Expert: Todd C. Menard - 2/16/2009

Question
Sir,
I need to ask a ethic question. A realestate agent used a new loan officer to complete a sale on one of his listings.
Then once the loan officer started the paper work she told the buyer that her dad is a realestate agent and that he should use him to help complete the loan. This caused the original agent to loose 1/2 the comission to this uninvolved agent( loan officers DAD!) This seems very wrong and possiblly criminal. She may also be recieving part of the money from her dad.
What rules or laws have been broken in this case?
please help.
This loan officer is not going to recieve any more work from this office, however we would like to know what actions take against her and her dad...
Thank you very much,
Greg Misamore  

Answer
Hello Greg - I apologize for the delay in my reply. This is a great question! It raises a number of issues... but let me answer the question, then I will discuss the other details. ***** You said "This caused the original agent to loose 1/2 the comission to this uninvolved agent". WHO gets paid is irrelevant to the number of agents involved or WHO represented the buyer. The agent who "should be" paid, according to The NAR Code of Ethics and Arbitration Manual "COEAM" (available to REALTORS online), will be settled by determining who is the "procuring cause". This is defined by Black's Law Dictionary, Fifth Edition as "The proximate cause; the cause originating a series of events which, without break in their continuity, result in the accomplishment of the prime object. The inducing cause; the direct or proximate cause. Substantially synonymous with "efficient cause." Therfore, if the buyer had already decided to purchase the property as a result of discussions with the listing agent, the listing agent would probably be the procuring cause therefore entitled to a full compensation. The listing agent's Broker/DR should investigate procuring cause with the local real estate association's Professional Standards Administrator and file an Arbitration Complaint. According to the NAR COEAM, if the other broker is also an NAR member, this Arbitration would be mandatory! Anyone who refers clients/customers/prospects to affiliated services should proactively protect themselves from this situation by establishing and agreeing to a mutual covenant. This covenant might establish a cross-polination of referrals and the further establishing any business referrals in either direction shall be protected from beign referred to another provider of the same service. ******** Many people misuse the terms immoral, unethicical, against the law, fraud, criminal, etc, and what actions constitute a violation of one of these 'categories'. Something is imorral when determine it violates our personal and individual sense of right and wrong, good and bad; it is unethical (in real estate) if it violates one of the Articles of the NAR Code of Ethics; against the law, fradulent or criminal if it violates the state's statutes (laws); So we all need to be certain what it violates before we represent the action as having violated one of these categories. I state this for the benefit of all readers of this post as a precursor to my comments. ******* You asked "What rules or laws have been broken in this case"? Real estate agents and loan officers are governed by different regulatory laws, rules and regulations. Food for thought... "would it make a difference if the referral was at the request of the borrower(buyer)? Your statement that "She may also be recieving part of the money from her dad"... In Arizona, state law prevents a real estate agent from paying a 'referral' fee to anyone who is unlicensed. ******* Finally you asked "what actions (can be taken)against her and her dad"? If her Dad is a member of the National Association of REALTORS Article 16 of the Code of Ethics prevents another NAR REALTOR Member from interfering with the exclusive representation fo another member. In this situation this does not apply since the listing agent is already subject to an exclusive relationship with the seller, therefore representing only the seller. The buyer would be considered a "prospect" and not subject to any service agreeement, therefore not obligated to work with the listing agent. Of couse, if the buyer elected to be represented by another agent, the 'new' agent would have to investigate the situation and exlain to the buyer that in the event the listing broker is not offering compensation, the buyer would be obligated to compensate the buyer's representative. Therefore, the listing agent is still entitled to a full compensation... providing hte listing agent was determined to be procuring cause. *********** I hope this has helped to explain the situation as you indicated. Please feel free to reply if you have additional questions. - Todd C. Menard.