What is Sign-Crossing?
Here's one interpretation (mine, of course) of the current thinking around sign-crossing, influenced by the facts that I'm licensed in Colorado and am a REALTOR®.
A real estate broker (or agent, salesperson, etc., as per local naming conventions; broker in Colorado) cannot approach - with the intent to enter into a new contract - a seller/landlord or buyer/tenant who is already in a valid exclusive contract with another broker. To do so, or to attempt to do so, can be considered sign-crossing.
If the seller/landlord or buyer/tenant initiates contact with another broker, the parties can enter into a new contract as long as it has a start date after the end date of the currently valid exclusive contract. To have overlapping dates can be considered sign-crossing.
Since I'm a visual person, I've drawn up graphics for my interpretation. Click each to enlarge it if desired.
In the olden, olden days, neither sellers nor buyers had representation. That's a wolf in sheep's clothing story for another day, perhaps.
In the olden days, only sellers had broker representation. They'd sign an exclusive contract with one broker, who'd then likely physically put a sign in the seller's yard for all to see. Another broker might then approach that seller and attempt to talk the seller into working with them and signing a new contract. This action was considered to be sign-crossing -- the second broker had crossed the imaginary line drawn around the property from the sign having been planted in the yard.
Then along came buyer's representatives. A buyer would sign an exclusive contract with one broker. Another broker might then approach that buyer and attempt to talk the buyer into working with them and signing a new contract. Sound familiar? What's missing? The sign! The buyer certainly does't carry a sign around with them saying they're working with broker XYZ in their property search. It is still considered sign-crossing, though, for the purposes of the contract and any subsequent disputes.
Also, it was deemed fair for the seller or buyer to approach another broker at any time, free-will, exercising choice, and all that, but if together they created a new contract with dates overlapping that of the existing contract, that was also considered sign-crossing.
There is no sign-crossing without an existing valid exclusive contract. In most states, real estate contracts have to be in written form and should be signed by all parties (among other things) in order to be valid, thus typically there would be no sign-crossing without signatures. So, I like to think of the latest iteration convering both sellers and buyers as signature-crossing.
Sign-crossing concept can be covered on multiple levels, depending on the state (or possibly even down to the locality), the broker's professional affiliations, and contract law.
Colorado, for instance, defines sign-crossing in the Division of Real Estate Rules Regarding Real Estate Brokers, Rule E-13 , and clarifies it in CP-3 Commission Statement Concerning Commission Rule E-13. Other states/localities might define it differently.
The National Association of REALTORs® defines the sign-crossing concept in the Code of Ethics and Standards of Practice, article 16.
NOTE: NAR also provides an exception case wherein if the broker with the current exclusive contract is contacted by a REALTOR® and refuses to provide the expiration date and nature of the listing, the REALTOR® may initiate contact with the seller/landlord or buyer/tenant party.
QUESTION: If the state has rules which do not expressly state this same exception, which takes precedence? Likely the more restrictive ruling, would be my guess.
The courts, of course, may interpret contract language according to their own sets of rules and precedences. It's never fun when an issue reaches the justice system, right? Do your best to avoid it!
How can you tell it's happening?
If you're a seller/landlord or buyer/tenant and have a valid exclusive contract with a broker, and another broker approaches you about establishing a new contract for the same property or search criteria, chances are good they've crossed the sign. They may not be aware that they have done so as there might not be any overt indications of your relationship with another broker. Since you know that you've signed a contract with someone else, please take the initiative to mention that early on and to respond honestly if they ask you first. Remember, you can approach a new broker at any time about establishing a relationship with that new broker but they still need to know about any current contract you have in place.
If you're a broker and you approach a seller/landlord or buyer/tenant about establising a contract, ASK them if they already have representation! Ways you can find out if you're in danger of crossing the sign include but are not limited to the following:
- For Listing Agents
- ASK, as mentioned
- SEE the sign in their yard
- SEE the MLS listing for the property
- SEE adverstisements regarding the property
- For Buyer's Agents
- ASK, as mentioned
Why should you care?
Prohibitions against sign-crossing are intended to protect the broker - seller/landlord or broker - buyer/tenant relationship.
As the seller/landlord or buyer/tenant, you're protected from being approached (harrassed? inundated? overrun?) by other brokers, though you may initiate a new relationship if you wish to do so. If a broker tries to convince you to sign with them and doesn't stop after you've indicated that you have an existing valid contract with a broker, you can report them to the Division of Real Estate, their professional association (e.g. National Assocation of REALTORs®), or potentially even pursue the matter via the court system.
On the flip side, if you knowingly, or possibly even unknowingly, enter into conflcting contracts you might well be the one in the hot seat.
As the broker, your relationship with the seller/landlord or buyer/tenant is protected from being infringed upon (hijacked? poached? undermined? toes-stepped-upon?) by other brokers. If find out that a broker has tried to do so and doesn't stop after you've indicated that you have an existing valid contract with the seller/landlord or buyer/tenant, you can report them to the Division of Real Estate, their professional association (e.g. National Assocation of REALTORs®), or potentially even pursue the matter via the court system. If the seller/landlord or buyer/tenant enters into a conflicting contract with another broker, you have recourse there too, but the options are more limited as they are typically not regulated by the Division of Real Estate or professional associations (unless they are also licensed, affiliated, etc.).
On the flip side, if you knowingly, or possibly even unknowingly, attempt to or actually enter into conflcting contracts you might well be the one in the hot seat.
A bit of comic relief.
In the words of Bill Engvall with a bit of relevant twist: "Here's your sign", don't cross it!