This ongoing series explores the NAR Code of Ethics through various case interpretations. Please read through the following case and try to decide if there was any Code of Ethics violations. Then click the box at the bottom to find out the answer. (These cases have been provided by the National Association of REALTORS®.)


Code of Ethics Case Interpretation – Article 6: Advertising R​eal Estate-Related Products and Services

Realtor® X, a principal broker in the firm XY&Z, developed a robust, interactive website that he used both to publicize his and to serve the firm’s clients and customers electronically. REALTOR® X maintained positive business relationships with providers of real estate-related products and services including financial institutions, title insurance companies, home inspectors, mortgage brokers, insurance agencies, appraisers, exterminators, decorators, landscapers, moving companies, and others. Given the volume of business REALTOR® X’s firm handled, several of these companies purchased banner advertisements on the XY&Z website and some, including the Third National Bank, included links in their banner ads to their own websites.

Buyer B, who had earlier entered into an exclusive buyer representation agreement with XY&Z, received frequent e-mail reports from REALTOR® X about new properties coming onto the market. Hoping to purchase a home in the near future, he explored Realtor® X’s website to learn more about the home buying process and familiarize himself with the real estate-related products and services advertised there. Understanding that pre-qualifying for a mortgage would ensure he presented the strongest offer, Buyer B went to REALTOR® X’s website and clicked on the Third National Bank’s link. Once at the bank’s website, he found a mortgage to his liking, completed the on-line application process, and learned in a matter of days that he was qualified for a mortgage loan.

In the meantime, Buyer B’s property search proved fruitful. REALTOR® X and Buyer B visited a new listing on Hickory Street several times. Buyer B decided it met his needs and made an offer which was accepted by the seller.

A few weeks after the closing, Buyer B hosted a housewarming attended by his friend D, a website designer who had, coincidentally, been instrumental in developing REALTOR® X’s website. Buyer B told D how helpful the information from REALTOR® X’s website had been. “You know, don’t you, that each time a visitor to REALTOR® X’s website clicks on some of those links, REALTOR® X is paid a fee?”, asked D. “I didn’t know that,” said Buyer B, “I thought the links were to products and services REALTOR® X was recommending.”

Buyer B filed an ethics complaint against REALTOR® X alleging a violation of Article 6 for having recommended real estate products and services without disclosing the financial benefit or fee that REALTOR® X would receive for making the recommendation. At the hearing, REALTOR® X defended himself and his website, indicating that the advertisements for real estate-related products and services on his website were simply that, advertisements, and not recommendations or endorsements. He acknowledged that he collected a fee each time a visitor to his website clicked on certain links, regardless of whether the visitor chose to do business with the “linked to” entity or not. “In some instances I do recommend products and services to clients and to customers. In some instances I receive a financial benefit; in others I don’t. But in any instance where I recommend a real estate-related product or service, I go out of my way to make it absolutely clear I am making a recommendation, and I spell out the basis for my recommendation. I also disclose, as required by the Code, the financial benefit or fee that I might receive. Those banner advertisements on my website are simply that, advertisements.”

What do you think the Hearing Panel decided? Click here to find out.

The hearing panel agreed with REALTOR® X’s rationale, concluding that the mere presence of real estate-related advertisements on REALTOR® X’s website did not constitute a “recommendation” or “endorsement” of those products or services, and that the “click through” fee that REALTOR® X earned when visitors to his website linked to certain advertisers’ sites was not the type of financial benefit or fee that must be disclosed under Article 6.

See more case interpretations here

Blanca Lopez has joined SCCAOR as our new Membership Coordinator. Working alongside our membership services team, Blanca will help new REALTORS® and Affiliates join SCCAOR and assist current members with everything relating to their Association membership.

“I am happy to start my career with SCCAOR and I look forward to providing the best customer service to our members,” said Lopez. “I want them to have a great experience and be happy to be a part of this Association.”

Before joining SCCAOR, Blanca was a project coordinator for a company that provided interpretation services to doctors and attorneys.

“Blanca is a great addition to our Membership team,” said Tracey Lee, Membership Services Manager. “Her background in customer service will be a great benefit to our organization.”

In her free time, Blanca enjoys jogging, watching sports, and listening to music.

“I love to listen to 80’s music and techno,” she said.


 If you ever have any questions, you can reach our Membership Services team by phone (408-445-8500), email (membership@sccaor.com), and also via live chat on our website.

This ongoing series explores the NAR Code of Ethics through various case interpretations. Please read through the following case and try to decide if there was any Code of Ethics violations. Then click the box at the bottom to find out the answer. (These cases have been provided by the National Association of REALTORS®.)


Code of Ethics Case Interpretation – Article 3: REALTOR®’s Obligation to Disclose Dual Commission Arrangements

REALTORS® A and B were members of the same Association and Participants in the MLS. REALTOR® A, cooperating with REALTOR® B on REALTOR® B’s listing, submitted an offer to purchase signed by buyers offering the listed price, and a check for earnest money. The only contingency was a financing contingency, and REALTOR® A shared with REALTOR® B the buyers’ loan prequalification letter. The following day, REALTOR® B emailed the offer back to REALTOR® A with “REJECTED” written on it and initialed by the seller, and explained that the seller had accepted another offer secured by one of REALTOR® B’s sales associates. REALTOR® A inquired about the seller’s reason for rejecting the full price offer with only a mortgage contingency, and what had caused the seller to accept the other offer. REALTOR® B responded that he did not know, but with equal offers, he supposed the seller would favor the offer secured by the listing broker.

Later, REALTOR® A saw the seller at a dinner party. The seller thanked him for his efforts in connection with the recent sale of the seller’s home. The seller hoped REALTOR® A understood there was nothing personal in his decision, adding that the money he saved through his “special agreement” with REALTOR® B had been the deciding factor. When REALTOR® A asked about the “special agreement,” the seller explained he had signed a listing agreement for the sale of his property which authorized the submission of the listing to the Multiple Listing Service and specified a certain amount of compensation. However, the seller stated that he had also signed an addendum to the listing agreement specifying that if REALTOR® B sold the listing through his own office, a percentage of the agreed compensation would be discounted to the seller’s credit, resulting in a lower commission payable by the seller.

REALTOR® A filed a complaint with the Association of REALTORS® against REALTOR® B, alleging a violation of Article 3. After its review of the complaint, the Grievance Committee requested that an ethics hearing be arranged.

REALTOR® A, in restating his complaint to the Hearing Panel, said that REALTOR® B’s failure to disclose the actual terms and conditions of the compensation offered through the MLS resulted in concealment and misrepresentation of pertinent facts to REALTOR® A and to the prospective buyers served by REALTOR® A who had, in good faith, offered to purchase the property at the listed price with only a mortgage contingency. REALTOR® A told the Hearing Panel that if he had known the facts which were not disclosed by REALTOR® B, he could have fully and accurately informed the buyers who could have taken those facts into consideration when making their offer. As it was, said REALTOR® A, the buyers acting in good faith were deceived by facts unknown to them because they were unknown to REALTOR® A. Further, REALTOR® A said that REALTOR® B’s failure to fully disclose the true terms and conditions relating to compensation made it impossible to have a responsible relationship with REALTOR® B and make proper value judgments as to accepting the offer of compensation.

REALTOR® B stated that it was his business what he charged and the Association or MLS could not regulate his charges for his services. If he wished to establish a dual commission charge by agreement with his client, that was his right, and there was no need or right of the Association or MLS to interfere.

What do you think the Hearing Panel decided? Click here to find out.

The Hearing Panel agreed that it was REALTOR® B’s right to establish his fees and charges as he saw fit, and that the Association or MLS could not and would not interfere. However, the Hearing Panel noted that his complete freedom to establish charges for his services did not relieve him of his obligation to fully disclose the real terms and conditions of the compensation offered to the other Participants of the Multiple Listing Service, and did not justify his failure to disclose the dual commission arrangement. In the case of a dual commission arrangement, the listing broker must disclose not only the existence of the “special arrangement” but also must disclose, in response to an inquiry from a potential cooperating broker, the differential that would result in the total commission in a cooperative transaction. The Hearing Panel concluded that by submitting a listing to the MLS indicating that he was offering a certain amount of compensation to cooperating brokers while other relevant terms and conditions were not disclosed to the other MLS Participants, he had concealed and misrepresented real facts and was in violation of Article 3 of the Code of Ethics.

See more case interpretations here

After conducting extensive in-person interviews with potential candidates for the Santa Clara County Association of REALTORS® Board of Director and Officer positions, our Nominating Committee has made their choices for 2020 President-Elect, Vice President, and Secretary-Treasurer. These candidates will join President Sandy Jamison, who will automatically become President after having served as President-Elect in 2019 (This cycle will continue next year as the 2020 President-Elect will automatically become President in 2021).

2020 SCCAOR Officers:

 

The Nominating Committee also chose the following 2020 Director Candidates:

Jen Beehler
Elizabeth Monley
John Scaglione
Will Chea
Gustavo Gonzalez*
Derek Essary – 2020 SCRA Representative**


* Per SCCAOR policy, the immediate Past President is given a three-year term.


**Per SCCAOR Bylaws, one director shall be designated by the South County REALTORS® Alliance to serve a one-year term from January 1,
2020 through December 31, 2020.

Petition: Candidates for officers or directors, other than those candidates selected by the Nominating Committee, may be nominated by written petition on a form from SCCAOR. You may pick up the petition form at SCCAOR. The petition must be signed by 150 or more REALTOR® members in good standing and be delivered to the Chief Executive Officer at SCCAOR not later than noon on July 22, 2019 (as prescribed in the SCCAOR Bylaws Article 10, Section 5). If you have any questions, please contact Alma Moreno or Neil Collins at (408) 445-8500.


Timeline of Election of Board of Directors

July 22 – Deadline to petition to be on the ballot.
July 24 – Record Date (Voting members must have their current e-mail address on file at SCCAOR prior to this date. Contact Member Services or go online to ensure your e-mail address is current.)
August 1 – Online voting begins at 8:00 a.m. (E-ballot sent via e-mail to all eligible members.)
August 23 – Online polls close at 5:00 p.m.
August 27 – Election results reported to Board of Directors.


Special Thanks to the SCCAOR Nominating Committee

Rick Smith, Chairperson (Past President 2017)
Kevin Cole, Vice-Chairperson (Past President 2018)
Trisha Motter, (Past President 2016)
Craig Gorman, (Past President 2015)
Myron Von Raesfeld, (Past President 2014)
Carl San Miguel, (Past President 2013)
Barbara Lymberis, (Past President 2012)
Jim Myrick, (Past President 2005)
Steve Hanleigh, (Past President 2002)
Karen Nelsen, (SCRA President 2019)
Tam Quach, SCCAOR Board of Director
Don Jessup, 2019 Foundation Chair & SCCAOR Board of Director
Kelly Hunt, SCCAOR Member
Anne Hansen, SCCAOR Member

By Joshua J. Borger
Partner, Gates Eisenhart Dawson

California real estate transactions are constantly the subject of hacking scams (i.e., wire fraud) due to our real estate prices. The inevitable purpose is to divert funds intended for escrow into a fake bank account. This article provides tips by a litigation attorney for agents and brokers to avoid liability for cybertheft.

In June 2016, the California Association of Realtors issued a new form entitled, “Wire Fraud Advisory” due to the drastic increase in wire transfer fraud targeting real estate transactions. Yet, as a fiduciary, a well-meaning agent or broker may be inclined to help their client close escrow by facilitating the transfer of the down payment. For example, the broker may confirm that wire instructions from escrow are correct. However, an inevitable problem arises when the instructions that the broker confirm are, in fact, the fake instructions.

A strikingly similar situation arose recently in a federal district court case in Kansas. In Bain v. Platinum Realty, LLC, the buyers sought to purchase a house. The buyers had their bank wire the purchase funds to a bank account that they thought was the sellers’ account. Unfortunately, it was actually some unknown criminal’s account who unlawfully entered the transaction by using fake email accounts that appeared to be similar to accounts used in the transaction. The buyers wired the money based on wiring instructions that were attached to an email account purportedly from the seller’s broker’s account. Having lost their money, the buyers sued the seller’s real estate agent and her employer claiming that an unknown criminal hacker intercepted an email from the title company to the real estate agent that contained the actual wiring instructions, altered the instructions to redirect the funds, created an email address similar to the title company, and sent the new fake wiring instructions to the agent, who then forwarded them to one of the buyers.

In an attempt to prevail shy of trial, the agent argued based on a California case that negligent misrepresentation—that is, a representation made without a reasonable basis for believing it to be true–requires a “positive assertion,” not an implied assertion. As argued, the agent forwarding an email was not sufficient. The court denied the motion, holding that Kansas law differed from California law.

The district court conducted a jury trial based on one of the buyer’s claims for negligent misrepresentation against the broker and her employer. The jury found against the broker and the employer.

Would it really have turned out differently under California law?  It is true that in California a negligent misrepresentation requires an affirmative statement. However, agents and brokers are fiduciaries to their clients. As fiduciaries, their clients are entitled to rely upon the information given to them. Thus, the agent or broker who—albeit inadvertently—forwards the fake email to their client without confirming it breaches the fiduciary duty to use reasonable care.

At the same time, the agent/broker would have nullified the warnings in the “Wire Fraud Advisory.” It is unlikely that a court would allow a broker to avoid liability for its own actions based on a prior advisory. Such a holding would contradict the right of the client to rely upon his fiduciary’s representations.

On the other hand, a broker does not owe a fiduciary duty to anyone but his client. Yet, he may be liable to someone other than his client if he represents that the fake email is valid without reasonable grounds for doing so. But, the broker likely would not be liable for negligent misrepresentation for merely serving as a conduit for the hackers (i.e., forwarding the email without confirming that it’s valid) because negligent misrepresentation has to be based on an affirmative statement; it cannot be implied.

The lesson from the Bain case is for agents and brokers to require that the clients work directly with escrow. Although you are well intentioned, do not serve as an intermediary. Otherwise, you may be doing more harm than good to both you and your client.


Interested in learning more? Come to Joshua’s class at SCCAOR on June 18th. He will be teaching “Duties and Liabilities of Brokers and Agents to the Client: 101”. Click here for more information.

Thank you to all our members who came out to our second General Membership Meeting of the year. We were welcomed by our 2019 President, Gustavo Gonzalez, who welcomed the packed crowd and shared some SCCAOR updates. We then heard from Otto Catrina, candidate for C.A.R. President-Elect 2021.

This meeting also featured a fantastic panel that discussed Accessory Dwelling Units (ADUs) aka “Granny Units”. A huge thank you to our panelists: Bob Wieckowski (CA District 10 Senator), Pam Foley (San Jose Councilmember), Rosalynn Hughey (Director of Planning, Building and Code Enforcement for San Jose), and Steve Vallejos (President of prefabADU). The panel was moderated by Chrissy Garavaglia (SCCAOR Government Affairs Director).

SCCAOR then recognized Membership Milestones for our long-standing members. Congratulations to everyone who hit a milestone!

We concluded the meeting with a local government affairs update from Chrissy Garavaglia, a C.A.R. update from Rick Smith, an NAR update from Mike Sibilia, and an MLSListings update from Karl Lee. You can see all the photos from this meeting on our Facebook page.

You can watch an archive of the Facebook Live video here:

This was the first SCCAOR General Membership meeting that featured interactive live polling. We asked the audience two questions after the panel on Accessory Dwelling Units, and they were able to cast their vote with their smartphone. The results of each question were then displayed live on the TVs in the room. Here are the results from each question: