Real Estate Ethics and Professionalism
Ethics refer to the habits, values, and practices that the society considers to be morally sound, on which our behavior is measured. Real estate agents ethics are the guiding principles that ensure transparency, honesty, and integrity in their interactions with clients, colleagues, and the broader community.
While there are no official norms for all realtors, there are many members of the National Association of Realtors (NAR), which has ethical codes. The Code of Ethics and Standards of Practice of the National Association of Realtors has 17 provisions which can actually be summarized using the golden rule.
"Do to others as you would like them to do to you."
Members may lose their membership if they do not follow this Code of Ethics. Moreover, not all professionals are part of the NAR, but everyone is expected to follow the Code of Ethics.
The NAR Code of Ethics has been around for more than a century already. The Code of Ethics was first adopted as a set of guiding principles in 1913, and has continued to evolve to become the standard by which all real estate agents abide.
Although it has been revised to reflect new developments in the real estate industry, the Code of Ethics still reflects the original principles of integrity, competence, responsibility, and the resolution of commission disputes in a reasonable and low-cost manner.
The recently revised Code of Ethics was added in 2020, but won't come into effect until January 1, 2021. The code consists of 17 articles, each of which covers a different field of conduct, and has a set of content called "Standards of Practice." Treat these real estate ethics as the "ground rules" which encourage and motivate agents to act in the best interest of the client, while maintaining professionalism and proper etiquette.
Are All Real Estate Agents Bound to the REALTOR® Code of Ethics?
Although the Code of Ethics is useful for all real estate agents, only licensed members of NAR will subscribe to this, which means that if you are not a member of NAR, you will not be bound by the Code of Ethics as you have not yet signed up to become a REALTOR® under the umbrella of real estate agents ethics.
In other words, even if you are not a member of NAR, in the long run, using the REALTOR® Code of Ethics as a guide on how to run your business will be helpful, especially when you are working with other real estate professionals who use the official Code of Ethics to regulate their business practices within the framework of real estate agents ethics.
Moreover, the Code of Ethics is useful for all agents, whether or not they are members of the NAR, emphasizing the broader importance of real estate agents ethics.
Working with Buyers and Clients
Real estate agents are responsible for their clients. They must first promote the interests of their clients, while still having an obligation to treat all parties fairly and honestly. Agents should not mislead owners or buyers about the market value of the property or the cost they can save through their services. In the real estate transaction process, agents are privy to the personal financial information of their clients. They are ethically bound to keep this information confidential and not to share it with anyone outside of the agency's client relationship.
Agents must also not exaggerate or conceal facts related to the property of their clients or their representatives. If an agent, a company, or any immediate member is interested in negotiating for their property, the client must be informed or notified. This must always be in writing.
The General Public
Real estate agents cannot refuse to serve people on the basis of race, color, religion, gender, marital status, or nation origin, nor can they "guide" clients to specific communities based on discriminatory requirements. Agents must also be careful not to provide "professional services" in areas where they are incompetent. Just because agents are licensed, it doesn't mean that they understand commercial and residential real estate laws. They must stay focused.
Agents must also be careful not to make misleading advertisements. Agents can provide prizes, bonuses, and other rewards to customers who hire them, provided they clearly explain the terms of the offer in writing.
Agents also cannot provide legal or accounting advice. Instead, they must refer clients to the appropriate professionals for the job.
Conduct Towards Fellow Professionals
The real estate industry is a very competitive industry. The chance of another agent outperforming you is highly likely. This, however, does not give you the license to use dirty tactics in order to gain an advantage against your competitors, as it goes against the principles of real estate agents ethics.
Real estate agents should never make false claims and accusations against other agents, nor should they interfere with their business with exclusive clients. They are not allowed to offer their services to clients of other agents via call or email, but it's important to note that these restrictions are only applicable to agents of the same field. An agent working in the property management field may offer their services to a client being handled by an agent who is offering brokerage services, adhering to the principles of real estate agents ethics.
Principles of the Real Estate Code of Ethics
In essence, the Code of Ethics for Real Estate Agents contains some general topics that reflect the entire real estate industry. These principles remind you to:
Act honestly and do not mislead clients
Adhere to the quality of justice
Operate with the highest level of integrity, which requires acting honestly and ethically when dealing with all parties to reduce disputes and avoid going to court
Strive for high ideals
Maintain enthusiasm to improve your personal and professional standards
Have patriotic obligations
Build a professional reputation built on excellence
Constantly resolve problematic ethical issues and propose solutions to problems that may arise in your career
Avoid building or acting in a way that can be seen as a conflict of interest
Treat every real estate business or practice as part of the community, and strive to add value to the community.
When faced with a moral impasse, always look for the choice with "minimal damage."
Unlike other industries, real estate leans heavily on building public trust to prosper. For this reason alone, real agents collectively agree to abide by these ethical principles. Violating or failing to adhere to basic principles will undermine the hard earned public trust in the real estate industry and make your job more difficult than expected.
Following the same code of ethics helps provide a consistent image to the public, which in turn gives potential clients an image they can look forward to when working with you.
Complaints and Violations of the Code of Ethics
Formal violations of the Code of Ethics usually involve crimes against the board of directors or associations and their members. In short, when you do not comply with the provisions of the REALTOR® Code of Ethics, you are committing ethical violations.
Examples of violations of real estate ethics include:
Exaggerating the characteristics of a property to make it look more attractive
Refusing to cooperate with all buyers and sellers
Disclosing confidential information
Collecting additional commissions from customers
Misleading use of advertising
Failure to provide professional services
Discrimination
Misinterpretation or omission of important information that affects the value or applicability of the property.
If you are found to have violated the code of ethics, you must undergo official board or association proceedings. Usually, it is a client who lodges a formal ethics complaint with the board of directors. Other times, it may be a fellow real estate agent or the board of directors / association itself.
Ethics violations often occur unintentionally or out of ignorance, which is why the formal board hearing proves to be an education experience for the agent in question most of the time. However, depending on the severity of the violation, you can also:
Lose your membership in the board or association
Be suspended from the board or association for a period of time.
Be fined up to $15,000
Be ordered to stop behaving in a specific way
Be required to attend seminars or courses
Receive letter containing reprimands or warnings.
In order to build more public confidence and avoid being summoned by the board of directors, it's extremely essential to be familiar with the "Standards of Practice" in the Code of Ethics and fully understand them. Real estate agents ethics encompass a set of principles and standards that guide the conduct of professionals in the real estate industry, ensuring fairness and trust in property dealings.