Real estate brokers and salesmen are frequently called upon by consumers to recommend an insurance company, an attorney, a termite exterminator, a builder or some other professional or service company for assistance in connection with a real estate transaction. For example, a home buyer may ask the agent to recommend a termite exterminator to inspect his property. Or an agent, after selling a building lot, may recommend to the purchaser that he contact ABC Building Contractor concerning the construction of his home.

Usually the person who is seeking the advice is the agent's client or customer in a pending real estate transaction. But sometimes real estate consumers simply approach brokers and salesmen because they understandably consider licensed real estate brokers and salesmen to be specialists in real estate matters.

A problem arises for the agent, however, if he or she has an arrangement with the provider of the service whereby the agent will be compensated for making referrals. In these instances the question arises, "Does the agent have a duty to disclose that he will be compensated in some way for making the recommendation?" The answer is, "Yes".

Since the advice of the real estate agent is being sought by a consumer because of the agent's special expertise in real estate matters, the consumer rightfully expects to receive from the agent a fair and unbiased opinion or recommendation-one which would not in any way be prejudiced or affected by a referral fee arrangement between the agent and the person or company being recommended.

Consequently, if a real estate broker or salesman recommends the services of a particular person or company in connection with a real estate transaction and the recommendation is being made with a promise or expectation of compensation, then the broker or salesman must disclose this fact to the person to whom the recommendation is being made. And, in those situations where there is no promise or expectation of compensation, brokers and salesmen would be well advised to decline any offer of compensation or remuneration for making a recommendation or referral simply to avoid the appearance of impropriety