Code of ethics distinguishes Realtors®
Originally appeared in Hills Publications, Dec. 14, 2007 and ANG Newspapers, Nov. 25, 2007
The word Realtor® is more than a generic term meaning a real estate salesperson. It refers to a member of the National Association of Realtors® who adheres to a set of behavioral standards known as the “Code of Ethics.” First adopted in 1913, this is what differentiates Realtors® from all other real estate licensees.
The concept of agency
The public commonly refers to those of us in the business as “agents,” without always being clear on what this means. An agent represents another (the principal) in dealings with third parties. “Represent” is the key word here. It means your agent stands in your shoes and does what is best for you, putting your interests above his or her own.
According to the Agency Disclosure form, agents owe their clients “a fiduciary duty of utmost care, integrity, honesty and loyalty.”
Full disclosure
Realtors® must not conceal material facts, i.e., information that might influence either the buyer’s decision to purchase or the amount of his offer.
For instance, if a selling (buyer’s) agent became aware and substantiated that, unknown to the current seller and prior to his purchase, there had been a violent death in the house, he would be obligated to disclose this to the seller’s agent and to his buyer.
Confidential information
Full disclosure does not include personal knowledge about a client which, if disclosed, could put him at a disadvantage. An example is how much the buyer is willing to pay or the seller is willing to accept. Another is a deteriorated personal relationship between the sellers that is pressuring them to sell quickly.
In the latter case, the listing agent should be careful about revealing this. Even if asked directly by a buyer or his agent, an appropriate response would be, “They have personal reasons for selling.”
Fair dealing
Realtors® are obligated to treat all parties honestly, not just their client. As an example, when asked about other offers on a listing, the seller’s agent must not exaggerate or misrepresent the degree of activity. A buyer who is led to believe he is in competition for a home he really likes, when this is not the case, might bid more than necessary.
Adequate knowledge and experience
The Code of Ethics indicates that Realtors® must “conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage.” In other words, a Realtor® who specializes in commercial properties may not have the background to adequately represent clients in a home purchase. Conversely, a residential Realtor® might not be qualified to sell a 24-unit apartment building.
Unfortunately, in the quest for commissions, some licensees get into situations that are beyond their level of competence. As an expert witness in legal cases, I am often called upon to testify about whether an individual met the standard of care of a reasonably diligent agent.
Truthfulness to the public
This includes “a true picture in their advertising,” as well as in Realtors’® descriptions of themselves. Terms like “top producer” are often loosely applied. A number of years ago, a brand new Realtor® advertised on his Web site that he was in the “top one percent” in his area.
When asked by another Realtor® how this could be so, he responded that his “Web site” was in the top one percent, whatever that meant. In the end, he changed his claim rather than answer a complaint for violating the Code of Ethics.
It goes through your agent
Once a contract has been accepted, it is a violation for a Realtor®, without permission, to deal directly with another Realtor’s® client. This is to protect you from saying or doing something that, unknown to you, may not be in your best interests.
To illustrate, I represented an 84-year-old widow in the sale of her home. At the end of the escrow period, during the buyer’s visit with his agent to measure for furniture, the buyer’s agent talked my seller into moving out earlier than agreed in the contract. He did this for his buyer’s convenience and disregarded the impact on my seller.
When the buyer’s agent inadvertently mentioned this to me, I was not pleased. I explained all the complications of this frail, elderly woman having to move a lifetime’s worth of belongings to a much smaller residence. I reminded him that he had violated the Code of Ethics and my agency relationship with my client by negotiating with her in my absence. Needless to say, the seller’s original schedule prevailed.
You have recourse
Although most real estate transactions end up satisfactorily, there are some that require a further look. If you feel that either your agent or the cooperating agent in your sale violated the Code of Ethics, you can take action.
The first step is to discuss it with your Realtor® and/or his or her designated broker. If you do not get satisfaction, ask to which Association of Realtors® they belong. Call the Association and ask for the “Professional Standards” administrator. He or she will be happy to listen and advise you on next steps, which may involve filing a formal complaint.
If there is an ethics hearing, your case will be heard by a three-person panel of experienced Realtors® who have been specifically trained for this purpose. As a long-time member of the Professional Standards Committee and someone who has been the presiding officer at these hearings, I can tell you that we take ethics complaints very seriously.
Final thoughts
The main mission of organized real estate is to support Realtors® in providing quality, ethical service to buyers and sellers. The Realtor® Code of Ethics is central to that function. Repeating my theme as 2004 president of the Oakland Association of Realtors®, “It’s not how much business we do, but how we do business.”
Related Articles:
Understanding Agency