The Realtor Code of Ethics has existed for over 100 years in some form or another. The articles of the Code are updated regularly to keep it relevant to today’s world. But as of 2020, the essence of the Realtor Code of Ethics remains unchanged: honesty, integrity, and proficiency. Unethical practices are prohibited in all aspects of the real estate world. But what is so important about the realtor code of ethics?
The realtor code of ethics has great importance as it assures the integrity and security of both the seller and the buyer. But that’s not all. Its importance is beyond this simple assurance.
So, to know more, we recommend you go through this entire article as we have given more information on this subject.
Difference between a Realtor and a Real Estate Agent
Many people assume that the terms Realtor and real estate agent are similar or the same, but the truth is they are not. A Realtor is a part of the largest trade organization in the United States, the National Association of Realtors (NAR) which currently has 1.4 million members. A Realtor is also bound to follow the rules set by the Code of Ethics strictly.
While a real estate agent is a licensed professional who conducts the buying and selling of properties. They are affiliated with or work for real estate brokers and do not have a strict Code of Ethics to follow. Hence, Realtors are preferred over real estate agents even though there is no proof that Realtors are morally or ethically “better” than a real estate agent. This give a buyer or seller a way to seek recourse if something unethical occurs in the transaction.
A Realtor can be a real estate agent, broker- associate, etc. but a real estate licensee has to agree to follow the Code of Ethics when applying to NAR to become a Realtor. The title of a Realtor is respected and trusted widely as only a Realtor is subscribed to the Code of Ethics.
The Importance of The Realtor Code of Ethics
The legal duty of a Realtor is to promote and protect the rights of the buying and selling parties and has duties to discourage unscrupulous and corrupt practices that dishonor the real estate industry.
The Code of Ethics provides the highest assurance and safety measures for both buyers and sellers of real estate. Following the Code, the Realtor is bound to offer the clients advantages and apply all knowledge and experience with every client. It assures the buyers and sellers that their best interest is the primary concern.
Consequently, clients are inclined to choose a Realtor over a real estate agent, and the business for the Realtors surges. Besides, if a Realtor fails to stand by the code of ethics, sanctions for violations need to be paid which can result in monetary loss and can tarnish the image of the Realtor in his community.
The Origins of the Code of Ethics
The Code of Ethics was taken on in early stages of 1990s, during that period “caveat emptor” (“Let the buyer beware”) was the code of conduct which later became “Let the public be served.” It was adopted to establish professional and ethical standards in the industry of real estate.
At the earliest of the 1900s, people wanted to move out of the crowded cities and own their own homes, as a result many “real estate dealers” surfaced. They set up their shops on the sidewalks and swindled anyone they could. They forged documents, sold properties they weren’t authorized to, and even sold the same property again and again to different clients.
Peter Van Vlissingen, considered Chicago’s most prosperous and reputable businessman, was arrested for fraud. Upon his arrest, he confessed to swindling 25 people out of $700,000, which was later found to be a 100 people and over 2 million dollars. After this, real estate practitioners from seven Midwestern boards met and formed NAR in 1908.
The Rules set by the Realtor Code of Ethics
All Realtors must stand by the Realtor Code of Ethics and swear to protect the clients and customers they work for. It is 17 articles long and extremely detailed to help the Realtor in every possible situation and to ensure they act accordingly. these ethical codes not only protect the prestigious image of NAR but also makes sure the clients are treated fairly.
The Realtor’s ethical codes can be broken into three parts:
Articles 1-9 outline duties to the clients and customers, articles 10-14 outlines the duties to the public, and articles 15-17 outlines duties to realtors, in pursuance of an honest and competent work environment.
According to the Article 1 of the Code of Ethics, the primary concern of a Realtor is to promote and protect their client’s best interest and to manage every party involved, such as buyers and sellers, with honesty and equality. A Realtor is forbidden from exaggerating, misrepresenting, or concealing material facts about a property, also known as fraud.
For example, if a Realtor sees a problem at a house, the listing agent must be informed or if the sellers request the Realtor to remove their shoes upon entering the house, they should leave their shoes outside the house and honor the sellers. A Realtor must always use common sense and good manners while working with clients.
For duties to the public, a realtor has to decline fees from multiple parties without informing and having the consent of the involved parties. and must not differentiate among the parties based on their familial status, sex, race, handicap, color, gender identity, religion, etc. All corrupt activities must be prohibited.
For duties to his community, a Realtor must agree to not slander his rivals or file baseless ethics charges or create an unfair advantage over competitors.
The rules set by the Code are updated regularly. Since 2019, the Code of Ethics Training is required every three years. This change was made by NAR’s Board of Directors to ensure that a Realtor must abide by the ethical codes and stay updated with the alterations.
To get fully acquainted with the code of ethics please click here
The Preamble to the Code of Ethics
The Preamble to the Code is the aspirational foundation for the ethical concepts that the Realtors believe in. The core concepts are honesty, integrity, fairness, and moral conduct in business relations. In the final paragraphs of the Preamble, the timeless, the universal principle of the Golden Rule is cited.
The Consequences of Violation of The Realtor Code of Ethics
When a realtor supposedly violates any ethical code, ethics complaint is filed against the violator. Enforcement of the NAR standards of practice unfolds at a local level first, monitored by 1200 local realtor associations across the country. Realtors with complaints bring offense to their local community.
From there, a few different bodies review, and the process of screening of the complaint takes is done by the association’s Grievance Committee. It is then passed on to a committee which conducts a hearing board of 3-5 members to determine if there was a violation or not and the disciplinary actions to be taken.
The Code helps Realtors avoid legal battles and solves disputes through arbitration overseen by the association. According to the Code of Ethics and arbitration manual, the penalty may include fines (not more than $5000), letter of reprimand, the requirement that the respondent attends an education course.
The Real estate industry is primarily based on trust and realtors need to develop an ethical culture. This shows what is so important about the realtor code of ethics. It is important to follow them to form strong relationships between a realtor and clients.
We hope this article was of help to you and wish you the best of luck on your upcoming career decision.