May I set up and advertise a charity donation program?

QUESTION: I would like to set up a program where I would donate a portion of my commission to a charitable organization in my community that I’ve supported for many years. The offer would apply to any person who buys or sells a property using me as their real estate agent. Is it permissible for me to set up and advertise a program of this sort?

ANSWER: Yes, provided that: (1) your advertising, marketing and other representations about the program meet the “true picture” requirements of Article 12 of the REALTOR® Code of Ethics; and (2) the charity does not become involved in any way in referring you business or promoting the program.

Regarding the first requirement, Standard of Practice 12-3 of the REALTOR® Code of Ethics provides that “[t]he offering of premiums, prizes, merchandise discounts or other inducements to list, sell, purchase, or lease is not, in itself, unethical even if receipt of the benefit is contingent on listing, selling, purchasing, or leasing through the REALTOR® making the offer.” So, it would be ethical for you to offer to make a donation to the charity as an inducement for prospects to become your clients. However, it is important that any advertisement or other representation containing any such offer is carefully worded so that, in the words of Standard of Practice 12-3, “any party interested in receiving or otherwise benefiting from the REALTOR®’s offer will have clear, thorough, advance understanding of all the terms and conditions of the offer.”

Regarding the second requirement, although you may establish and advertise a program where you will pay a part of your commission to a charity designated by you (or, alternatively, by your client), the real estate license law prohibits a broker from paying any kind of incentive (cash or other consideration) to unlicensed persons or entities for the referral of business.  That prohibition includes charities. Therefore, a referral of business to you by a representative of the charity (for example, an officer, director, employee, or volunteer) who is aware of the program likely would be considered a referral from the charity and thus prohibited. In addition, the charity should not help you advertise the program; for example, permitting you to have a link on the organization’s website or to appear at its events to explain your program.  Although it isn’t the same as a direct referral of business, if the charity assists you in marketing your program with the expectation that it may result in the receipt of donations from you, the charity is arguably engaged in the real estate business. Unless the entity has a real estate license, you may run afoul of the real estate license law if you pay any incentive to it in connection with its assistance.

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Filed Under: Advertising, Code of Ethics,