e010803 A marketing agreement between a real estate agent and inspector
Identifier: e010803
Date: 11/05/2001
Question
Is assuming Realty's liability a prohibited compensation? In order for any agent of a certain realty company to be allowed to refer business to an inspector, the realty company requires the inspector to sign a "Marketing Agreement" that has certain indemnification requirements.
Response
The inspector referral agreement provided with the RFI appears to be an indemnification by the inspector for the inspector's liability to the client for negligent inspecting. Therefore, the specific question is moot due to a mischaracterization of the agreement.
This does not mean the accompanying agreement is or is not in compliance with the Code of Ethics. Conflicting interests arise naturally between a real estate company (when obligated to represent seller's interest) and a homebuyer. The indemnification both mitigates the conflicting interests and expands the client's opportunity for redress in the event of negligent inspecting/reporting.
However, the agreement lacks means by which clients are apprised of such benefits. Therefore, the agreement between referring real estate company and inspector is a quid pro quo that benefits only the realty company. Participating in such an agreement does not comply with second paragraph of the Code of Ethics to avoid conflicts of interest and is contrary to Code of Ethics paragraph #2 to act in good faith toward each client because clients would assume referrals are based on competence, not on a hidden protection to the realty company.