CASE STUDIES

Is That Really in the Code of Ethics? 

“I deal with my clients and other Realtors® honestly and would never intentionally do anything to harm or take advantage of them. I’ve followed these guidelines for my whole career so I’m reasonably confident that my real estate business activities are in conformity with the NAR Code of Ethics.”

This is a common belief held by Realtors® about their daily professional dealings but may not accurately reflect reality. Due to oversight, lack of knowledge or carelessness, even seasoned Realtors® can violate the Code of Ethics leaving themselves vulnerable to an ethics complaint.

The maximum disciplinary fine is now $15,000    

And depending upon the nature of the discipline, a Realtor’s® name and picture may appear on the CAR Ethics Violators webpage

Counter-Intuitive Case Studies 

Here are four hypothetical situations resulting in an interpretation of the Code of Ethics that may seem counter-intuitive. The first three situations involve Article 1, one of the more frequently cited Articles in ethics complaints. The last situation involves Article 16. See if the reasoning conflicts with your common sense thinking about the Code of Ethics.

Because it is your behavior (despite your honest intentions) that results in a violation, please familiarize yourself with the Code of Ethics and MLS Rules and Regulations. And yes, the latter may also be addressed in ethics hearings.

Imagine that one day you are rudely surprised by notification from PFAR that an ethics complaint has been filed against you. The complaint might have been filed by a former client, a fellow Realtor® or someone whom you don’t even know. Even more disturbing is that the complaint might be anonymous.

Your typical response might be “I’ve never had a complaint filed against me in my real estate career, and I didn’t intentionally violate the Code of Ethics.” While true, these may not be compelling arguments against the complaint at hand. Most Realtors® who appear before an Ethics Hearing Panel are there for the first time and didn’t intend to do harm. 

When facing a complaint, what do you do and to whom do you turn?

Other articles and links in the Professional Standards section of this website will answer these questions more at length. But suffice it to say that a Realtor® does not have to go it alone in the Ethics Hearing. He/she may have an attorney, a fellow Realtor® or a PFAR-provided Ethics Advocate assist in defending against the complaint. These individuals can help the Realtor® Respondent not only with the written response but also with the oral defense at the Hearing.  

Refamiliarize Yourself with the Code of Ethics

In recent years the Code of Ethics has undergone several revisions. Hopefully these Case Scenarios will motivate you to re-read the Code of Ethics to keep up to date and to gain a more thorough understanding of the ethical obligations embodied within. To learn more about the Code of Ethics, recent revisions and case studies you may follow the links on PFAR’s website or visit CAR.org directly.    

 

Case Scenario #1:  Dealing Honestly with All Parties – Article 1

You list a home for sale and in a few days two full-price offers come in. One from a Realtor® in your office and one from a Realtor® not affiliated with your company. The terms are the same and both buyers are pre-qualified for the same amount with similar financial backgrounds and credit scores.

You tell the seller that you personally know the agent with your company and that her buyer seems solid. You can’t really vouch for the other “outside” agent or her buyer. You hint that when an agent outside of your company is involved you can’t really predict what issues might arise to hinder the transaction. Without directly saying it you leave your seller with the impression that the transaction is more likely to close successfully with the agent in your company.

Your seller chooses the offer from your company’s agent and escrow closes successfully. The outside Realtor® later learns that you had possibly cast her offer in an unfavorable light with the seller and files an ethics complaint against you.

The outside Realtor® alleges that you violated Article 1 which says in part that Realtors® are obligated to treat all parties honestly. Interpreted by Standard of Practice 1-6: “Realtors® shall submit offers and counter-offers objectively and as quickly as possible.” 

Although the outcome of any ethics complaint will depend upon the facts of the case and the Hearing Panel’s interpretation of the events, it is very possible that you could be found in violation of Article 1 in this instance because you did not present the outside Realtor’s® offer “objectively.”

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Case Scenario #2:  Clerical Errors on Transactional Forms – Article 1

You list a property for sale. A few weeks later an offer comes in. You send a counter back to the buyer’s agent but an agreement is not reached. Later while reviewing some of the papers of the transaction your seller notices errors in a few critical sections of the counter offer. You explain to her that these errors were not intentional but were simply due to your hectic schedule at the time. You also point out that the errors did not seem to materially affect the outcome of the transaction.

The property does not sell and after the listing expires your seller notices an error in the listing contract. You had failed to indicate how much of the total commission you were offering to cooperating agents. She becomes concerned that perhaps the home did not sell due to your sloppy handling of the paperwork and files an ethics complaint against you based on Article 1, Standard of Practice 1-12: “When entering into listing contracts, Realtors® must advise sellers/landlords of: 1)the Realtor’s® company policies regarding cooperation and the amount(s) of any compensation that will be offered to subagents…” 

Even though the listing has expired your seller has 180 days to file the complaint from the time she learned of or should have known about the alleged infraction. Depending upon the specific facts of your case a Hearing Panel could find you in violation of Article 1 because you failed to disclose the compensation offered to the cooperating agent even though your oversight was not intentional and had no provable connection with the home not selling.

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Case Scenario #3:  Disclosing Multiple Offers – Article 1

You take a new listing and the seller instructs you not to reveal the existence or nature of any offers that are submitted. The first offer is from a buyer whom you represent. Another Realtor® with a potential buyer contacts you before your current offer is accepted and asks if you have any offers on the table. You reply that you cannot reveal that information.

Frustrated with your response the Realtor® decides that he doesn’t want to work with you and does not submit an offer. Your seller accepts the offer from your buyer and you close escrow successfully. The other Realtor® notices in the MLS that you had represented the buyer in the sale and threatens to file an ethics complaint against you. 

You convince the Realtor® that he doesn’t have a basis for an ethical complaint by quoting to him Article 1, Standard of Practice 1-15. This states in part that only with your seller’s approval are you allowed to disclose the existence of offers on the property and whether they were obtained by you or another agent. Contrary to the Realtor’s® thinking you did not violate Article 1 but could possibly have violated the Code of Ethics if you had revealed this information to him.

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Case Scenario #4:  Revealing Information about Your Listing – Article 16

You list a property for sale and withhold it from the MLS at the seller’s request. A few months later another Realtor® notices that your sign has been on the property for quite a while and calls you to determine the nature of your listing and when it expires. You tell him that this information is private and that you will not reveal it. He then contacts your seller to find out if the listing is active and when it expires.

After your listing expires you discover that the same agent has listed the property for sale. You file a complaint with the Association alleging that the Realtor® violated Article 16 by not respecting your agency relationship with the seller. Article 16 states that Realtors® shall not solicit a listing which is currently listed exclusively with another broker.

But because you refused to disclose the type and duration of your listing to the other Realtor®, Standard of Practice 16-4 gives him the right to contact the seller directly to obtain this information. It also permits him to discuss the terms of a future listing with the seller. It is likely that your complaint will not be successful.

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