What you might not realize is that the behaviors of Realtors\u00ae are in fact held against an 8,000 word, 17-article long Code of Ethics and Standard of Practice<\/a> because there is so much at stake for real estate clients.<\/p>\n While many professional fields have codes of ethics, real estate is one of the only industries in which the code\u2019s sponsoring organization has disciplinary procedures and power. Let\u2019s explore the history of this rulebook, how it gets enforced, the most common types of violations brought to light, and the code\u2019s influence on the world of real estate.<\/p>\n A client came to David Magua<\/a>, a top-selling real estate agent in Weston, Florida, asking for advice on a subdivision he had his eye on. The buyer wanted to know: Was now the right time to snatch up the property?<\/p>\n \u201cI looked at the subdivision, and I looked at the analytics,\u201d recalls Magua. \u201cAnd I said, \u2018No, I think you should wait. The market\u2019s going down. Rent for a period, and you\u2019re gonna get it for substantially less.\u201d He was honest but, poof! There went Magua\u2019s $12,000 commission.<\/p>\n This type of situation is one real estate professionals deal with all the time: the responsibility to give honest advice that goes against their own financial interest. In some cases a deal falling through could mean a Realtor\u00ae can\u2019t afford their next car or mortgage payment. The stakes are high, and agents are human.<\/p>\n So the National Association of Realtors\u00ae, the trade group behind the Code, has good reason to set ground rules for behavior in the profession. And it’s not just an imaginary benchmark \u2014 it’s a meticulous ethical framework for the real estate industry.<\/p>\n Based on the concept of \u201cLet the public be served,\u201d the Code governs the dealings between Realtors\u00ae, their clients, and the public interest.<\/p>\n A common misconception among homebuyers and sellers is that real estate agents and Realtors\u00ae are interchangeable terms \u2014 six of one, half a dozen of the other.<\/p>\n However, to earn the trademarked title of \u201cRealtor\u00ae,\u201d a real estate licensee must officially join the National Association of Realtors\u00ae, the largest trade organization in the country representing 1.3 million members<\/a>. (For context, there are an estimated 2 million active real estate licensees in the U.S.<\/a>)<\/p>\n What does it mean to become a \u201cRealtor\u00ae?\u201d Well, for one, you have to pay annual dues ($150 per year as of 2020-2021<\/a>). In addition, a Realtor\u00ae must (among other qualifications):<\/p>\n In other words, abiding by the Code of Ethics is required of all Realtors\u00ae \u2014 but not real estate agents in general. A real estate licensee agrees to follow the code at the time of their application to become a NAR member. Realtors\u00ae also may be asked by their broker or team leader to sign additional ethics paperwork when they sign on.<\/p>\n In practice Realtors\u00ae are required to abide by the Code of Ethics as a way of doing business.<\/p>\n According to the code\u2019s preamble, Realtors\u00ae \u201cpledge to observe [the code\u2019s] spirit in all of their activities whether conducted personally, through associates or others, or via technological means, and to conduct their business in accordance with the tenets.\u201d<\/p>\n The standard of conduct applies in a Realtor\u00ae\u2019s dealings with:<\/p>\n How do violators get caught? Generally someone would need to file a complaint against the perpetrator. But NAR is a behemoth and trying to take a complaint all the way up would be like sending your small claims gripe to the Supreme Court.<\/p>\n So, like the justice system, enforcement of the NAR standards of practice unfold at a local level first. Disciplinary power is mainly wielded by the 1,200 local Realtor\u00ae associations<\/a> across the country.<\/p>\n Realtors\u00ae with a complaint can bring their grievance to their local association. From there a few different bodies are involved in the process of reviewing the issue<\/a>, according to Realtor Magazine<\/em>.<\/p>\n The association\u2019s Grievance Committee screens complaints and passes on violations or arbitration matters to the Professional Standards Committee. The Professional Standards Committee then conducts a hearing with a panel consisting of 3-5 committee members (this is the Realtor\u00ae version of \u201cdue process\u201d) \u00a0to determine if there was a violation and to decide on disciplinary action or in the case of arbitration, who is deserving of a monetary award.<\/p>\n The Board of Directors at a high level holds the right to review or appeal the committee\u2019s decisions.<\/p>\n The most common types of complaints that arise have to do with ethics violations or requests to arbitrate money disputes, such as who is owed commission between Realtors\u00ae of different firms. The board will typically try to mediate contractual disputes<\/a> before they go to arbitration (unless both parties in the dispute advise against mediation in writing).<\/p>\n But one major point to note is that the code helps Realtors\u00ae avoid legal battles by settling disputes through arbitration overseen by the association instead. (The types of disputes that qualify for arbitration can be found in Article 17 of the Code.)<\/p>\n Per the Code of Ethics and Arbitration manual, sanctions for a violation<\/a> may include:<\/p>\n However, one thing a hearing panel or association cannot require is a written apology from the violator, according to Realtor Magazine<\/em>.<\/p>\n The Code of Ethics for real estate has existed in some form for over 100 years. The original Code of Ethics (drafted, ahem, for quote \u201cReal Estate Men,\u201d ironic considering now 63% of all Realtors\u00ae are female<\/a>) was adopted in 1913<\/a> as a much leaner list of rules.<\/p>\n Over time it\u2019s been revised and revised to reflect new developments and the industry as it stands today. But the most recent version, amended as recently as 2019, still reflects the original principles of honesty, competency, and settling disputes with the board rather than court.<\/p>\n The 2021 Code of Ethics<\/a> consists of 17 articles covering different areas of conduct that each feature several of what are called \u201cStandards of Practice,\u201d or specific ground rules Realtors\u00ae are held against.<\/p>\n \u201cI try to keep to these standards, if not higher,\u201d says Magua. \u201cYou\u2019re dealing with people\u2019s money. You\u2019re dealing with probably their biggest asset. I\u2019d always rather keep a good relationship with the client, be truthful, and keep to what may ethics tell me to do. I\u2019m there to concierge. I\u2019m there to direct. I\u2019m there to give unbiased good advice.\u201d<\/p>\n Here we\u2019ll greatly oversimplify the Code of Ethics from a bird\u2019s-eye view. However, if you\u2019re unclear on a rule or are using this as a guide for your own conduct as a Realtor\u00ae, please consult the full Code<\/a>.<\/p>\n The preamble to the Code of Ethics sets forth what NAR describes as the aspirational objectives<\/a> of moral conduct. Think of it like the Realtor\u00ae mission statement, rallying cry, or anthem. The preamble even cites the Golden Rule, \u201cWhatsoever ye would that others should do to you, do ye even so to them.\u201d<\/p>\n The philosophical and therefore subjective nature of the Preamble means that it cannot be used as grounds for disciplinary action against a Realtor\u00ae. That\u2019s what the 17 articles to follow are for.<\/p>\n Article 1: <\/b>Protect the best interests of the client.<\/p>\n Article 2: <\/b>No misrepresentation, exaggeration, or hiding facts about the property at hand.<\/p>\n Article 3:<\/b> Realtors\u00ae should cooperate with each other unless it\u2019s not in the best interest of the client.<\/p>\n Article 4-5: <\/b>Disclose any personal interest in a property.<\/p>\n Article 6-8:<\/b> No recommending services for a kickback or collecting money under the table. Keep client funds separate from your own.<\/p>\n Article 9:<\/b> All documents pertaining to the transaction should be presented to the buyer\/seller in understandable terms.<\/p>\n Article 10: <\/b>No denying services on the basis of discrimination. (Note: Standard of Practice 10-5<\/a> prohibiting Realtors\u00ae from using harassing or hate speech, including racial or other slurs, was added to the Realtor Code of Ethics on Nov. 13, 2020).<\/p>\n Article 11: <\/b>Provide clients competent services only within a Realtor\u2019s\u00ae professional scope.<\/p>\n Article 12: <\/b>No false or misleading advertising.<\/p>\n Article 13: <\/b>Don\u2019t break the law.<\/p>\n Article 14: <\/b>Cooperate with the Realtor\u00ae board\u2019s investigative proceedings if charged with a violation.<\/p>\n Article 15: <\/b>No false or misleading statements about other Realtors\u00ae.<\/p>\n Article 16:<\/b> Don\u2019t solicit clients that have already signed an exclusive listing agreement with another Realtor\u00ae.<\/p>\n Article 17:<\/b> Contractual disputes will be mediated or arbitrated by the Realtor\u00ae Board.<\/p>\n Honesty as policy? Not in the rogue world of real estate \u2014 at least, that\u2019s the perception held by many Americans who question the authenticity of real estate professionals.<\/p>\n In one survey<\/a> on how trustworthy consumers view various professionals, Realtors\u00ae beat out only two others for the least-trusted award: politicians and car salespeople. (And we all know Danny Devito in Matilda<\/i><\/a> isn\u2019t exactly a show of character worth striving for).<\/p>\n Just 11% of participants in the survey said they believe Realtors\u00ae can be \u201ccompletely trusted<\/a>.\u201d Meanwhile, only around 20% of respondents to Gallup\u2019s Honesty and Ethics survey consistently give the real estate field \u201chigh\u201d or \u201cvery high\u201d marks<\/a>.<\/p>\n The source of the distrust? It could be stories of backroom deals<\/a> among real estate players, deceptive tactics<\/a> that fly under the radar, or the nightmare that was the 2008 subprime mortgage crisis where many consumers felt mislead by the real estate industry.<\/p>\n![\"\"](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/02\/realtor-code-of-ethics-1.jpg\")
<\/a>The Code of Ethics: A meticulous ethical framework<\/h2>\n
What is the Code of Ethics and who does it apply to?<\/h2>\n
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How is the Realtor Code of Ethics used and enforced?<\/h2>\n
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![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/02\/realtor-code-of-ethics-contract.jpg\")
<\/a>What do the various articles of the Code of Ethics cover?<\/h2>\n
Preamble: The Realtor\u00ae rallying cry<\/h3>\n
Duties to clients and customers<\/h4>\n
Duties to the public<\/h4>\n
Duties to Realtors\u00ae<\/h4>\n
![\"The](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/02\/realtor-code-of-ethics-agent.jpg\")
<\/a>The Realtor\u00ae Code of Ethics: A North Star for the profession and peace of mind for buyers and sellers<\/h2>\n