The Code of Ethics and Standard of Practice of the National Association of Realtors (“NAR”) has been a vital part of the real estate industry. It was created by NAR more than 100 years ago, and the Code now has 17 articles covering fair dealings with clients, the public and colleagues. Failure to comply can result in disciplinary action and fines. Here are some tips on how to avoid the most common ethics complaints.
Duties to Clients
Articles 1 to 9 deal with the duties real estate agents have toward clients. Article 1 requires agents to protect and promote the interests of their clients, while they remain obligated to treat all parties honestly. For example, agents may have a dilemma determining whether to advise publically the existence of multiple offers. Listing agents will need the seller’s permission to disclose such information, and a selling agent will commonly ask for the disclosure for their buyers. Selling agents should always ask the listing agent if other offers exist and, if so, who procured them. They should also inform buyers that their offer is not confidential and may potentially be disclosed by the seller to other parties.
Article 2 instructs agents to avoid exaggeration, misrepresentation, and concealment of material facts. Typical complaints that come up under Article 2 involve sellers or listing agents who intentionally fail to disclose facts about their properties. To avoid the risk of liability and possible legal action that may result from a seller’s failure to disclose, real estate agents should advise their clients to make full disclosure.
Duties to the Public
Articles 10 to 14 deal with the duties of a real estate agent to the public. Article 10 forbids agents from denying services to people for reasons of race, color, religion, sex, family status or nationality. Failure to comply will subject agents to a violation of the Code and can also constitute a violation of federal and state Fair Housing laws.
According to Article 12, agents must be truthful in all advertising and present a “true picture” in their advertising, and they shall not advertise, nor permit any person employed by or affiliated with them to advertise, real estate services or listed property in any medium (e.g., electronically, print, radio, television, etc.) without disclosing the name of that licensees’ firm in a reasonable and readily apparent manner. Further, beginning January 1, 2018, a real estate agent must disclose in all first point of contact solicitation materials: 1) the name and license number (type-size no smaller than the smallest font in the solicitation) and 2) the responsible broker’s identity (the responsible broker’s name or broker’s name and license number).
Duties to Other Members
Articles 15 to 17 deal with interactions between real estate agents. Article 15 prohibits agents from making false or misleading statements about competitors and Article 16 prohibits the act of soliciting business from exclusive clients of other agents. However, this is acceptable if the services offered are different than what the other agent is currently offering.
One scenario of possible violation of Article 16 is calling or sending solicitations to clients who are exclusively listed with other agents. Agents are prohibited from doing this unless the owner initiates the contact and the agent did not otherwise have reason to know of the relationship.