State law controls how agency relationships are formed, the duties and responsibilities imposed, how long the agency relationship lasts and how it is terminated. In Oregon, the agency duties imposed on real estate licensees are found in statute. These statutes are set out and explained in the Statutory Provisions Involved section of this subject. State statutes are fleshed out and implemented by administrative rules. These rules, promulgated by the Oregon Real Estate Agency, are explained in the Administrative Rules Affecting Agency section.
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What is this topic about?

Working with clients is about the relationships that exist between real estate licensees and their customers and clients and the legal duties those relationships create. In Oregon, these relationships are subject to a complicated system of statutory and regulatory control as well judge-man common law. Whether listing property, showing property or just working with a customer, real estate licensees must keep this complicated and, at times, confusing area of the law in mind.

This topic begins with an overview of real estate license laws that control agency relationships. In the Understanding Real Estate License Laws section of this topic you will find copies of all of the Statutes and Administrative Rules that apply to agency relationships in Oregon, along with a brief explanation of each statute and rule. The Law of Agencysection contains a detailed overview of the subject of agency, including Creating and Terminating agency relationships.

You will also find in this topic a discussion of the Scope of Agency Relationships. Key to understanding agency isUnderstanding Agency Duties, including Common Law Duties and Statutory Duties. No examination of agency relationships and laws in Oregon would be complete without Understanding Agency Disclosure including Initial Agency Disclosure, Final Agency Acknowledgement and Disclosed Limited Agency.

Working with clients in today’s real estate market means Dealing with FSBOs and MLS Only or Limited Service Listings, including the Potential Problems that arise and their Solutions. Finally, no discussion of working with clients would be complete without Understanding Commissions. That means Understanding Procuring Cause. Understanding procuring cause includes not only the Legal Definition of Procuring Causes, but Applying Procuring Cause to Real Estate. You can also find a discussion of Commission Sharing and Commissions and Antitrust in this section of the Toolkit.

Sharing commissions is a peculiarly REALTOR® thing. It is also one of the oldest practices in real estate. Real estate commissions have historically been paid only by sellers. Although other methods of payment exist in the industry today, commissions paid only by sellers continue to dominate. The seller pays tradition, and its continuance, are a consequence of a “sales” based approach to real estate services. If the industry continues to be more about client services than about sales, in the future you can expect tremendous changes in commissions and how they are shared.

Commissions are a transaction cost. No different than marketing costs, or taxes, repairs, insurance or any other transaction cost. Such costs are normally paid by the seller of goods. They are, of course, to the extent the market will bear, included in the price paid by the buyer. It is, therefore, no simple matter to allocate commission costs between buyer and seller in a transaction. About all that can be said is that the cost is assessed to the seller who will, to the extent possible, try to recapture those costs from the buyer.

This background understanding of commissions is critical to understanding commission sharing. Sellers hire brokers to market the property, find a buyer and help close the deal. How much a seller is willing to pay a broker for those services, all things being equal, depends on the market for such services. Supply, in the form of number of brokers providing services, and demand, in the form of sellers seeking service, will set the commission rate. It will not, however, determine the structure of the real estate service market.

The structure of the real estate service market will tend, like all markets, to be driven by efficiency. Efficiency is a way to lower costs and thus capture market share. As in any business, there are economies of scale. Sure, every market will have its niches where special abilities or circumstances create opportunities for small operators but, generally, size matters in markets.

Real estate has, until very recently, been a “mom and pop” or “cottage” industry. “Mom and pop” industries are made up of many small operators. Small operators lose potential business simply because they do not have the resources or personnel to provide the services necessary to capture or sustain a larger market share. If you apply these economic ideas to the real estate industry, you will see that commission sharing is simply a mutual help program intended to increase total volume in a particular market.

Brokers offer to share the commission they earn from the seller with other brokers because they believe that at the end of the day they will make more money by sharing commissions than they would make if they serviced every potential client or customer themselves. Suppose, by way of example, an individual broker-owner can close twenty transactions a year by working alone. In the parlance of the industry, that is forty “sides.” If the market is such that by sharing half his commission the broker can get more than forty sides a year, then that broker will cooperate and share commissions. Modern franchise companies, who run “in-house” numbers well above fifty percent, are beginning to reassess commission sharing.

In the past, the “mom and pop” structure of the real estate services market was such that commission sharing was of huge economic benefit to almost every real estate service provider. The only problem with this kind of economic “bootstrapping” is the transaction costs associated with creating cooperation among many small brokers. Those costs include the cost of sharing the information necessary to make cooperation possible and the cost associated with negotiating commission sharing agreements repeatedly among many different parties.

Cooperation transaction costs are managed in the real estate industry by creating multiple listing services (MLS). An MLS is nothing more than a vehicle to make possible cooperation and commission sharing among competing brokers. The fees paid by brokers to multiple listing services are a measure of the actual cost of cooperation. As long as the cost of MLS services does not exceed the total benefit the broker gains from cooperation MLS services will remain central to the practice of real estate. Cooperation and commission sharing will last exactly as long as it continues to be true that the majority of real estate service market participants make more money sharing commissions than would not sharing commissions.

Many of the difficult issues in the real estate industry today revolve around the economics that have structured the existing market in real estate services. The rise of large franchise offices and the reduction of transaction costs made possible by modern communication and computer technology are putting tremendous pressure on the existing structure. It is hardly surprising that at the center of these pressures is the MLS. Every change in MLS operations and rules reflects real changes in the real estate services market. A wise participant in the market will consider these changes in the context of the basic economics of commission sharing.

Commissions based on a percentage of the purchase price of the property sold have always been the most common form of compensation in the real estate industry. Although fee-for-service and even wage programs exist in the industry today, commissions continue to dominate. This topic is about how commissions are earned, shared, disputed, used and misused in real estate.

Central to any discussion of commissions has to be a discussion of “procuring cause.” Accordingly, Understanding Procuring Cause is the first subject in this topic. The subject includes sections explaining the Legal Definition of Procuring Cause as well as Applying Procuring Cause to Real Estate. If procuring cause has to be the first subject in any discussion of commission, Sharing Commissions has to be second. Finally, no discussion of commissions would be complete without some mention of Commissions and Antitrust.

Modern real estate practice can bring agents working for buyers into direct contact with sellers who are not represented or are not represented for the purpose of negotiating and closing a transaction. Typically, such cases arise when an agent is working with a buyer who is interested in a property that is being offered for sale by the owner (FSBO). To represent their buyer client, the agent must deal directly with the unrepresented owner.

A similar situation can arise in cases where the property of interest to the buyer is listed in the MLS but the listing broker and the seller have agreed to limit the services the listing broker will provide. Some listings may involve what are called “MLS Only” listings where the only service provided by the listing broker is placing the property in the MLS. In other situations, called “Limited Service Listings,” the listing broker may provide marketing, forms and other preliminary services to the seller.

When the services being provided to the seller by the listing broker do not include arranging for showing, negotiating the contract or assisting the seller in contract performance, the buyer’s agent can be in basically the same position as when dealing with a FSBO. That is, in order to represent their buyer client, the buyer’s agent must deal directly with the unrepresented owner. MLS Only and Limited Service Listings, therefore, raise many of the same problems as for-sale-by-owner transactions.

Recently, there has been much discussion in the industry about the impact of MLS Only and Limited Service Listings. Many buyer agents feel they are being asked to do the “work” of the listing broker. That is not true any more than it was true that the listing agent’s subagents in other companies were doing the buyer’s agent’s work in the old single agency days of real estate. A buyer’s agent dealing with an unrepresented seller on their buyer’s behalf is no different than a listing agent dealing with an unrepresented buyer on the seller’s behalf.

Problems that arise in FSBO and Limited Service Listings situations have nothing to do with who is doing the most work. The issues raised have nothing to do with what duties a listing broker “should” provide. Attempts in other states to take that road by having the state demand that brokers provide certain minimum services have met with lawsuits, confusion and uncertainty. How to deal with unrepresented sellers is a business issue, not a regulation issue. How to handle the business issues involved is the next topic in this subject.

Oregon Administrative Rule 863-015-0200 Agency Relationships.

OAR 863-015-0200 defines and fleshes out by administrative rule the types of agency relationships allowed by statute. The rule makes it clear that an agency relationship can be created by agreement or conduct. Disclosed limited agency and designated agency relationships are defined in the rule more closely than in ORS 696.815, but no new obligations are imposed. The rule is strictly definitional as far as agency relationships are concerned. The rule also contains the full text of the Final Agency Disclosure form required by statute. Agency disclosure requirements are discussed in detail in the Agency Disclosure section of this topic.

Oregon Administrative Rule 863-015-0205 Disclosed Limited Agency.

OAR 863-015-0205 is the administrative rule that controls disclosed limited agency relationships. Under the statute, such relationships can be established only by written agreement. Disclosed limited agency agreements must meet all of the requirements of OAR 863-015-210.

OAR 863-015-0205 allows for designated agency and even, under subsection (5), for true single agency relationships within the same company. The key to designated agency and in-company single agency is the control of confidential information. OAR 863-015-205(4) demands that principal brokers have “established procedures to assure that a licensee who represents one client will not have access to and will not obtain confidential information concerning another client involved in the same transaction.” For in-company single agency to work, the principal broker must also have divided supervision and control agreements in place so there is no overlapping supervision of both the listing and selling licensees.

Oregon Administrative Rule 863-015-0210 Disclosed Limited Agency Agreement.

OAR 863-015-210 contains the administrative rule requirements for disclosed limited agency agreements. The required contents of such agreements are contained in the first two subsections of the rule. Subsection (3) of the rule sets out a statutorily sufficient form for disclosed limited agency agreements. The form is not “required” by the rule, but the rule does make it clear that use of the statutory form is evidence of having complied with the requirements of the rule. Not surprisingly, the statutory form is universally used in Oregon real estate. Click Here for a detailed discussion of Disclosed Limited Agency.

Oregon Administrative Rule 863-015-0215 Initial Agency Disclosure Pamphlet.

OAR 863-015-0215 is the administrative rule that sets out the requirements for the statutorily required Initial Agency Disclosure Pamphlet. Agency disclosure is peculiar to real estate and its form and substance is controlled by the Real Estate Agency. Agency disclosure is discussed in detail in the Agency Disclosure section of this topic. Click Here for a copy of the Initial Agency Disclosure Pamphlet.

Oregon Administrative Rule 863-015-0220 Written Company Policy.

OAR 863-015-0220 is the last of the administrative rules dealing with agency relationships. Under the rule, “each real estate business shall develop and maintain a written company policy that sets forth the types of relationships real estate licensees associated with the business may establish” It is in these policies that the principal broker must detail what agency relationships the broker’s agents will be allowed to form and how the broker will comply with the agency relationships set forth in OAR 863-015-0200. Chief among the required policies are those that will ensure protection of confidential information. Agents should be aware of the policies adopted by their company under these rules because the policies can affect the kinds of agency relationships the agent is allowed to form.

State law controls how agency relationships are formed, the duties and responsibilities imposed, how long the agency relationship lasts and how it is terminated. In Oregon, the agency duties imposed on real estate licensees are found in statute. These statutes are set out and explained in the Statutory Provisions Involved section of this subject. State statutes are fleshed out and implemented by administrative rules. These rules, promulgated by the Oregon Real Estate Agency, are explained in the Administrative Rules Affecting Agency section.

A telemarketer or seller may call a consumer with whom it has an established business relationship for up to 18 months after the consumer’s last purchase, delivery, or payment – even if the consumer’s number is on the National Do Not Call Registry. In addition, a company may call a consumer for up to three months after the consumer makes an inquiry or submits an application to the company. These rules ease the burden of Do Not Call on the practice of real estate by allowing agents to call buyers and seller who have done business with the agent’s company. They do not, however, help when calling buyers or sellers who have not done business with your company.

There is a tradition in real estate of cold calling sellers with expired listings and FSBOs. These practices were immediately called into question when the Do Not Call Registry was implemented in January of 2005. As a result, the National Association of REALTORS® petitioned the FCC for clarification regarding expired listings and FSBOs.

On February 18, 2005, the Federal Communications Commission (FCC) issued an Order addressing issues raised by NAR. According to the FCC, a real estate professional representing a potential buyer may call a FSBO so long as the purpose of the call is to discuss the potential sale of the property to the buyer. An agent may not cold call a FSBO on the Do Not Call Registry List for the purpose of soliciting a listing. The FCC also declined to exempt from the Do Not Call Registry rules any calls to expired listings. These rules are simple applications of the established business relationship exception.

In 1991, Congress enacted the Telephone Consumer Protection Act (TCPA) in an effort to address a growing number of consumer complaints about telephone marketing calls. The TCPA restricts the making of telemarketing calls and the use of automatic telephone dialing systems and artificial or prerecorded voice messages. The rules apply to common carriers and telemarketers.

In 1992, the Federal Communication Commission (FCC) adopted rules to implement the TCPA. Under FCC rules, entities making telephone solicitations were required to have procedures for maintaining company-specific do-not-call lists. On July 3, 2003, the FCC revised its TCPA rules to establish, in coordination with the Federal Trade Commission (FTC), a National Do-Not-Call Registry.

The National registry covers all telemarketers (with the exception of certain nonprofit organizations) and applies to both interstate (between) and intrastate (within) calls. The registry went into effect on October 1, 2003, and is administered by the FTC. Starting January 1, 2005, telemarketers and sellers are required to search the registry at least once every 31 days and drop from their call lists the phone numbers of consumers who have registered.

The National Do Not Call Registry covers intrastate telemarketing calls, like those commonly made by real estate agents, under the FCC’s rules. You can find information on the FCC regulations at www.fcc.gov/cgb/donotcall/. All sellers covered by the FCC rules must subscribe to the list before they call, or cause a telemarketer to call, any consumer within that area code, even those consumers whose telephone numbers are not on the registry. The only exceptions are for sellers who call only consumers with which they have an existing business relationship or written agreement to call, and do not access the National registry for any other purpose.

These provisions make any cold calling without access to the Do Not Call Registry an extremely risky undertaking. It’s against the law to call (or cause a telemarketer to call) any number on the Registry (unless the seller has an established business relationship with the consumer whose number is being called, or the consumer has given written agreement to be called). It is also against the law for a seller to call (or cause a telemarketer to call) any person whose number is within a given area code unless the seller first has subscribed to and accessed the portion of the Registry that includes numbers within that area code, and paid the annual fee, if required.

Signing up for the Do Not Call Registry list entitles the subscriber to data for up to five area codes for free. If you want more than five area codes, the annual fee is $62 per area code of data, with a maximum annual fee of $17,050 for the entire U.S. database. Fees are paid annually.

Companies that have subscribed, and paid the appropriate fee (if any), are allowed to check a small number of telephone numbers (10 or less) at a time via interactive Internet pages. This makes it easy for small volume callers like most real estate agents to comply with the do not call requirements without having to download a large list of all registered telephone numbers within a particular area.

Fortunately, there are “safe harbor” provisions that cover inadvertent mistakes. If a seller or telemarketer can show that, as part of its routine business practice, it meets all the requirements of the safe harbor, it will not be subject to civil penalties or sanctions for mistakenly calling a consumer who has asked for no more calls, or for calling a person on the Registry. To meet the safe harbor requirements, the seller or telemarketer must demonstrate that:

  1. it has written procedures to comply with the do not call requirements
  2. it trains its personnel in those procedures
  3. it monitors and enforces compliance with these procedures
  4. it maintains a company-specific list of telephone numbers that it may not call
  5. it accesses the National Registry no more than 31 days (starting January 1, 2005) before calling any consumer, and maintains records documenting this process
  6. any call made in violation of the do not call rules was the result of an error.

Data for up to five area codes is free. The annual fee is $62 per area code of data (after five), with a maximum annual fee of $17,050 for the entire U.S. database.