Tell Everyone About Commission Reduction Proposal: RECO Discipline
Betty Crocker was the Listing Agent and hosted a bidding war.
One of the agents offered to reduce his commission.
The property was listed at $1,198,000.00 and the Listing Agreement provided:
“…. the commission breakdown to be as follows: 4.5%/4 if Crocker team brings in offer w/out competition”
There were four Offers on 4 June 2014.
In addition, one of those Offers was from another agent, Barney Rubble with the same ABC Brokerage as Crocker.
Wilma Flintstone an agent with XYZ Brokerage also had an Offer. She said that she would waive her portion of the commission should her Buyer be successful.
Crocker advised Wilma that the Sellers had chosen to accept the offer presented by Rubbles’ clients.
In a letter to RECO received on July 22, 2014, Crocker admitted that Rubble reduced his commission to 1.5% plus HST.
Crocker’s explanation was with the savings on commission offered by Rubble, his offer was $1,543,243.80, which was slightly higher than Wilma’s offer, which came to $1,540,318.50, after taking account of the commission savings.
Wilma stated to RECO that at no time was she advised of the commission reduction offered by Rubble.
It was determined that Crocker acted unprofessionally:
1. Failing to inform Wilma Flintstone, before or during the offer presentation, that the offer being presented by clients of Brokerage ABC contained an agreement to reduce its commission to facilitate the sale, thereby violating sections 2(1) with reference to s25(1), and 3 of the Code of Ethics under the Act, (hereinafter the “Code of Ethics”).
2. Failing to confirm in writing that Brokerage ABC represented one of the buyers, thereby violating section 17 of the Code of Ethics under the Act (hereinafter the “Code of Ethics”).
It is agreed that Crocker breached the following sections of the Code of Ethics:
Brokers and Salespersons
2(1) A broker or salesperson shall not do or omit to do anything that causes the brokerage that employs the broker or salesperson to contravene this Regulation with reference to s25.
Agreements Relating to Commission
25(1) If a brokerage has a seller as a client and an agreement between the brokerage and the seller contains terms that relate to a commission or other remuneration and that may affect whether an offer to buy is accepted, the brokerage shall disclose the existence of and the details of those terms to any person who makes a written offer to buy, at the earliest practicable opportunity and before any offer is accepted.
Fairness, Honesty, Etc.
3 A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.
Nature of Relationship
17 If a registrant represents or provides services to more than one buyer or seller in respect of the same trade in real estate, the registrant shall, in writing, at the earliest practicable opportunity and before any offer is made, inform all buyers and sellers involved in that trade of the nature of the registrant’s relationship to each buyer and seller.
It is important to note that it is the Brokerage which THE Agent, not the individual Broker or Sales Representative.
Rubble is in the same position as Crocker. She must deal with him in the same way as if it were her own Offer. That step is needed for the protection of ABC Brokerage.
Had Wilma been aware that Rubble was reducing his commission, she might have offered more. But, of course, she didn’t know that.
Betty was assessed a $6,000.00 fine, but strangely no courses to take even though she lacked a proper understanding of the rules.
Note: As a rule, I use fictitious names. The actual case is published on RECO’s website and is available to the public. For educational purposes, the names of the parties really don’t have any bearing. If you need to quote the case, you will have to obtain the proper legal citation.
Brian Madigan LL.B., Broker