The National Association of Realtors (NAR) Realtor Code of Ethics has existed in this industry for over a century. First adopted in 1913 as a set of guiding principles, the Code of Ethics has evolved to become the standard to which all real estate agents are held. While it’s been revised over the years to reflect new developments, the Realtor Code of Ethics still reflects the original principles of integrity, competency, accountability, and solving disputes in a reasonable manner. The code is technically something that only licensed NAR members are bound to, but it still serves as a guiding light for how to run your business – and will be helpful to understand when working with other real estate professionals who dictate their practices by the Code of Ethics.
The Code of Ethics includes 17 articles, each covering distinct areas of conduct and Standards of Practice. Think of the Code of Ethics as ground rules for acting in the client’s best interests while maintaining a sense of professionalism and decorum. Based on the concept of “let the public be served,” the code governs the dealings between realtors, their clients, and the public interest. Not well versed in the code or need a refresher? This guide will provide an overview of the Realtor Code of Ethics, how it’s enforced, common violations, the code’s influence on real estate and more key takeaways for agents!
What’s in the Real Estate Code of Ethics?
There are several common themes in the Code of Ethics that outline best practices for realtors. These themes include: honesty and fairness, competency and integrity, maintaining high personal and professional standards, constant improvement and community support and awareness.
Realtor Code of Ethics Preamble
According to the code’s preamble, Realtors “pledge to observe the code’s 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.“
The preamble to the Code of Ethics is philosophical and subjective in nature and sets what NAR describes as the aspirational objectives of moral conduct. For example, the preamble cites the Golden Rule, “Whatsoever ye would that others should do to you, do ye even so to them.“
While the preamble cannot be used as grounds for disciplinary action against a realtor, the 17 articles to follow can. The Code of Ethics has three major sections – each with a list of articles and standards of practice. The 17 articles below provide standards for business conduct with clients and customers, the public, and other realtors.
Duties to Clients and Customers
It’s an agent’s duty to protect their client’s best interest, but treat all parties involved in a transaction honestly.
1: Protect the best interests of the client.
2: No misrepresentation, exaggeration, or hiding facts about the property at hand.
3: Realtors should cooperate with each other unless it’s not in the client’s best interests.
4-5: Disclose any personal interest in a property.
6-7: No recommending services for a kickback or collecting money under the table.
8: Keep client funds separate from your own.
9: Present all documents for the transaction to the buyer/seller in understandable terms.
Duties to the Public
Realtors must meet professional competency standards and stand against discriminatory housing practices.
10: No denying services on the basis of discrimination.
11: Provide clients with competent services only within a realtor’s professional scope.
12: No false or misleading advertising.
13: Don’t break the law.
14: Cooperate with the realtor board’s investigative proceedings if charged with a violation.
Duties to Realtors
Agents must refrain from making false or reckless statements about their fellow professionals.
15: No false or misleading statements about other realtors.
16: Don’t solicit clients that have already signed an exclusive listing agreement with another realtor.
17: The realtor board will mediate or arbitrate contractual disputes.
This code outlines the values of realtors in real estate. It covers the ethical principles and standards that NAR believes professionals should aim for. As a real estate agent, you should try to keep to these standards, if not higher. You’re dealing with people’s money, probably their biggest asset and with their emotions. It’s important to keep a good relationship with the client, be truthful, and stick to these ethics. Act as a concierge and direct. Give unbiased, good advice and aim to make a positive impact on peoples’ lives.
Code of Ethics Violations
Realtors who ignore the Code of Ethics do so at their own risk. Angry buyers & sellers who believe they suffered financial damages because of an agent are quick to instigate lawsuits to recover their alleged losses. Realtors who learn and abide by the Code of Ethics can avoid the mistakes and temptations that lead some licensees to litigation nightmares. Common real estate ethics complaints and violations include:
- Not acting in the best interests of clients.
- Revealing private or confidential information.
- Exaggerating the qualities or features of a property.
- Failing to disclose a personal relationship with a purchaser to a home seller and client.
- Collecting extra commission from a client.
- Posting discriminatory or offensive comments on social media.
- Advertising a listed property without disclosing realtor status.
Complaints can also include requests to arbitrate money disputes, such as commission disputes between realtors of different firms. The board will typically try to mediate contractual disputes before they go to arbitration, unless both parties advise against mediation in writing. The code helps realtors avoid legal battles by settling disputes through arbitration overseen by the association instead. You can find the types of disputes that qualify for arbitration in Article 17 of the Code. Sanctions for a violation may include: a fine not to exceed $15,000, suspension from the board or association, a letter of reprimand and required education courses.
Are you confident in your understanding of the Realtor Code of Ethics? Let us know your thoughts in the comments below and let’s keep it ethical out there!