Ethics Q&A

What is your responsibility to disclose relationships? What’s the difference between arbitration and mediation?

Read the full Code of Ethics.

Q My sister is looking for a new home, and I’m acting as her buyer’s agent. Am I required by TREC rules or the Code of Ethics to disclose to the seller that the buyer is my sister?

A TREC rules only require that you disclose your licensee status in writing to a seller when you are acquiring property on your own behalf or on behalf of a business entity in which you are more than a 10% owner (TREC Rule §535.144, "When Acquiring or Disposing of Own Property").

However, Article 4 of the Code of Ethics requires that you disclose to the seller or the seller’s agent your true position when acquiring any ownership interest in property or presenting offers for yourself, any member of your immediate family, members of your firm, or any entities in which you have any ownership interest. Such disclosure is required to be in writing prior to the signing of any contract.

It is probably a good idea to disclose your status and relationship to any principal to the other party to a transaction, even if such a disclosure is not required by TREC or the Code of Ethics. Disclosure can help eliminate complaints or criticism and increase respect for REALTORS®.

Q I’m confused about the difference between mediation and arbitration. Are they the same thing?

A For starters, mediation must be entered into willingly by both parties. Arbitration, on the other hand, may be required in certain circumstances. Article 17 of the Code of Ethics spells out the following: "In the event of contractual disputed or specific non-contractual disputes as defined in Standard of Practice 17-4 between REALTORS® (principals) associated with different firms, arising out of their relationship as REALTORS®, the REALTORS® shall submit the dispute to arbitration ..."

Arbitration is similar to a trial, in that the parties can present evidence and witnesses and can cross examine the other party’s witnesses. Also like a trial, the parties are bound by the outcome, a decision of an award made by a hearing panel.

Mediation is more like a negotiation between parties to try to come to an acceptable resolution. Witnesses and evidence are not required.

A mediation officer, who must be an unbiased third party, works with both sides to find an acceptable solution. The mediation officer has no authority to impose an award or other outcome. Only the parties themselves can agree to a resolution. The mediation officer can, with the parties’ blessing, offer proposed agreements.

Either party may withdraw from the mediation process before an agreement is signed and may choose arbitration; however, once both parties sign a mediation agreement, they cannot later bring up the matter for arbitration.

Mediation often provides a less-antagonistic process to solve disputes that enables the parties to maintain their relationship in the long term.

Send questions about ethics to texasrealtor@texasrealtors.com. Not all questions received can be answered.

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