Accepted O;ers Must Be Disclosed
Question: Do I have to tell buyers’ agents that I have an accepted o;er on a property I’m listing?
Bruce Aydt, ABR, CRB,
is senior vice president
and general counsel of
REALTORS®, in St. Louis
and a former chair of
HAVE A DILEMMA?
Send your ethics questions
Answer: Yes, the Code of Ethics requires disclosure
of accepted o;ers. Standard of Practice 3-6 provides
a well-defined standard on this: “R;;;;;;;® shall
disclose the existence of accepted o;ers, including
o;ers with unresolved contingencies, to any broker
This Standard of Practice was amended several
years ago to add the phrase “including o;ers with
unresolved contingencies.” That makes it clear that,
regardless of the nature of the accepted o;er or type
of contingency—short sale, buyer’s property sale, or
other—the o;er must be disclosed to brokers when
they seek cooperation.
R;;;;;;;® should distinguish this ethical stan-
dard from the rules of their MLS. Local MLS rules
may or may not require the change of a listing’s sta-
tus when an o;er is accepted. It is possible that MLS
rules may not require the disclosure of an accepted
o;er in the MLS, but the ethical requirement of
Standard of Practice 3-6 requiring disclosure still
applies to a listing broker when a cooperating broker
seeks cooperation on the listing.
Brokerage No Part of the Ponzi Scheme
A listing brokerage that received commissions for the
sale of two apartment buildings in 2007, after learning the
company buying the properties was being operated as a
Ponzi scheme, was entitled to keep its commissions, the
U.S. District Court for the District of Utah, Central District,
ruled. In a Ponzi scheme, investors in a company are
paid dividends not by investment earnings but by money
obtained through new investors.
McConkie v. Rice Properties
U.S. District Court for the District of Utah, Central District
The brokerage argued, and the Court agreed, that the
commissions for the two transactions didn’t represent a
fraudulent conveyance because the money didn’t come
from the buyer; it came from the seller. As a result, the
brokerage was a “subsequent transferee” and not a direct
recipient of the money.
In agreeing, the court said the brokerage served as the
listing broker for the sellers of both properties and was paid
from the seller’s sales proceeds. Even though the commission payment happened during the course of the closing,
the sellers had obtained legal control of the sales proceeds
during the closing and the escrow agent was following the
seller’s instructions when it made the payments to the brokerage. Thus, the brokerage was a subsequent transferee,
not a recipient of the funds from the buyer, so the commissions were o; limits to the receiver. W
The U.S. Securities and Exchange Commission in 2008
charged the company and its o;cers with fraud and appointed a receiver to take control of the company’s assets.
As part of those duties, the receiver filed a lawsuit against
the brokerage to recover its commissions from the sale
of the two properties. The receiver claimed that, because
salespeople at the brokerage learned of the deceitful activities of the company before the transactions had closed, the
commissions constituted “fraudulent conveyances.”
Editor’s Note: Through its Legal Action Committee, NAR
provided financial support to the brokerage in its e;ort to
retain its commissions.