Are you thinking of putting your home up for sale or buying a property soon? Then, you’ll need a professional real estate agent to guide you through the process and help you achieve your goal. When choosing a realtor you should know that there’s a difference between a regular real estate agent and a Realtor due to the obligations that come with National Association of Realtors (NAR) membership.
Any real estate agent that wants to get an NAR membership must agree to the Realtors Code of Ethics, 17 rules and regulations that guide every registered real estate professional to ensure their daily business practice is ethical.
These principles help ensure that registered real estate agents treat customers fairly and provide their services with integrity and honesty, setting them apart from regular real estate agents.
Since its adoption in 1913, the Code of Ethics has become a guiding standard for aspiring real estate agents. The principles extend to customers, clients, other realtors, and the public. Thus, real estate agents must always act with integrity and honesty at all times.
Note that every real estate licensee isn’t a Realtor. Only registered Realtors can enjoy the benefits of an NAR membership. Thus, all Realtors must undertake extensive training on the principles necessary to effectively discharge their duties.
To understand the importance of the Realtor Code of Ethics, you need to know more about it and what the principles represent. This guide provides an overview of the Code of Ethics in real estate while outlining major takeaways for real estate agents.
The History of NAR’s Code of Ethics
Presently, the National Association of Realtors (NAR) is the most prominent US trade association with nearly 1.5 million members. NAR is involved with all aspects of the industry and has a code of ethics every prospective Realtor must agree too.
NAR’s primary aim is to assist its members in becoming more successful and enjoying a profitable practice. They want real estate agents to view them as instrumental to their success by developing efficient, effective, and ethical business practices.
NAR first came into existence in 1908 but was known as the National Association of Real Estate Exchanges as a single state association with 120 members. However, over 113 years, NAR has grown tremendously with more than a million members today.
The Code of Ethics used by NAR presently was adopted officially in 1913. Three years later, the association introduced the term “Realtor” for any agent registered by the association and bound by The Code.
While the association introduced the term “Realtor” in 1916, it took them more than 30 years to trademark the phrase. “Realtors” got its trademark in 1949, and the following year, “Realtor” was trademarked. In 1972, the association changed its name officially to the National Association of Realtors (NAR).
Over the years, NAR has witnessed massive growth, from about 400,000 members to nearly 1.5 million members. They also belong to 54 state associations, including the Virgin Islands, Guam, and Puerto Rico. Simply put, NAR members are scattered all over the country.
NAR real estate Code of Ethics is binding to every professional that joins the association, helping to preserve NAR’s sterling reputation in the real estate industry. The Code of Ethics consists of guidelines pertaining to real estate agents’ moral conduct and ground rules on the professional standards and due process every agent must follow while providing equal professional services to their clients.
Real estate agents that have completed the ethics training, which is done every three-years, in their present association won’t be required to undergo the same ethics training if they join any other local association in a different state.
Must All Real Estate Agents Obey the Realtor Code of Ethics?
Although the Code of Ethics is invaluable to every real estate agent, only licensed NAR members are required to abide by it. Therefore, if you aren’t a Realtor, you’re not bound by the principles.
That said, whether you are a registered Realtor or not, the Code of Ethics can be helpful, especially if you intend to work with other real estate agents using the principles to guide their business practices.
Conclusively, the Realtor Code of Ethics is ideal for both NAR members and non-members to ensure a successful practice.
Details of the Realtor Code of Ethics
The Realtors Code of Ethics outlines the way a realtor should deal with various parties, such as:
Clients and Customers
The first nine articles in The Code center around the agents’ duty to clients and customers. A great relationship between both parties is essential to every real estate agent’s success. This section reiterates that the Realtor must always protect their customers and clients’ best interests.
According to articles one and two, registered agents mustn’t misrepresent, hide facts, or exaggerate a property’s features, or make false or misleading statements when dealing with a client. If the Realtor wants the property for a specific reason they should inform their customer.
Under this section, article three states that agents should cooperate with each other, especially if the cooperation is for the client’s best interests while offering their professional services. Agents aren’t allowed to recommend any service that will result in them collecting money or obtaining a kickback when showing a property.
The client’s money in a trust fund or put through escrow should be separated from the Realtor’s funds. Under article nine, a Realtor must explain any document about a property sale or purchase in understandable terms to the client. Thus, there shouldn’t be any complicated legalese to avoid misinterpretation.
The General Public
Although the Realtors Code of Ethics focuses primarily on how real estate agents deal with their customers and clients, they also have duties to the public, as seen in public articles ten to 14.
A Realtor can’t deny people their services due to any form of discrimination, including religion, sex, race, sexual orientation, disability, familial status, color, gender identity, or national origin.
Real estate agents are only allowed to offer services within their professional scope, meaning they shouldn’t perform any duty they aren’t qualified to render.
When marketing a listed home to the public, a Realtor must not engage in false or misleading advertising. Article 13 implies that agents must not engage in activities that would appear like practicing law, meaning that they should only recommend obtaining legal services if the transaction requires it.
The fourth article in this section isn’t entirely crucial to the public. However, it is included to ensure that a Realtor is always honest while discharging their duties. Suppose a Realtor violates the Code of Ethics and is undergoing investigation, the Realtor must cooperate with the investigative proceedings and even present evidence when required.
The Realtor must not delay or obstruct the investigation, and if they do, they’ll be subjected to more disciplinary actions.
Fellow Real Estate Agents
This last section of the Code of Ethics entails realtors’ duties to their fellow agents. According to the last three articles in this section, every NAR member is mandated to treat other members with respect and honesty.
For example, a Realtor can’t make a misleading or false statement against another real estate agent, which might lead to filing unfounded complaints of ethical misconduct.
Other Realtors aren’t allowed to solicit a client that has signed a home listing agreement with another real estate agent. So many instances of Realtor interference can stop a real estate deal which is the primary reason this form of interference from other agents isn’t allowed.
Lastly, any contractual disputes between Realtors must be mediated and arbitrated by NAR’s Realtor Board. Summarily, this article means that Realtors must seek resolution to conflicts between each other through the association rather than within the judicial system.
These are simply the summarized version of the NAR Code of Ethics. Many articles within The Code have several amendments, called the “Standard of Practice” amendments. Every Realtor should acquaint themselves with the rules and principles for a successful real estate practice.
Realtor Code of Ethics Principles
The Realtors Code of Ethics at its core incorporates some themes that encompass the real estate profession as a whole. These principles help them to:
- Adhere to being fair at all times
- Demonstrate a high level of competency in all real estate matters
- Practice honesty and not mislead customers
- Strive for lofty ideals
- Have a patriotic obligation
- Operate with a high level of integrity
- Act ethically and honestly to all parties involved to avoid controversy and lawsuit
- Remain committed to improving professional and personal standards
- Seek for the “the least harm” when dealing with ethical stalemates
- Build a professional and occupational reputation based strictly on merit
- Avoid acting in a manner that might appear as leading to a conflict of interest
- Treat all real estate practices or businesses as part of the community, striving to add value to the community
- Always suggest and address solutions to ethical issues that may come up in their career
Unlike other professions, Realtors need to create a public trust to succeed. Thus, Realtors agree to obey these ethical principles collectively. Inability to adhere to or a breach of the core principles could destroy people’s hard-earned trust in the profession.
On the other hand, obeying the Code of Ethics ensures Realtors present a consistent image to the public and prospective customers on what they’ll get working with a registered Realtor.
Violations and Complaints of the Realtor Code of Ethics
A Code of Ethics violation involves committing an offense against the association, its members, or the board. Simply put, a Realtor commits an ethical violation when they fail to follow the provisions of The Code.
Some examples of real estate ethics violations include:
- Revealing confidential information
- Using misleading statements while advertising properties
- Exaggerating a building’s features to increase its appeal
- Collecting extra commission from customers
- Refusal to cooperate with both sellers and buyers
- Omitting or misinterpreting vital information affecting a property’s desirability or value
- Failure to offer competent services
Any Realtor found guilty of a Realtor ethics violation will undergo association or official board proceedings. It might be a client or other real estate professionals, or even the association/board itself that submits an official ethics complaint against an agent to the board.
However, unintentionally, ethical violations might occur through ignorance, and the official board hearing will become an educational experience.
Depending on the violation’s severity, a Realtor might:
- Incur a fine up to $15,000
- Lose their association or board membership
- Receive warning or reprimand letters
- Association or board temporary suspension
- Be mandated to attend courses and seminars
- Be ordered to cease specific conduct
To avoid the humiliation that comes with a board summon on account of ethics violation and gain more public trust, every Realtor must familiarize themselves with the Realtors Code of Ethics “Standards of Practice.”
Whether you want to list your home or buy a new property, it’s good to have an understanding of the principles and ethics of NAR for real estate agents. That way, you can confidently choose a licensed and registered Realtor over an average real estate agent.
More so, you’ll know what to expect from your Realtor. Realtors also need to be updated with the Code of Ethics to understand what clients and customers expect of them.
Kris Reid is the CEO of Ardor SEO, a company that helps real estate professionals get more leads and customers to predictably grow their business.
Over the years, Kris acquired extensive knowledge of SEO and its practical applications in various industries, with the main focus on real estate.
In 2021 Ardor launched the Icons of Real Estate Podcast to share proven strategies from the top producing icon agents with the real estate community.
After obtaining the real estate license in 2022, Kris joined eXp Realty and launched Homes by Ardor, the platform that was built to be the fastest way to buy or sell a house. Homes by Ardor also provides leads for its partner companies and realtors.
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