crossroads

An Ethical Dilemma

We’ll call the seller “Mike”. Mike was selling a home that he had renovated and immediately got several showings. One of the selling agents, we’ll call her “Cheryl” brought “Bob” through the house and he loved it. The next thing Mike new. He was fielding offers.

The offers were good, but they weren’t at his asking price. One of the offers was close enough that he planned to accept it. Before he did, however, his phone rang. It was Bob. Bob indicated that he could save Mike the real estate commission by Bob jettisoning Cheryl so that Mike didn’t have to pay Cheryl’s commission…or that of his listing agent. The net, Bob explained, would be higher to Mike than his other offers.

Mike was tempted to accept Bob’s offer, but in the end, he decided to go with the next highest offer. Why might you ask? Well, there were several reasons.

In real estate agent speak, Cheryl was the “procuring cause” of the transaction with Bob. Cheryl made Bob aware of Mike’s listing and arranged for Bob to see the home. Mike had entered into a contractual relationship with his listing agent to list the property on the MLS. Mike’s agent had professional pictures taken of the home, had listed the property and arranged for the property’s listing to be sent to hundreds of real estate agents for their clients’ consideration. Part of that listing agreement included a commission to the listing agent regardless of who purchased the home. That is standard language in a listing agreement. It also states in the agreement that the listing agent will split commissions with any selling agent that was procuring cause for a buyer to purchase the property…in this case Cheryl. Once the real estate transaction was consummated, both agents would be due their commissions. They could, and probably would, come after Mike for commissions plus legal fees and costs.

The other reason that Mike didn’t accept Bob’s underhanded offer is simple. If Bob was this slimy in negotiating the contract, would Bob not be inclined to be underhanded in other parts of the transaction? Bob has already proven to be ethically challenged. He’s very likely to let his lack of ethics show its ugly head again.

Yet another reason that Mike didn’t accept the offer was his relationship with his real estate agent. His agent has been a valuable part of Mike’s real estate investment team. The agent has provided him with valuations whenever he has needed it. They have assisted with advice on his renovations and they’ve been there for Mike every time he has needed them. Pushing his agent in front of a bus would be a sure way to lose a very valuable team member and it would give other great team members pause to whether or not Mike could be trusted in the future.

This story repeats itself time and time again. Although the story is fictitious, we’ve seen this exact story play out numerous times. My grandfather used to say “you can’t get a little bit pregnant…either you are or you aren’t.” Your words mean nothing. Your actions mean everything. If you allow your ethics to be compromised, people will forever question whether or not you have them.