Humber/Ontario Real Estate Course 2 Exam Practice

Salesperson Karen negotiates an unconditional offer for $500,000 for a commercial property. A competing offer for $515,000 is received. Karen decides to reduce her commission by $3,000 to provide a higher net to the seller. What should Karen do ethically?

1. She only needs to disclose that there are competing offers.

2. She must inform both the buyer and the seller about the change in her commission.

3. She is not required to disclose the commission reduction to anyone.

4. She should report the reduction only to her brokerage.

5. She should advise the competing offeror about her reduced commission.

6. She should keep the commission change confidential from all parties.

The correct answer is: She must inform both the buyer and the seller about the change in her commission.

In this scenario, it is important for Karen to ethically disclose to both the buyer and the seller about the change in her commission. This is because any change in the terms of the agreement, such as a reduction in commission, can potentially impact the parties involved in the transaction. By informing both the buyer and the seller about the commission reduction, Karen ensures transparency and upholds ethical standards in the negotiation process. It is crucial to maintain honesty and transparency in real estate transactions to avoid any conflicts of interest and to ensure a fair deal for all parties involved. Option A is incorrect because simply disclosing the presence of competing offers does not address the change in commission, which is an important detail affecting the transaction. Option C is incorrect because deliberately withholding information about the commission reduction can be seen as unethical and may not serve the best interests of the parties involved. Option D is incorrect as reporting the reduction only to the brokerage does not fulfill the obligation of informing both the buyer and the seller directly. Option E is incorrect as advising the competing offeror specifically about her reduced commission may be perceived as biased towards that offeror, potentially compromising Karen's neutrality in the negotiation. Option F is incorrect because keeping the commission change confidential from all parties goes against the principle of transparency and openness in real estate transactions.