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For most people, buying and selling a home is one of the largest financial transactions of their lives, and they rely on Realtors to shepherd them through this often difficult process.
To ensure integrity and clarity, The National Association of Realtors (NAR) established a Code of Ethics for its members in 1913. The code of ethics, which is regularly updated, is composed of 17 articles that outline duties Realtors owe to clients, the public and their industry colleagues.
Bad behavior and violations of any of these articles may result in an ethics complaint where a Realtor may have to appear before their peers at a professional standards hearing.
Below are five examples of unethical behavior that can land an agent in Realtor “court.”
1. Disclosing a client will ‘take less’ than the listing price
Possible articles violated: Articles 1 and 11.
Article 1 is about protecting and promoting the interests of a client. Article 1 is also about honesty and confidentiality. Negotiating an offer can be quick and intense.
It might be tempting to let a little information slip about a seller’s bottom line or their reason for selling their home, but doing so may be a violation of Article 1.
Again, realtors owe a duty to protect and promote the interests of their clients, and confidentiality ensures that a client’s best interest is protected. Unless you have written permission from a client to reveal their financial bottom line or reason for selling, it’s best to take a tip from The Go-Go’s and keep those lips sealed.
One could also be faced with a complaint over violation of Article 11. Realtors need to be competent when negotiating on behalf of their buyers and sellers. “Loose lips” during negotiations may reveal a lack of competency expected during a real estate transaction.
2. Failing to disclose any ownership or interest in a transaction
Possible articles violated: Articles 1 and 4.
Disclose. Disclose. Disclose. Article 4 deals with disclosing any material relationships or interest one might have in a real estate transaction. This means if a Realtor is going to sell mom’s house, or has an ownership interest with a vendor who may be a party to the transaction, that agent has a duty to disclose these facts.
Failure to disclose may also be a violation of article 1 due to lack of honesty.
Transparency builds trust. If one has a gut feeling to disclose something, disclose it.
3. Guessing when disclosing or conveying property facts
Possible articles violated: Articles, 1, 2 and 12.
Whether listing a home or working with a buyer, Realtors have an obligation to ensure that the information presented to clients and the public is true to the best of their knowledge and research. It also means that if a Realtor has knowledge of a material defect, they are obligated to disclose it.
This doesn’t mean one has to “seek out” problems with a property. It does mean that there is a duty to present true and factual information about a property.
Agents should have a source for the property information they are providing to consumers through the MLS and other means. Providing erroneous information about a property could violate the terms of Article 2 (which covers misrepresentation) and Article 12, which deals with honest and truthful advertising.
4. Commingling funds
Possible articles violated: Articles 1 and 8.
Any money related to the processing of a transaction from a client should never go into your personal bank account. Ever. Money meant for an earnest deposit, rents or repairs should be placed in a separate trust account or deposited in a timely manner with the title company.
Article 8 states that Realtors will keep a special account for money in their possession that belongs to other people.
A Realtor will also be in hot water with Article 1 for failing to protect their client and dishonesty. An agent who doesn’t abide by this rule may also lose their real estate license or go to jail, so there’s that.
5. Poaching another Realtor’s client
Possible articles violated: Articles 1 and 16.
Clients and customers will always be there for those who work hard to foster good relationships. The code of ethics reminds Realtors to follow the golden rule, “do unto others as you would have them do to you.”
Article 16 prohibits phone calls or written communications that solicit a seller who has an active listing contract with another agent. This is direct contact with the intent of trying to steal another Realtor’s listing, not generic farming to a market area.
One exception to the rule is if another agent contacts you to ask when your listing expires and you refuse to tell them, they are allowed to contact the seller to find out.
Everything a Realtor does starts with the land. Land is part of a home’s story. As the preamble to The Code of Ethics states, “under all is the land.”
Owning a home is sacred. Realtors are a vital part of every home’s story, where home represents joy, hope comfort and security. Realtors have the privilege of being a part of that story, and they should honor it with their best behavior.
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