Case Studies Client Confidentiality / Agency Law and Ethics

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The following case studies have been taken from our Code Of Ethics.

These Case Interpretations offer examples of the practical application of the Code in professional standards enforcement and help REALTORS® understand the ethical obligations created by the Code of Ethics.

Case #1-1: Fidelity to Client
(Originally Case #7-1. Revised May 1988. Transferred to Article 1 November 1994.)

Client, A complained to a Board of REALTORS® that two of its members, REALTORS® B, and his sales associate, REALTOR-ASSOCIATE® C, had failed to represent the client’s interests faithfully by proposing to various prospective buyers that a price less than the listed price of a house be offered. His complaint specified that REALTOR® B, in consultation with him, had agreed that $137,900 would be a fair price for the house, and it had been listed at that figure. The complaint also named three different prospective buyers who had told Client A that while looking at the property, REALTOR-ASSOCIATE® C, representing REALTOR® B, when asked the price had said, “It’s listed at $137,900, but I’m pretty sure that an offer of $130,000 will be accepted.”

REALTOR® B and REALTOR-ASSOCIATE® C were notified of the complaint and requested to be present at a hearing on the matter scheduled before a Hearing Panel of the Board’s Professional Standards Committee.

During the hearing, REALTOR® B confirmed that he had agreed with Client A that $137,900 was a fair price for the house and that it was listed at that figure. He added that he had asked for a 90-day listing contract as some time might be required in securing the full market value. Client A had agreed to do this but had indicated that he was interested in selling within a month even if it meant making some concession on the price. The discussion concluded with an agreement on listing at $137,900 and with REALTOR® B agreeing to make every effort to get that price for Client A.

REALTOR-ASSOCIATE® C said in the hearing that REALTOR® B had repeated these comments of Client A and him, REALTOR-ASSOCIATE® C, had interpreted them as meaning that an early offer of about 10 percent less than the listed price would be acceptable to the seller, Client A. Questioning by the Hearing Panel established that neither REALTOR® B nor REALTOR-ASSOCIATE® C had been authorized to quote a price other than $137,900.

It was the Hearing Panel’s conclusion that REALTOR® B was not in violation of Article 1 since he had no reason to know of REALTOR-ASSOCIATE® C’s actions. The panel did find REALTOR-ASSOCIATE® C in violation of Article 1 for divulging his knowledge that the client was desirous of a rapid sale even if it meant accepting less than the asking price. The panel noted that such a disclosure was not in the client’s best interest and should never be made without the client’s knowledge and consent.

Quick Quiz

Fill in the Blank:
Neither REALTOR® B nor REALTOR-ASSOCIATE® C had been to quote a price than $137,900.

Case #1-2: Honest Treatment of All Parties
(Originally Case #7-2. Revised May 1988. Transferred to Article 1 November 1994. Cross-reference Case #2-18.)

As the exclusive agent of Client A, REALTOR® B offered Client A’s house for sale, advertising it as being located near a bus stop. Prospect C, who explained that his daily schedule made it necessary for him to have a house near the bus stop, was shown Client A’s property, liked it and made a deposit. Two days later, REALTOR® B read a notice that the bus line running near Client A’s house was being discontinued. He informed Prospect C of this, and Prospect C responded that he was no longer interested in Client A’s house since the availability of bus transportation was essential to him. REALTOR® B informed Client A and recommended that Prospect C’s deposit be returned.

Client A reluctantly complied with REALTOR® B’s recommendation, but then complained to the Board of REALTORS® that REALTOR® B had not faithfully protected and promoted his interests; that after Prospect C had expressed his willingness to buy, REALTOR® B should not have made a disclosure that killed the sale since the point actually was not of major importance. The new bus route, he showed, would put a stop within six blocks of the property.

In a hearing before a Hearing Panel of the Board’s Professional Standards Committee, REALTOR® B explained that in advertising Client A’s property, the fact that a bus stop was less than a block from the property had been prominently featured. He also made the point that Prospect C, in consulting with him, had emphasized that Prospect C’s physical disability necessitated a home near a bus stop. Thus, in his judgment, the change in bus routing materially changed the characteristics of the property in the eyes of the prospective buyer, and he felt under his obligation to give honest treatment to all parties in the transaction, that he should inform Prospect C, and that in so doing he was not violating his obligation to his client.

The Hearing Panel concluded that REALTOR® B had not violated Article 1, but had acted properly under both the spirit and the letter of the Code of Ethics. The panel noted that the decision to refund Prospect C’s deposit was made by the seller, Client A, even though the listing broker, REALTOR® B, had suggested that it was only fair due to the change in circumstances.

When acting in good faith to protect the public, it is hard to have all parties agree and not think that someone was mistreated. Do what is right ALL THE TIME.

Follow the Golden Rule which is also in our Code of Ethics in the Preamble. “Whatsoever ye would that others should do to you, do ye even so to them.”

Quick Quiz

Fill in the Blank:
“Whatsoever ye would that should do to you, do ye, even so, to .” 

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