May I tell a buyer that they can hire me at no cost to them?

QUESTION: I heard recently that it’s unethical for me to tell a buyer that they may hire me at no cost to them. Is that right? If so, what am I supposed to say if a buyer asks me if they will have to pay me for my services?

ANSWER: Yes, in response to your first question. Effective January 1, 2022, Standard of Practice 12-1 of the REALTOR® Code of Ethics was amended. It now provides that “REALTORS® must not represent that their brokerage services to a client or customer are free or available at no cost to their clients, unless the REALTOR® will receive no financial compensation from any source for those services.” In other words, you can’t tell a client or customer that your services are free unless you are truly working for free.

The change was made in response to a civil lawsuit filed by the US Department of Justice against the National Association of REALTORS® in November 2020 in which the DOJ alleged that NAR rules impose illegal restraints on the way that REALTORS® compete. A proposed settlement of the case requires NAR to modify certain rules that, among other things, allegedly permit REALTORS® to misrepresent that buyer broker services are free. Although the DOJ is now attempting to withdraw from the proposed settlement, and although NAR vigorously denies the allegations of the DOJ complaint, NAR has moved forward with some of the changes that were outlined in the settlement, including the amendment of Standard of Practice 12-1.

Regarding your second question, when you are discussing with a prospective buyer client how you typically are compensated, you should be careful not say that your commission will be paid by the seller or that the buyer will not be charged for your services, or anything else to the effect that your services are free to the buyer. Rather, you should simply say that if there is a closing, your commission will be paid out of the closing proceeds. That’s quite different from saying that the seller will pay the commission, because although it’s true that commissions are typically paid out of the seller’s proceeds, it’s also true that it’s the buyer who brings the money to the closing table!

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Filed Under: Code of Ethics,