June 19, 2021

Realtor Code of Ethics - Know Everything About It!

As a real estate agent, you have a responsibility to your clients and the public. This responsibility includes upholding the Code of Ethics for Realtors. In order to be successful in this industry, it is essential that you know what exactly these rules are so as not to break them. The following blog post will provide an overview of the Code of Ethics for Realtors and all its key points so that you can avoid breaking any rules and keep your license!

NOTE: This text is not intended to provide legal advice. Because interpretations of the Realtor Code of Ethics vary by state, you should obtain your own legal counsel to ensure you follow the proper procedure.

The National Association of Realtors (NAR) has strong cause to establish ground rules for professional behaviour. The Code of Ethics and Standards of Practice is not a fictitious standard, but rather a rigorous ethical framework.

The code oversees transactions between Realtors, their customers, and the public interest and is based on the notion of "let the public be served."

While many professional sectors have ethical rules, real estate is one of the few where the sponsoring organization has disciplinary processes and power. Let's look at the history of this rulebook, how it's enforced, the most prevalent sorts of infractions, and the code's impact on the real estate industry.

What exactly is the Code of Ethics, and who is it applicable to?

Consumers frequently believe that real estate agents and Realtors are interchangeable names.

To gain the trademarked title of "Realtor," a real estate licensee must first join the National Association of Realtors, the country's biggest trade group with 1.3 million members. In the United States, there are an estimated 2 million active real estate licenses.

What exactly does it mean to be a "Realtor"? 

For starters, you must pay annual dues ($150 per year as of 2019). Furthermore, a Realtor must:

  • Have an active real estate license in their state and work for a real estate firm in that state.
  • They have not had any civil judgments enforced on them in the last seven years.
  • If there has been a history of criminal convictions in the last seven years, provide mitigating considerations for the association to consider.
  • Agree to follow the Realtor Code of Ethics at all times.

In other words, all Realtors are obligated to follow the Code of Ethics, but not all real estate brokers in general. When a real estate licensee applies to become a member of the NAR, they pledge to follow the code. Realtors may also be requested to sign extra ethics documentation by their broker or team leader when they join on.

NAR Code of Ethics

The NAR Code of Ethics establishes the industry standard for Realtor business activities. Its 17 articles provide guidelines for dealing with clients and customers, the general public, and fellow Realtors. If a Realtor violates the code of ethics, a complaint can be made, and the Realtor's local Realtor association can take disciplinary action.

In practice, Realtors are obligated to follow the Code of Ethics as a business practice.

Realtors "pledge to respect [the code's] spirit in all of their actions, whether undertaken directly, through colleagues or others, or via technical means and to conduct their business in line with the precepts," according to the code's prologue.

A Realtor's transactions with the following people are subject to the standard of conduct:

  • Their clients and consumers include: It is their responsibility to safeguard their client's best interests while also treating all parties involved in a transaction fairly.
  • The general public: The Realtor must achieve professional competency criteria while also opposing discriminatory housing practices.
  • Other Realtors: Realtors must avoid making inaccurate or careless remarks about their colleagues.

How are offenders apprehended? 

A complaint would have to be filed against the culprit. However, NAR is a giant, and taking a complaint all the way up would be akin to taking your small claims lawsuit to the Supreme Court.

As with the court system, enforcement of the NAR standards of practice begins at the local level. Disciplinary authority is mostly handled by the country's 1,200 local Realtor organizations.

Realtors who have a problem can take it to their local association. Following then, the matter is reviewed by a number of different bodies. The Grievance Committee of the association investigates complaints and refers infractions or arbitration cases to the Professional Standards Committee.

The Professional Standards Committee then holds a hearing with a panel of 3-5 committee members to evaluate if there was a violation and to decide on disciplinary punishment or, in the event of arbitration, who is deserving of a monetary award (this is the Realtor version of "due process"). At a high level, the Board of Directors has the authority to review or challenge the committee's decisions.

The most common forms of complaints are over ethics breaches or requests to arbitrate money issues, such as who is a due commission by Realtors from various firms.

Before going to arbitration, the board would usually endeavor to negotiate contractual disagreements (unless both parties in the dispute advise against mediation in writing).

However, one important aspect to notice is that the code assists Realtors in avoiding legal fights by resolving issues through arbitration mediated by the group rather than litigation. Article 17 of the Code defines the categories of issues that can be resolved by arbitration.

Sanctions for a breach may include the following, according to the Code of Ethics and Arbitration manual:

  • A fine of up to $5,000 is levied.
  • A reprimand letter.
  • The demand that the respondent participate in an educational course.

A formal apology from the perpetrator cannot, however, be required by a hearing panel or organization.

What are the regulations established by the Code of Ethics?

The real estate code of ethics has existed in some form for over 100 years. The first Code of Ethics (written, ahem, for quote "Real Estate Men," amusing given that 63 percent of all Realtors are now female) was established in 1913 as a far shorter list of guidelines.

It has been amended and altered throughout time to reflect new advances and the current state of the industry. However, the most recent version, revised as recently as 2019, still adheres to the fundamental values of honesty, competency, and resolving conflicts through the board rather than the courts.

The 2019 Code of Ethics consists of 17 articles addressing various areas of conduct, each with multiple "Standards of Practice," or particular ground rules Realtors are held to.

Realtor Ethics Code Preamble

The prologue of the Code of Ethics establishes what NAR refers to as the aspirational goals of moral behaviour. Consider it a Realtor mission statement, rallying cry, or hymn. The Golden Rule is specifically mentioned in the preamble: "Whatsoever you desire that others should do to you, do ye even so to them."

Because the Preamble is philosophical and hence subjective, it cannot be used to justify disciplinary action against a Realtor. That is the purpose of the 17 pieces that will follow.

Client and customer responsibilities

Article 1: Protect the client's best interests.

Article 2: No deception, exaggeration, or concealment of facts concerning the property under consideration.

Article 3: Realtors should work together unless it is not in the client's best interests.

Article 4-5: Make any personal interest in a property known.

Articles 6-8: No suggesting services in exchange for a fee or collecting money under the table. Maintain a separate account for customer funds from your own.

Article 9: All transaction paperwork shall be supplied to the buyer/seller in simple language.

Duties to the Public Article 10: No discrimination in the provision of services.

Article 11: Only provide competent services to customers within the limits of a Realtor's professional scope.

Article 12: There shall be no deceptive or misleading advertising.

Article 13: Do not violate the law.

Article 14: If accused of a violation, cooperate with the Realtor board's investigation processes.

Article 16: Do not pursue customers who have an exclusive listing agreement with another Realtor.

Article 17: The Realtor Board will mediate or resolve contractual issues.

The Realtor Code of Ethics: A Profession's Guide

Sincerity as a policy? Not in the renegade world of real estate, at least, according to many Americans who distrust the credibility of real estate specialists.

In a recent assessment of how trustworthy customers consider various occupations, Realtors were beaten only by politicians and auto salesmen for the least-trusted prize.

Only 11% of poll respondents stated they thought Realtors can be "fully trusted." Meanwhile, just around 20% of respondents to Gallup's Honesty and Ethics poll regularly rate the real estate industry as "high" or "very high."

What is the root of the skepticism? It might be backroom transactions between real estate players, misleading methods that go unnoticed, or the nightmare that was the 2008 subprime mortgage crisis, in which many customers felt misled by the real estate business.

Helping individuals purchase and sell houses is a major profession with far-reaching consequences.

Share Post:

Comments System WIDGET PACK
Written by

Tara McWhite

Start engaging with your users and clients today