it with them, and they ask her to submit an offer for $900,000. REALTOR® C explains the risks in submitting an offer so far below asking price, but the buyers are in love with the home and ask her to submit the offer anyway.

REALTOR® C calls REALTOR® A, and REALTOR® A communicates the cooperative brokerage compensation being offered. REALTOR® C submits the offer to REALTOR® A, who discusses it with Seller B. Seller B is concerned about accepting an offer so far below the home’s asking price, so REALTOR® A offers to reduce her commission, as articulated in the listing agreement, by 1% if Seller B wants to accept the offer of $900,000 and ensure a quick sale. Seller B agrees to accept the offer and reduce the commission she pays to REALTOR® A by 1%.

REALTOR® A informs REALTOR® C that their offer was accepted, but that REALTOR® A is now being paid 1% less in commission. “Listen,” she explains to REALTOR® C, “it seems like both of our clients are happy with the price if it means the sale moves quickly. Would you be willing to split the difference on my reduced commission and I pay you 0.5% less in cooperative compensation than I agreed to in the original compensation agreement?”

REALTOR® C agrees to accept 0.5% less than the commission offered, and a new compensation agreement is signed. After closing, REALTOR® C files an ethics complaint against REALTOR® A, alleging a violation of Article 3, as illustrated by Standard of Practice 3-2.

At the hearing on the matter, REALTOR® C argued that by asking her to accept 0.5% less in cooperative compensation after the offer was submitted, REALTOR® A was unilaterally modifying the compensation with regard to that transaction. The Hearing Panel disagreed and found no violation of Article 3, noting that Standard of Practice 3-3 specifically authorizes listing and cooperating brokers to enter into an agreement to change the compensation for a transaction at any time, and that the Code of Ethics would never interfere with the negotiation of commissions between listing and cooperating brokers. The Panel also noted that REALTOR® C could have said no to the reduced commission, and in that instance REALTOR® A would have been obligated to pay the commission stated in the original compensation agreement.