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Legally speaking: Help! My buyer wants to see a minimum service listing!

By Peg Ritenour, OAR Vice President of Legal Services/Administration

The OAR Legal Assistance Hotline receives an array of real estate-related legal questions — including license law issues, disclosure, contract law, ethics and commission problems, among others. In an effort to help you work within the law, our “Legally Speaking” series spotlights some of the timely questions that are being asked by REALTORS. This one involves situations where a minimum service listing exists…

Q: There is a brokerage who always indicates in her listings in the MLS that buyers agents should contact the seller directly to arrange showings and that any offer to purchase is to be presented directly to the seller. Is that legal for a listing brokerage to do? More importantly will I be violating the license law or Code of Ethics  by dealing directly with the seller to schedule a showing for my buyer or to negotiate with the seller?

A: Business models such as the one you have described are often referred to as “fee-for-service,” “flat-fee,” “minimum service,” or “MLS entry-only brokerages.” Regardless of the label placed on them, these arrangements all involve the situation in which a real estate broker performs fewer services than does a traditional broker, and as a result, the seller usually pays a lower fee.

Under Ohio license law such arrangements are legal as long as certain requirements are met. Foremost among these is that the seller sign a “Waiver of Duties Statement.” This form lists those duties that can be waived, and also specifies that fiduciary duties that cannot be waived. Developed by the Ohio Division of Real Estate and Professional Licensing, this waiver form — like other Division forms — cannot be altered by brokers.

As to the issue of whether you can contact a seller whose property is listed with another brokerage to schedule showings and to deliver offers, many licensees are concerned because of the ethical and license law prohibitions in this area. The key to avoiding violations of either is consent. Under the NAR Code of Ethics, although such contacts with another REALTOR’S client are generally prohibited, they are allowed if you have the consent of the listing broker/agent. Likewise, under Ohio’s license law, a licensee can negotiate directly with a seller whose property is  listed with another brokerage as long as that listing broker/agent authorizes such direct negotiations in writing. Such written consent can be provided in an e-mail, letter, or through the MLS.

So what does “negotiate” mean? The license law defines “negotiations” as doing any of the following:

  • Delivering or communicating an offer, counteroffer or proposal;
  • Discussing or reviewing the terms of any offer, counteroffer or proposal; or
  • Facilitating communication regarding an offer, counteroffer, or proposal and preparing any response as directed.

To avoid license law violations it is crucial that a buyer’s agent knows exactly what type of contact the listing broker is permitting and that the consent be in writing. For example, if the listing agent merely directs buyers agents to contact the seller directly to schedule a showing, that would not be sufficient to allow a buyer’s agent to present an offer or to negotiate directly with the seller. On the other hand, if in the MLS it indicates “contact seller to  negotiate all offers,” the buyer’s agent could contact the seller to do all of those things included under the definition of negotiations. Thus, the key to avoiding a violation when contacting a seller who is represented by another brokerage is to always to make sure you have the necessary written consent and that it specify what type of contact is permitted. If you aren’t clear, always seek clarification from the listing agent.

Click here for more information on minimum service listings.

Tags: legal, Legally Speaking