chapter 37

The real estate industry has developed a code of professional standards and ethics as a guideline in serving the real estate needs of consumers. This professional code has emerged from three primary sources:

federal and state legislation state real estate licensing regulation industry self-regulation through trade associations and institutes

Most codes of ethics uphold the commitment to fulfill fiduciary duties. Specific applications include:

honestly representing market value and property condition respecting rights and duties of other client-agent relationships submitting all offers avoiding commingling and conversion keeping transaction documents current maintaining confidentiality managing client property competently

A professional real estate agent must understand the skills and knowledge the profession requires and make a commitment to maintain and improve expertise in these areas. Of particular importance are:

market knowledge real estate laws evolving standards of practice

In compliance with applicable laws and to promote respect for the real estate profession, licensees should be careful to disclose

that the agent is going to receive compensation from more than one party in a transaction property defects if they are reasonably apparent; however there is no duty to disclose a defect which it would require technical expertise to discover any interest the agent has in a listed property if the agent is representing a party concerning the property any profits made on a client's money the agent's identity in advertisements the agent's representation of both parties in a transaction the existence of accepted offers identity of broker and firm in advertising as required by state law

Much of the information incorporated into the real estate professional code of ethics has come from three sources.

-Federal and state laws which focus on anti-discrimination laws and fair trade practices -Real estate licensing regulation on the state level dealing primarily with agency issues and disclosures -Self-regulation by real estate associations that set standards for professional conduct

A complaint must be filed with the grievance committee within how many days?

180

Who can file a complaint against a real estate agent?

A client

What is a code of ethics?

A code of ethics is a set of principles of conduct based on ideas of what is morally good or bad that guide decision making and behavior. The purpose of a code of ethics is to provide members and other interested persons with guidelines for making ethical choices in the conduct of their work.

What types of cases are usually seen in arbitration?

Arbitration issues are typically monetary disputes among broker members of the Association.

A detailed document that spells out the professional responsibilities of every REALTOR® is the

Code of Ethics.

all real estate company policy manuals should address the following ethics related information

Company Mission Professional Ethical Standards State Laws Ethical Violations

Articles 10 through 14

Duties to the Public

Once a complaint is filed, two groups of people are responsible for dealing with them:

Grievance committee Hearing panel

Ethical Violations

It is important to include a section on what happens if an associate or employee violates the ethical standards set forth by the office. The office must follow through on ethics violations

How should licensees handle multiple offers to avoid ethical issues?

Licensees should always be unbiased in presentation of all offers.

Professional Ethical Standards

Most policy manuals for real estate brokerages state that the Code of Ethics from the National Association of REALTORS® is the company's ethical standards guide.

Ethical issues in real estate tend to be in one of the following areas:

Multiple offers Property disclosures Loyalty to clients Showings Advertising

The policy manual may also include a list of expected behavior for all employees and associates to follow. The following are examples of expected behavior a brokerage might have for its licensees:

Never lie or be disrespectful of others. Never advise clients on subjects without holding a professional license in the area, such as providing legal advice without being a licensed lawyer. Do not make promises that can't be kept. Follow the "Golden Rule." Maintain a professional appearance, including proper hygiene, professional clothing, and a clean car when driving clients to showings. Keep the clients' best interest at all times; do not forget fiduciary duties to clients. Always treat other licensees, clients, and customers with respect, courtesy, and honesty.

What role does an ombudsman have in solving an ethics dispute?

Ombudsmen do not participate in any formal process. Instead, they focus on communication and finding mutual, non-coerced agreement between the parties, rather than determining who is right and who is wrong. They foresee, recognize, and help settle misunderstandings and differences before they become full-fledged disputes that can result in charges of unethical behavior.

Describe a common ethical concern regarding showings.

One major unethical practice regarding showings is allowing clients to look at homes on their own by providing a key or giving a lockbox combination.

The NAR Code is comprised of four sections:

Preamble Duties to Clients and Customers Duties to the Public Duties to REALTORS®

When business entities act in an ethical manner, they:

Reduce legal lawsuits. Avoid code and law violations. Attract customers to the firm's products and services. Attract high quality employees. Attract investors.

According the Code's preamble, who should a licensee report to if there is knowledge of any actions involving misappropriation of client or customer funds?

The appropriate Board of REALTORS®

Mediation

The goal of this process is to bring two parties together to sort out misunderstandings, expose concerns, and reach a resolution. The process is voluntary, although sometimes it may be urged by an entity or agency.

How does the grievance committee and ethics hearing panel work together to resolve a complaint?

The grievance committee establishes whether a potential violation occurred and if all requirements are met for the case to be heard by the ethics hearing panel. The ethics hearing panel conducts the hearings and decides if there has been a violation of the Code. The panel also determines what discipline they will impose on the violator.

When someone files an ethics complaint against a licensee, what part of the Code must be cited?

The only part of the Code that can be named in complaints is Articles. However, Standards of Practice may be referenced to support an alleged Article violation.

What is the goal of the NAR Code of Ethics?

The ultimate goal of the NAR Code of Ethics is to encourage the highest standard of ethical business practice by all of the members of the association. A secondary part of that goal is to provide protection for the public by using a formal complaint process whereby the association can sanction a member for improper actions through an informed peer process as opposed to court litigation.

Why is the Code referred to as a "living document?"

There is an annual review by the Professional Standards Committee that recommends changes where necessary. As the industry itself goes through change, the articles of the Code often need new interpretation or clarification.

However, if it happens that the licensees cannot resolve their difficulties on their own, they have two courses of action open to them:

They can take advantage of informal dispute resolution. They can file an ethics complaint or an arbitration request.

Why is practicing ethical behavior good business practice?

When licensees meet the needs of their clients, they will feel good about themselves and it will propel them to continue to keep their clients' best interests at heart. Also, if associates are ethical, their clients will be loyal and send referrals their way.

The key to learning how to make ethical decisions is to

become comfortable in uncomfortable situations

Articles 15 through 17

contain Duties to fellow REALTORS®.

Describe values.

define what is important to someone and they guide a person's beliefs, principles, and actions. Personal values affect people's ethics since ethics help determine what is right or wrong. Without being consciously aware of it, our highest values influence the actions we take, words we say, and beliefs we have about the world.

If an ethics complaint is settled through an ombudsman, the complaint is considered

discharged.

Real Estate Ombudsman Programs

foresee, recognize, and help settle misunderstandings and differences before they become full-fledged disputes that can result in charges of unethical behavior.

ethics hearing panel

he group that will conduct any full "due process" hearings. A hearing will include sworn testimony, counsel, witnesses, and evidence. A hearing panel is made up of members of an association's professional standards committee.

Preamble

he ideals that the whole real estate community hopes that all REALTORS® will aspire to reach and make a part of their daily practice ends with a statement that REALTORS® should pledge to observe the spirit of the Code in all of their activities both personal and professional and to conduct their business in accordance with the tenets presented in the Articles.

State Laws

he policy manual typically includes a section emphasizing that all employees and associates must observe the law regarding obligations to clients and customers.

Articles 1 through 9

identify Duties to Clients and Customers

Golden Rule

law of reciprocity, is a universal and simple concept that says to treat others the way you want to be treated.

grievance committee

made up of members of the association. These members conduct a review of the complaint to determine if a possible violation of the Code of Ethics has occurred. This review is not a hearing on the merits, but rather a preliminary analysis to determine if the complaint calls for a hearing

When someone files an ethics complaint against a licensee,

only Articles may be named, never anything contained in the Preamble

A hearing panel is made up of members of an association's

professional standards committee.

What are ethics?

rules of conduct or accepted behavior based on moral principles.

Company Mission

specify what the organization's leaders expect from all employees. Expectations of behavior might include fairness to all parties, full disclosure, non-favoritism, and unbiased behavior

The Preamble ends with a statement that REALTORS® should pledge to observe the

spirit of the Code in all of their activities both personal and professional.

arbitration hearing panel

the group that will conduct any full "due process" hearing will include sworn testimony, counsel, witnesses, and evidence. made up of members of an association's professional standards committee.