November 7, 2013, marks the year that of the 100th anniversary of the National Association of Realtors® Code of Ethics. The code spells out the professional responsibilities and expectations of NAR’s 1 million Realtor® members to their clients, customers, fellow Realtors® and the general public.
As a condition of membership for over 100 years and a leading advocate for homeowners and real estate investors, Realtors® have been subscribing to NAR’s strict Code of Ethics. The Code separates them from other real estate licensees. The Code of Ethics is the golden thread that binds the Realtor® community together and is the foundation for the value that Realtors® bring to their sellers and buyers.
In 1908, the National Association of Real Estate Exchanges was founded in an effort to standardize real estate practices; the entity later became the National Association of Realtors®. On July 29, 1913, the revolutionary Realtor® Code of Ethics was adopted. The organization’s original goals were to establish ethical standards, allow for the exchange of real estate information and statistics, and to develop sound public policies on real estate matters.
All Realtors® must take comprehensive training on the Code of Ethics once every quadrennial and turn in a certificate of completion to your board. The Code of Ethics has been amended 37 times and is considered a living document that protects sellers, buyers, landlords, tenants and others who place their trust in Realtors®. Not every agent is a Realtor®.
There are currently more than 1.84 million active licensed real estate professionals in the U.S.; 1 million are members of NAR and can call themselves Realtors®. NAR membership separates Realtors® from real estate agents who do not subscribe to a code of ethics or have access to the educational, business and market information advantages of their Realtor® counterparts.
Click here to see the full version of the NAR Code of Ethics.
The original Ethics of Real Estate Profession adopted in 1913 looked like this:
1. Be absolutely honest, truthful, faithful and efficient. Bear in mind that the broker is the employee of the client. If you continue to read this document, it is down to earth, open to disclosing and to be always in the mindset of fairness and friendliness to all. While the Code of Ethics establishes obligations that may be higher than those mandated by law, in any instance where the Code of Ethics and the law conflict, the obligations of the law must take precedence.
There are 17 Articles in the Code of Ethics.
Duties to Clients and Customers
Duties to the Public
Duties to REALTORS®
Let’s go over the parts. The Preamble starts out with “Under all is the land.” Members belong to one or more of some 1,600 local Realtor boards or associations. Not all Realtors® belong to a board and not all Realtors® take the oath to abide by the Code of Ethics. The term Realtor® has become to denote competency, fairness and high integrity, resulting in adhering to a lofty ideal of moral conduct in business relations. It is what you call the Golden Rule. Which in the preamble is in old English. “Whatsoever ye would that others should do to you, do ye even so to them.”
Article 1 To treat all parties honestly. Here is a case study scenario that shows Honest treatment of all parties.
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.