When Ethics Come Into Question
“We start out wanting to do good and wind up wanting to do well” – Michael Josephson.
Real estate is a complex business at its best. Meeting and cultivating prospective clients takes time, creativity, patience and stamina. Showing properties to prospective buyers or attracting prospective buyers to listed properties takes research, persistence and a LOT of energy. Overcoming objections to making an offer or negotiating an offer could try the patience of any of us. All this for a commission, IF the deal gets to the closing table.
The temptation to “help” this process along by either embellishing information (“This property will appreciate greatly within the next couple of years; there’s a big box store going in on the next corner.”) or withholding information (“No, the roof doesn’t leak; that’s just where someone spilled a lot of water.”) can be great. So great, in fact, that both the Georgia Real Estate Commission and the National Association of Realtors® Code of Ethics are founded upon “protecting the public”.
Consider this scenario:
Agent Gretta Greedy lists an income producing commercial property for sale. Gretta is well-known within the community of owners of similar properties and has a good understanding of the ins and outs of this particular type of income-producing property.
Prospective buyers for the property, Mr. and Mrs. New-intown, contact Gretta and sign an Exclusive Buyer Brokerage Agreement with Gretta for a multi-year period. Gretta immediately takes the New-intowns to her listing and, of course, the New-intowns like it and want to make an offer.
Gretta Greedy draws up the offer on the 21st of the month, checking in the Agency paragraph that the Listing Broker “IS” representing the Seller and the Selling Broker “IS” representing the Buyer. However, Gretta does not check the “Dual Agency” box and only signs on the signature page as the Listing Broker. The Selling Broker portion of the signature page is left completely blank. The New-intowns sign the offer and give Gretta a sizable earnest money check. Gretta assures the New-intowns that they will soon be the owners of the property.
For reasons unknown to this blog writer, Gretta Greedy decides that SHE is now interested in buying the same property for herself and submits an offer on her own behalf to the seller on the 25th of the month. The seller accepts Gretta Greedy’s offer.
Imagine the New-intowns reaction when they’re informed by Gretta that “there is another offer” and that the seller has accepted that other offer. Gretta decides that it’s best not to tell the New-intowns that she IS the other buyer.
The New-intowns are so distressed that they contact Gretta’s broker; after all, Gretta had TOLD them they would get the property. Gretta’s broker directly asks Gretta about the second offer and Gretta denies any inappropriate behavior, but the contract between Gretta and the Seller is terminated the next day, during the Due Diligence Period. The seller then accepts the New-intown’s offer and Gretta brings the New-intowns the good news. Closing takes place uneventfully and the New-intowns take possession of and enjoy their new property.
A year later, Mrs. New-intown’s brother, Ned Newlywed, wishes to purchase a similar income-producing property. Should he work with Gretta Greedy? What would you do?
By Ann Bone