One of our long time investors gave me the address of a property that he was interested in purchasing. At the time, the property was not being marketed for sale throughout the brokerage community, was not listed on any of the listing services (The MLS or Loopnet) and there was not a For Sale Sign on the site. When I contacted the owner of the property she was surprised that I contacted her directly because she did in fact have her building listed for sale and wondered why I was not contacting the company that was representing her. I received the name and phone number of her agent and was informed by him that he would prefer to work with principal buyers only and would later cooperate with outside brokers if he was unable to sell the property himself directly to a principal buyer. The commission rate was 5% and the seller of the property was under the impression that this property was listed on the Multiple Listing Service.

As real estate professionals, we have a code of ethics (not to mention decency) and a fiduciary obligation to work in the best interest of our customers, both buyers and sellers, which also includes cooperating brokers. The integrity in which we deal with anyone inquiring about the property is often a direct reflection of the principal buyers and sellers that we represent.

When a broker has a written contract to sell a building, it should include the type of listing that it is, the term of the listing period and the price and terms of a sale. This contact must include reference to the Multiple Listing Service (MLS) if the broker is a member of the listing service and unless the seller designates in writing that the property should not be listing on the MLS. The broker is required to list this property within 48 hours of an executed listing excluding weekends. The listing agreement will also have the amount of compensation usually referenced as a percent of the sale or can be a specified dollar amount. The agreement will also authorize the cooperation of other brokers.

It is highly unusual for a seller to not want the property listed on the listing services. Not only do the listing services increase the volume of exposure to other brokers and their buyers, but it is also listed on the internet. Exposure to the entire marketplace is the most effective way to achieve the best selling price and terms. When a seller is paying a percentage to sell the property, the seller is usually not concerned that the entire percentage is only paid to the listing broker. This is about the economics to the broker not about the broker’s fiduciary obligation to the seller.

In our industry, it is very common to have what is referred to as a “pocket listing.” This is not a signed “Exclusive Right to Sell” contract but an oral understanding between a seller and a broker that the seller may “consider” a sale at a specific price and terms. When this is the case, it is customary for brokers to only tell their own exclusive buyers is particular property. The broker will not be in a position nor is he under any fiduciary obligation to list this property on the Multiple Listing Services and will be very selective in marketing to principal buyers only. Throughout my career, I have worked on many “pocket listings” with sellers who for one reason or another did not choose to list the property. I have sold pocket listings directly to buyers whom I have also represented and I have also cooperated with outside brokers on pocket listings because I have long term trusted relationships with these brokers. On one pocket listing, my seller was reluctant to list because of family dynamics that I was sensitive to. We went under contract with a buyer at the acceptable price and terms. Just before we were about to open escrow this buyer was contacted by another broker who informed him that this building could be bought for less money. Naturally, he cancelled this contract and attempted to buy the property through this other broker only to find that the seller was not going to accept less. The same broker then attempted to list this property with the seller for even more money than the seller originally contracted for.

Needless to say, the seller steered clear of this broker and was not interested in working with the buyer when he came back to buy the property again at the previously agreed upon price and terms. The good news is that the seller retained the property, only experienced the loss of time and our relationship with the seller remained intact. The bad news is that this happens all too often and it gives a bad name to our industry when we do not honor our fiduciary obligations: operate with poor ethics, low integrity, dishonesty, and lack of values.

When listing your property, get to know the company that is representing you. Talk with former buyers and sellers. Ask around the industry itself. Check with the local Board of Realtors and the Chamber Of Commerce. Pay attention to the broker’s track record and the respect from colleagues in the industry. Make sure that your property is going to be listed with the Multiple Listing Services (unless for some reason you don’t want it to.) Verify that outside brokerage cooperation will be welcomed immediately. The world is continuing to move very fast with the speed of technology constantly changing the way that we do business. In our continual haste to move forward, let’s not pass over good values, honesty and integrity. This code of ethics should not become a thing of the past.