Heartland REALTOR® Organization | Professional Standards

Arbitration is one of the most fundamental and misunderstood services offered by the McHenry County Association of REALTORS® to its REALTOR® members. This is understandable when you consider how few members have ever been in the unfortunate position of participating in the arbitration process.

Over the last hundred years the real estate profession has developed a unique "culture of cooperation" in our industry. A system in which competitors cooperate to show each others listings and offers compensation to other brokers if the competitor procures a buyer for a listing. This system is fundamentally different than the sales practices of other industries and the real estate practices in other nations.

Our common practice is fundamentally different than the business practices of other industries or countries. All real estate agents start off as competitors attempting to secure the listings of a seller. However, once one agent has secured the listing, that listing agent will often offer cooperation and compensation to his or her competitors. This practice allows the listing agent to better serve the interests of this client by making a unilateral blanket offer of compensation and cooperation to the other agents in the area. This offer is contingent on the competitor being the procuring cause of the transaction by convincing a buyer to purchase the listed property.

Why do real estate agents offer to show other companies listings? The answer is simple. REALTORS® learned long ago that the best way to serve the average sellers interest in a quick sale at the best price was to offer compensation to other agents in competing firms if they procured a buyer for the listing. Cooperation is usually in the best interest of a seller because it broadens the market exposure of the listed property.

Even in a hot sellers market offers of cooperation and compensation can do the following for a seller:

Improves the chances for a quick sale
Increases the chance that there will be multiple offers and buyers will compete against each other for your property
Increases the possibility of a full price or above list price offer being submitted
Increases the possibility that the offer will contain terms that are more favorable to the seller's other interests

After all, from the sellers perspective, why settle for only one agent trying to find a buyer when the Listing Agent can expand his or her efforts by offering cooperation and compensation to other agents. This system makes the property available to the buyer clients of over 40,000 other agents in our area if it is listed in the Midwest Real Estate Data LLC (MRED).

In most cases there is no dispute over who is entitled to the compensation that is offered in the Midwest Real Estate Data LLC or through the other methods that are used to extend cooperation and compensation to competing agents. However, from time to time, a dispute may arise between two agents who believe they are entitled to the compensation offered by the listing agent (or when the listing agent does not believe the cooperating agent earned his or her compensation).

Arbitration is an alternative dispute resolution program that is offered as a service to our REALTOR® members to provide a forum for resolving their business disputes in lieu of litigation. This has been a vital part of membership in the NATIONAL ASSOCIATION of REALTORS® since 1913 when the first Code of Conduct was published.

It is important to note that arbitrations are completely separate from ethics complaints. We frequently encounter situations where both agents acted legally and ethically, but a legitimate dispute still arose between the agents due to the actions of others. Therefore, arbitration is not about sanctioning agents for bad behavior. Arbitration exists only to resolve business disputes involving REALTORS® in the event that the REALTORS® have been unable or unwilling to resolve the dispute between themselves.

It should be noted that REALTORS® are not always obligated to use the arbitration services of the McHenry County Association of REALTORS® to resolve their disputes. REALTORS® can decide to bypass the arbitration process by resolving the disputes informally between themselves or submitting the dispute to other venues including courts depending on the circumstances. However, if one party who is eligible to use the Association's arbitration services submits the claim to McHCAR, then the other party may be obligated to participate in arbitration and abide by the decision of our arbitrators if the case is classified as a mandatory arbitration.

Mandatory vs. Voluntary Arbitrations
The Professional Services Department notes with some pride that of the thousands of transactions that occur in our market every year fewer than twenty ever result in an arbitration claim that is filed with our Association. However, if you are involved in a situation that may result in a business dispute with a REALTOR® that is properly arbitrable under our procedures, please feel free to contact the Professional Services Department at (815) 459-0600 or ks@mchcar.com for further information about our process.

Information on How to File an Arbitration
In the event you are involved in a situation that is properly arbitrable, our Professional Standards Committee can convene a panel of impartial, unbiased and experienced REALTORS® to consider your case. Our arbitration system has been designed to ensure that the due process rights of all parties are protected. Complainants and Respondents are entitled to be represented by attorneys, call witnesses, present evidence and challenge the qualifications of the panel members selected to hear the case. The parties also enjoy a limited right to request a procedural review or file a legal challenge to the decision if he or she believes that there were procedural deficiencies or other irregularities that the party believes constitutes a deprivation of due process. However, this is not an appeal on the decision itself only the procedures used in conducting the hearing. If you wish to learn more about the procedures for an arbitration hearing, please click the link below for a summary of the procedures for an arbitration hearing.

To download a copy of the Arbitration Request Form (Form A-1), Download Here.

Outline of Procedures Arbitration
In addition to our arbitration services, McHCAR also offers mediation as an alternative for resolving your commission or other business disputes. Mediation has become a popular alternative to arbitration because it is quicker, easier and provides the parties with more control over the final resolution of their dispute. If you are interested in mediation, read the information at right.

McHCAR offers mediation as an alternative option to our arbitration process. Mediation is designed to reduce the time and expense of arbitration. Mediation allows members to negotiate a mutually agreeable solution by providing an impartial third party to facilitate discussion between the parties. Mediation is a voluntary process that requires the consent of both parties. The primary advantage of mediation is that it allows members to avoid the confrontational and adversarial nature of an arbitration hearing. In a mediation the goal is to foster dialog and reach an understanding that will allow the parties to find a middle ground that can resolve the conflict.

This is an attractive alternative to the arbitration process where the parties are generally more concerned with testifying to the panel than talking through their dispute. Furthermore, arbitration awards are generally an "all or nothing" proposition where one party is often awarded all the money in the monetary dispute and the other party is left with nothing. Feedback from our members does indicate that REALTORS® emerge from successful mediations with a higher level of satisfaction with the result than REALTORS® who participate in arbitration. Therefore, the Professional Services Department urges you to consider mediation as an alternative when filing an arbitration request. Furthermore, if mediation is unable to resolve the dispute, the parties can proceed to an arbitration hearing without any delay.

Download the Mediation Flyer from the NATIONAL ASSOCIATION of REALTORS® which explains the benefits of mediation. If you have any questions, please contact the Professional Services Department at (815) 459-0600 or ks@mchcar.com.