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Ethics Q&A
Can a buyer make multiple offers? Does a broker have the right to charge my client a transaction fee?
Read the full Code of Ethics updated for 2003.
Q My buyer wants to make offers on two properties at the same time. He plans to pay $100 for the option fee for each property. All he stands to lose is $100 on whichever property he doesn’t pursue. Is this ethical?
A Nothing prohibits a buyer from making more than one offer on two or more properties. The buyer is paying due consideration in both transactions for the right to terminate either or both contracts. The amount of the option fee is negotiable. A seller should seek an option fee that sufficiently compensates the seller in light of the buyer’s potential termination within the option period.
Of course, as the buyer’s broker, you remain obligated to be honest in your dealings with all parties. If a seller or seller’s agent were to ask you if the buyer is obligated or intends to make more than one offer on more than one property, you would be obligated to respond honestly, or, if your client does not wish for you to respond, to state that you are not at liberty to respond to the question.
Q While reviewing the HUD-1 closing statement with my client, we discovered a fee charged to my client by the broker representing the other party. This fee was described as a "transaction fee," and the other broker said they charge this fee to both sides of the transaction in every case. My client did not authorize this fee in the contract or in any other manner, and our office handled all of the brokerage and other services for my client. My client refuses to pay this transaction fee. Did the other broker violate TREC or ethics rules by charging this fee without my client’s authorization?
A It is a violation of the Real Estate License Act for a broker to receive compensation from more than one party to a transaction, except with the full knowledge and consent of all parties (Section 15(a)(6)(D)). If the broker does not receive this fee because your client refuses to pay it, then the broker might not be found to have violated Section 15(a)(6)(D). However, TREC might find that the broker in this case acted in bad faith in violation of Section 15(a)(6)(V) by instructing the closing agent to charge this fee to your client knowing that he did not have the consent of your client to charge that fee.
Article 7 of the Code of Ethics is not quite as restrictive in its terms. Article 7 prohibits a REALTOR® from accepting compensation from more than one party to a transaction without disclosure to all parties and the informed consent of the REALTOR®’s client. While the conduct described in this case might not be a violation of Article 7, it might constitute a violation of Article 1, which requires that REALTORS® treat all parties honestly. The other broker might be found to have not treated your client honestly by charging a fee not authorized by your client in the contract or in any other manner knowing that receiving such compensation without your client’s consent would violate Section 15(a)(6)(D).
Send questions about ethics to texasrealtor@texasrealtors.com. Not all questions received can be answered.
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