Code of Ethics - Article 1

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations. 

Article 1 - When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client.  This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly.  When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly.

Case #1-4: Fidelity to Client - Client A contacted Realtor^® B to list a vacant lot. Client A said he had heard that similar lots in the vicinity had sold for about $50,000 and thought he should be able to get a similar price. Realtor^® B stressed some minor disadvantages in location and grade of the lot, and said that the market for vacant lots was sluggish. He suggested listing at a price of $32,500 and the client agreed.

In two weeks, Realtor^® B came to Client A with an offer at the listed price of $32,500. The client raised some questions about it, pointing out that the offer had come in just two weeks after the property had been placed on the market which could be an indication that the lot was worth closer to $50,000 than $32,500. Realtor^® B strongly urged him to accept the offer, stating that because of the sluggish market, another offer might not develop for months and that the offer in hand simply vindicated Realtor^® B’s own judgment as to pricing the lot. Client A finally agreed and the sale was made to Buyer C.

Two months later, Client A discovered the lot was no longer owned by Buyer C, but had been purchased by Buyer D at $55,000. He investigated and found that Buyer C was a brother-in-law of Realtor^® B, and that Buyer C had acted on behalf of Realtor^® B in buying the property for $32,500.

Client A outlined the facts in a complaint to the Board of Realtors^®, charging Realtor^® B with collusion in betrayal of a client’s confidence and interests, and with failing to disclose that he was buying the property on his own behalf.

At a hearing before a panel of the Board’s Professional Standards Committee, Realtor^® B’s defense was that in his observation of real estate transactions there can be two legitimate prices of property—the price that a seller is willing to take in order to liquidate his investment, and the price that a buyer is willing to pay to acquire a property in which he is particularly interested. His position was that he saw no harm in bringing about a transaction to his own advantage in which the seller received a price that he was willing to take and the buyer paid a price that he was willing to pay.

The Hearing Panel concluded that Realtor^® B had deceitfully used the guise of rendering professional service to a client in acting as a speculator; that he had been unfaithful to the most basic principles of agency and allegiance to his client’s interest; and that he had violated Articles 1 and 4 of the Code of Ethics.

Code of Ethics - Article 6

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 6 - REALTORS® shall not accept any commission, rebate, or profit on expenditures made for their client, without the client’s knowledge and consent.
When recommending real estate products or services (e.g., homeowner’s insurance, warranty programs, mortgage financing, title insurance, etc.), REALTORS® shall disclose to the client or customer to whom the recommendation is made any financial benefits or fees, other than real estate referral fees, the REALTOR® or REALTOR®’s firm may receive as a direct result of such recommendation.

Case #6-6: Disclose Affiliated Business Relationships Prior to Recommending Real Estate-Related Products or Services

Realtor^® Z, a broker and sole proprietor, had invested considerable time, money and energy into developing her website. Seeking to recoup some of her costs, she approached virtually every provider of real estate-related products and services in her area, including financial institutions, title insurance companies, home inspectors, mortgage brokers, insurance agencies, appraisers, exterminators, decorators, landscapers, furniture and appliance dealers, rug and carpet dealers, moving companies, and others about advertising on her home page. As a condition of having a link to their own sites appear on her home page, Realtor^® Z required that a fee be paid to her each time a consumer “clicked through” from her site to an advertiser’s.

Ads for providers of real estate-related products and services who agreed to Realtor^® Z’s terms appeared on her home page under the heading “Preferred Providers”. Immediately under that heading read “These vendors provide quality goods and services. Please patronize them.”

Buyer A frequented Realtor^® Z’s website seeking information about available properties. Using that website, he became aware of a property on Elm Street that he made an offer on through Realtor^® Z, which was accepted by the seller. The sale closed shortly afterwards.

Buyer A was an avid remodeler and, using Realtor^® Z’s website, linked to the Real Rug company website, among others. Interested by what he found there, he subsequently visited their showroom in person and purchased wall-to-wall carpeting and several expensive area rugs.

Given the size of Buyer A’s order, one of the owners of Real Rug came to oversee the delivery and installation. In the course of conversation with Buyer A, he commented favorably on the amount of referral business received from Realtor^® Z’s website. “And to think I only pay a small fee for each customer who’s referred to me by Realtor^® Z,” he added.

Buyer A was somewhat surprised that Realtor^® Z would receive money for referring clients and customers to providers of real estate-related products and services and contacted the local association of Realtors^®. The association provided him with a copy of the Code of Ethics. Reading it carefully, Buyer A concluded that Realtor^® Z’s actions might have violated Article 6, and he filed an ethics complaint against Realtor^® Z.

At the hearing, Realtor^® Z defended herself and her website, stating that the advertisements for real estate-related products and services on her website were simply that, only advertisements and not recommendations or endorsements of the products and services found there. She acknowledged she collected a fee each time a visitor to her website clicked on the links found under “Preferred Providers” but claimed that simply referring to those advertisers as “preferred” did not constitute a recommendation or endorsement of the products and/or the services offered.

The hearing panel disagreed with Realtor^® Z’s reasoning, pointing out that a reasonable consumer would certainly conclude that referring to a provider of real estate-related products or services as being “preferred” by a Realtor^® constituted a recommendation or endorsement. Further, since Realtor^® Z received a fee each time a consumer “clicked through” to one of Realtor^® Z’s “Preferred Providers”, Realtor^® Z received a referral fee, and disclosure of that fee was required under Article 6. Realtor^® Z was found in violation of Article 6.

Code of Ethics - Article 4

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 4– REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker.  In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative.

Case #4-5: Fidelity to Client

Client A contacted Realtor^® B to list a vacant lot. Client A said he had heard that similar lots in the vicinity had sold for about $50,000 and thought he should be able to get a similar price. Realtor^® B stressed some minor disadvantages in location and grade of the lot, and said that the market for vacant lots was sluggish. He suggested listing at a price of $32,500 and the client agreed.

 In two weeks, Realtor^® B came to Client A with an offer at the listed price of $32,500. The client raised some questions about it, pointing out that the offer had come in just two weeks after the property had been placed on the market which could be an indication that the lot was worth closer to $50,000 than $32,500. Realtor^® B strongly urged him to accept the offer, stating that because of the sluggish market, another offer might not develop for months and that the offer in hand simply vindicated Realtor^® B’s own judgment as to pricing the lot. Client A finally agreed and the sale was made to Buyer C.

Two months later, Client A discovered the lot was no longer owned by Buyer C, but had been purchased by Buyer D at $55,000. He investigated and found that Buyer C was a brother-in-law of Realtor^® B, and that Buyer C had acted on behalf of Realtor^® B in buying the property for $32,500.

Client A outlined the facts in a complaint to the Board of Realtors^®, charging Realtor^® B with collusion in betrayal of a client’s confidence and interests, and with failing to disclose that he was buying the property on his own behalf.

At a hearing before a panel of the Board’s Professional Standards Committee, Realtor^® B’s defense was that in his observation of real estate transactions there can be two legitimate prices of property—the price that a seller is willing to take in order to liquidate his investment, and the price that a buyer is willing to pay to acquire a property in which he is particularly interested. His position was that he saw no harm in bringing about a transaction to his own advantage in which the seller received a price that he was willing to take and the buyer paid a price that he was willing to pay.

The Hearing Panel concluded that Realtor^® B had deceitfully used the guise of rendering professional service to a client in acting as a speculator; that he had been unfaithful to the most basic principles of agency and allegiance to his client’s interest; and that he had violated Articles 1 and 4 of the Code of Ethics.

Article 3 - Code of Ethics - Case Interpretations

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.


Article 3

REALTORS® shall cooperate with other brokers except when cooperation is not in the client’s best interest. The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise compensate another broker.


Case #3-9: REALTOR®’s Obligation to Disclose True Nature of Listing Agreement

REALTOR® A listed the home of Seller X and filed the listing with the Board’s MLS categorizing it as an exclusive right to sell listing. REALTOR® A did not disclose that there was a dual rate commission arrangement on this listing, even though the listing contract provided that, should the seller be the procuring cause of sale, the listing broker would receive a commission of $500.00, an amount intended to compensate REALTOR® A for his marketing costs.

REALTOR® B, a cooperating broker, showed the property several times. Eventually, REALTOR® B brought a signed purchase agreement to REALTOR® A. REALTOR® A returned the purchase agreement the next day, informing REALTOR® B that the seller had rejected the offer. Several weeks later, REALTOR® B learned that the property had been sold, and that the buyer was Seller X’s nephew.

Several months later, REALTOR® B met Seller X at a fund-raising event. Seller X thanked her for her efforts, and told her that, under “normal circumstances,” he might have seriously considered the offer she had produced. When asked why the circumstances surrounding this transaction were “unusual,” Seller X responded telling her of his agreement “with REALTOR® A to pay a $500.00 commission if Seller X found the buyer. And when my nephew decided to buy the house, I jumped at the chance to save some money.”


When REALTOR® B learned of this arrangement, she filed a complaint with the Board of REALTORS® alleging that REALTOR® A had violated Article 3 of the Code of Ethics. The Executive Officer of the Board referred the complaint to the Grievance Committee, and, after its review, the Grievance Committee referred the complaint back to the Executive Officer indicating that an ethics hearing should be scheduled.

At the hearing, REALTOR® B, in stating her complaint to the Hearing Panel, said that REALTOR® A’s failure to disclose the actual terms and conditions of his listing with Seller X was a misrepresentation. She explained that, had she been aware of this arrangement, she might have decided not to accept REALTOR® A’s offer of cooperation, since it might put potential purchasers she would produce in a possibly unfair position.


REALTOR® A, speaking in his own defense, stated no commission differential would have resulted if the buyer had been procured by either the listing broker or a cooperating broker so whatever other arrangements he had with Seller X were personal and, as listing broker, it was his right to establish the terms and conditions of his relationship with his client.


After careful deliberation, the Hearing Panel concluded that while it was REALTOR® A’s right to establish the terms and conditions of the listing contract, the existence of his “special” arrangement with Seller X should have been disclosed as a dual or variable rate commission, since without knowledge of it, cooperating brokers would be unable to make knowledgeable decisions regarding acceptance of the listing broker’s offer to cooperate.


The Hearing Panel concluded that REALTOR A had in fact concealed and misrepresented the real facts of the transaction and was in violation of Article 3 of the Code of Ethics as interpreted by Standard of Practice 3-4.

Code of Ethics-Article 2-Case Interpretation

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 2
REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non-agency relationships as defined by state law.

Case #2-2: Responsibility for Sales Associate’s Error
REALTOR® A, a REALTOR® principal, was asked to list a neglected house that obviously needed a wide range of repairs. He strongly advised the owner that it would be to his advantage to put the house in good repair before offering it for sale, but the owner wanted it sold at once on an “as is” basis. REALTOR® A wrote a novel advertisement offering a “clunker” in poor condition as a challenge to an ambitious do-it-yourself hobbyist.

A few days later, Sales Associate B, who was not a Board member, from REALTOR® A’s office showed the house to a retired couple who liked the location and general features, and who had been attracted by the ad because the husband was looking forward to applying his “fix-up” hobby to improving a home. The sale was made. Shortly thereafter, REALTOR® A was charged by the buyer with having misrepresented the condition of the property.

REALTOR® A accompanied Sales Associate B to the hearing, armed with a copy of his candid advertisement. The hearing established that the buyer fully understood that the house was represented to be generally in poor condition, but that while inspecting the house with a view to needed repairs, Sales Associate B had commented that since the house was of concrete block and stucco construction, there would be no termite worries since termites could not enter that type of construction. Sales Associate B confirmed this and his belief that the statement was correct. However, after the sale was made, the buyer ripped out a sill to replace it and found it swarming with termites, with termite damage to floors in evidence. Further questioning established that there had been no evidence of termite infestation prior to the sale, and that the Sales Associate had volunteered an assurance that he thought was well grounded.

REALTOR® A, prior to the conclusion of the hearing, offered to pay the cost of exterminating the building and the cost of lumber to repair termite damage in view of Sales Associate B’s failure to recommend a termite inspection, which was the usual and customary practice in this area. The complainant stated that this would satisfy him completely. It was the Hearing Panel’s view that while REALTOR® A’s actions were commendable, and would be taken into account by the Hearing Panel, REALTOR® A was still responsible for the errors and misstatements of the sales associates affiliated with him. The Hearing Panel concluded that REALTOR® A was in violation of Article 2.

Code of Ethics-Article1-Case Interpretations

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 1 - When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly.

Case #1-5: Promotion of Client’s Interests
Client A gave an exclusive listing on a house to REALTOR® B, stating that he thought $132,500 would be a fair price for the property. REALTOR® B agreed and the house was listed at that price in a 90-day listing contract. REALTOR® B advertised the house without response, showing it to a few prospective buyers who lost interest when they learned the price. In a sales meeting in his office, REALTOR® B discussed the property, advised his associates that it appeared to be overpriced, and that advertising and showing of the property had proved to be a waste of time and money.

After six weeks had gone by without a word from REALTOR® B, Client A called REALTOR® B’s office without identifying himself, described the property, and asked if the firm was still offering it for sale. The response he received from one of REALTOR® B’s nonmember associates was: “We still have the house listed, but there is little interest in it because, in our opinion, it is overpriced and not as attractive a value as other property we can show you.”

Client A wrote to the Board of REALTOR® complaining of REALTOR® B’s action, charging failure to promote and protect the client’s interest by REALTOR® B’s failure to advise the client of his judgment that the price agreed upon in the listing contract was excessive, and by REALTOR® B’s failure to actively seek a buyer.

In a hearing on the complaint before a Hearing Panel of the Board’s Professional Standards Committee, REALTOR® B’s response was that Client A had emphatically insisted that he wanted $132,500 for the property; that by advertising and showing the property he had made a diligent effort to attract a buyer at that price; that in receiving almost no response to this effort he was obliged to conclude that the house would not sell at the listed price; that in view of the client’s attitude at the time of listing, he felt it would be useless to attempt to get Client A’s agreement to lower the listed price; and that he had instructed his staff not to actively market the property at that price.

The Hearing Panel concluded that REALTOR® B was in violation of Article 1; that he had been unfaithful in his obligations in not advising his client of his conclusion that the property was overpriced, based on the response to his initial sales efforts; and in withholding his best efforts to bring about a sale of the property in the interests of his client.

Code of Ethics - Article 16 - Case Interpretations

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 16 – REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with clients.

Case #16-8: Unauthorized Use of Information Received from Listing Broker for the Purpose of Creating a Referral Prospect to a Third Broker or for Creating a Buyer Prospect

REALTOR® A filed a listing with the Board MLS which bulletined the information to all Participants. In the “Remarks” portion of the property data form, it was noted that the seller was moving out of state. Shortly thereafter, REALTOR® A received a call from REALTOR® B, requesting permission to show the property to a prospective purchaser. REALTOR® B’s request was granted and the property was shown to the prospect. During the showing, REALTOR® B started a conversation with Seller X regarding his proposed move to another state. REALTOR® B told the seller that he was acquainted with a number of real estate brokers in the city to which Seller X was relocating and suggested that he be allowed to refer Seller X to one of these brokers. Seller X responded that REALTOR® A, the listing broker, had previously mentioned the possibility of a referral and that Seller X felt obligated to be referred by REALTOR® A, if by anyone.

Several days later, Seller X received a phone call from REALTOR® B who again asked permission to refer the seller to a broker in the city to which the seller was moving. The seller indicated that he was not interested in REALTOR® B’s offer and that if he wished to be referred to another broker, he would do so through REALTOR® A. The seller then called REALTOR® A and asked if there was anything REALTOR® A could do to stop REALTOR® B from requesting that he be allowed to refer the seller to another broker. Upon learning of REALTOR® B’s attempts to create a referral prospect, REALTOR® A filed a complaint with the Grievance Committee of the Board alleging a violation of Article 16 of the Code of Ethics and cited Standard of Practice 16-18 in support of the allegations.

In accordance with the Board’s established procedures, the Grievance Committee reviewed the complaint and referred it to a panel of the Professional Standards Committee for hearing. The appropriate notices were sent to all parties and a hearing was scheduled.

At the hearing, REALTOR® A produced a written statement from Seller X in support of his testimony and concluded that REALTOR® B had violated Article 16 of the Code of Ethics in attempting to use confidential information received through the Board’s MLS to attempt to create a referral prospect to a third broker.

REALTOR® B responded that, as a subagent of the listing broker, he was attempting to promote the seller’s best interest by referring the seller to a reputable broker whom he knew personally in the city to which the seller was going to relocate. REALTOR® B indicated that the seller had not accepted his offer of referral and, based on such refusal, REALTOR® B had not, in fact, made any referral and, therefore, had not acted in a manner inconsistent with his obligations as expressed in Standard of Practice 16-18.

After giving careful consideration to all the evidence, the Hearing Panel determined REALTOR® B to be in violation of Article 16 by his attempt to utilize confidential MLS information to create a referral prospect to a third broker, contrary to the intent of Standard of Practice 16-18, even though his effort to obtain the seller’s permission to do so had been unsuccessful. The Hearing Panel also commented that MLS information is confidential and to be utilized only in connection with the REALTOR®’s role as cooperating broker. The panel further commented that information received from a listing broker through the MLS should not be used to create a referral prospect to a third broker or to create a buyer prospect unless such use is authorized by the listing broker.

Code of Ethics - Article 15 - Case Interpretations

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 15 – REALTORS® shall not knowingly or recklessly make false or misleading statements about competitors, their business, or their business practices.
• Standard of Practice 15-1 – REALTORS® shall not knowingly or recklessly file false or unfounded ethics complaints.
• Standard of Practice 15-2 – The obligation to refrain from making false or misleading statements about competitors, competitors’ businesses, and competitors’ business practices includes the duty to not knowingly or recklessly publish, repeat, retransmit, or republish false or misleading statements made by others. This duty applies whether false or misleading statements are repeated in person, in writing, by technological means (e.g., the Internet), or by any other means.
• Standard of Practice 15-3 – The obligation to refrain from making false or misleading statements about competitors, competitors’ businesses, and competitors’ business practices includes the duty to publish a clarification about or to remove statements made by others on electronic media the REALTOR® controls once the REALTOR® knows the statement is false or misleading.

Case #15-2: Intentional Misrepresentation of a Competitor’s Business Practices
Following a round of golf early one morning, Homeowner A approached REALTOR® X. “We’ve outgrown our home and I want to list it with you,” said Homeowner A. “I’m sorry,” said REALTOR® X, “but I represent buyers exclusively.” “Then how about REALTOR® Z?,” asked Homeowner A, “I’ve heard good things about him.” “I don’t know if I would do that,” said REALTOR® X, “while he does represent sellers, he doesn’t cooperate with buyer brokers and, as a result, sellers don’t get adequate market exposure for their properties.”

Later that day, Homeowner A repeated REALTOR® X’s remarks to his wife who happened to be a close friend of REALTOR® Z’s wife. Within hours, REALTOR® Z had been made aware of REALTOR® X’s remarks to Homeowner A earlier in the day. REALTOR® Z filed a complaint against REALTOR® X charging him with making false and misleading statements. REALTOR® Z’s complaint was considered by the Grievance Committee which determined that an ethics hearing should be held.

At the hearing REALTOR® Z stated, “I have no idea what REALTOR® X was thinking about when he made his comments to Homeowner A. I always cooperated with other REALTORS®.” REALTOR® X replied, “That’s not so. Last year you had a listing in the Multiple Listing Service and when I called to make an appointment to show the property to the buyer, you refused to agree to pay me.” REALTOR® Z responded that he had made a formal offer of subagency through the MLS with respect to that property but had chosen not to offer compensation to buyer agents through the MLS. He noted, however, that the fact that he had not made a blanket offer of compensation to buyer agents should not be construed as a refusal to cooperate and that he had, in fact, cooperated with REALTOR® X in the sale of that very property.

In response to REALTOR® Z’s questions, REALTOR® X acknowledged that he had shown his buyer-client REALTOR® Z’s listing and that the buyer had purchased the property. Moreover, REALTOR® X said, upon questioning by the panel members, he had no personal knowledge of any instance in which REALTOR Z had refused to cooperate with any other broker but had simply assumed that REALTOR® Z’s refusal to pay the compensation REALTOR® X had asked for was representative of a general practice on the part of REALTOR® Z.

The Hearing Panel, in its deliberations, noted that cooperation and compensation are not synonymous and though formal, blanket offers of cooperation and compensation can be communicated through Multiple Listing Services, even where they are not, cooperation remains the norm expected of REALTORS®. However, to characterize REALTOR® Z’s refusal to pay requested compensation as a “refusal to cooperate” and to make the assumption and subsequent statement that REALTOR® Z “did not cooperate with buyer agents” was false, misleading, and not based on factual information. Consequently, REALTOR® X was found in violation of Article 15.

Code of Ethics - Article 13 - Case Interpretations

Article 13 – REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it.

Case #13-3: REALTOR®’s Obligation to Recommend Counsel When Needed
REALTOR® A was the listing broker for 25 acres of land owned by Client B. Shortly after REALTOR® A’s sign was placed upon the property, Customer C called REALTOR® A and expressed interest in purchasing the property. After inspecting the property, Customer C made a full price offer. Surprised, Client B prepared a counter-offer at a higher price. REALTOR® A realized that he might have a legal claim for commission from Client B, but not wishing to jeopardize their relationship, agreed that he would go back to Customer C and attempt to negotiate a higher price. Upon being informed of the property owner’s change of mind and his requested higher price for the property, Customer C became upset and indicated his intent to consult his attorney to determine if he could force the seller to go through with the sales transaction at the price for which it had been originally offered. At this point REALTOR® A advised Customer C that, in his opinion, litigation would be lengthy and expensive and that in the final analysis the sale could not be enforced. On the basis of REALTOR® A’s advice Customer C agreed to the higher price, and the transaction was consummated. Shortly after, Customer C complained to the Board of REALTORS® that REALTOR® A had provided bad advice to him. The Secretary referred the complaint to the Grievance Committee which determined that a hearing should be held and referred the matter back to the Secretary to arrange such a hearing.

At the hearing, Customer C outlined his complaint to the Hearing Panel of the Professional Standards Committee. He indicated that he had intended to consult his attorney, however, because of the persuasive personality of REALTOR® A and REALTOR® A’s assurance that legal action would be an exercise in futility, he had not done so.

REALTOR® A advised the panel that he had told Customer C that he could consult his attorney, but that, in his opinion, it would be a waste of time. He defended what he had told Customer C stating that it was only his opinion, not intended as a conclusive statement of law, and, in fact, was a correct statement under the law of the state. The panel concluded that REALTOR® A, in pointing out the fact that legal action was likely to be time consuming and expensive, was stating a practical circumstance which Customer C should consider and was proper. The panel further concluded that the expression of an opinion as to the probable outcome of the case was not an “unauthorized practice of law” within the meaning of Article 13.

However, the panel noted that a REALTOR® is obligated to “recommend that legal counsel be obtained when the interest of any party to the transaction requires it.”

In this case, REALTOR® A was aware that the interest of Customer C required a legal opinion as to whether Customer C could compel Client B to convey title to the property and did not intend his personal opinion to represent a “statement of law” upon which Customer C could rely. Accordingly, REALTOR® A was obligated to affirmatively recommend that Customer C consult his attorney to definitively establish the legal rights in question.

Having failed to make such a recommendation, REALTOR® A was in violation of Article 13.

Code of Ethics - Article 12 - Case Interpretation

As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 12 – REALTORS® shall be honest and truthful in their real estate communication and shall present a true picture in their advertising, marketing, and other representations. REALTORS® shall ensure that their status as real estate professionals is readily apparent in their advertising, marketing, and other representations, and that the recipient of all real estate communications are, or have been, notified that those communications are from a real estate professional.

Case #12-6: Misleading Advertising
REALTOR® A’s business included real estate brokerage, property management, and home building. In one of his newspaper advertisements of his home building activities, in which he identified himself as a REALTOR®, there was prominently featured the words, “Buy Direct and Save.” REALTOR® B sent a copy of the advertisement to the Board of REALTORS® as the basis of a complaint that REALTOR® A in his advertising was, through use of the quoted phrase, seeking to take unfair advantage of other REALTORS®.

At the hearing, it was brought out that REALTOR® A’s properties had been listed with his real estate firm and processed through the MLS. He defended his advertising by asserting that it was no more than reasonable for him to seek the sale of houses in his subdivision through his own brokerage office to the greatest extent possible. He was not able to show the Hearing Panel any instances of reduced prices on direct sales even though several such sales had occurred.

It was the conclusion of the panel that REALTOR® A had violated Article 12. The panel’s decision indicated that just because he engaged in home building he could not be exempted from the standards that apply to REALTORS® generally; and that the phrase “Buy Direct and Save” in his advertising was an attempt to convince prospective buyers that a lower price would be offered those purchasing direct rather than through cooperating brokers when, in fact, he had maintained the same prices and there was no saving by buying direct.

Code of Ethics - Article 11 - Case Interpretation

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 11 – The services which REALTORS® provide to their clients and customers shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage; specifically, residential real estate brokerage, real property management, commercial and industrial real estate brokerage, land brokerage, real estate appraisal, real estate counseling, real estate syndication, real estate auction, and international real estate.

REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any person engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth.


Case #11-5: Appraiser’s Competence to Assignment
Client A engaged REALTOR® B to appraise an apartment house, indicating that he planned to put the building on the market. When the appraisal was submitted, REALTOR® B solicited the listing of the building at the price shown as current market value in his appraisal. Client A asked for time to think it over. Surprised at what he felt to be a low valuation in REALTOR® B’s appraisal, Client A went to REALTOR® C, recounted his business relations with REALTOR® B, and engaged REALTOR® C to make a second appraisal of the building. REALTOR® C submitted his appraisal which was 25% higher than REALTOR® B’s valuation. Client A listed the property for sale with REALTOR® C at his appraised value and the building was shortly sold by REALTOR® C at that price.

REALTOR® C filed a complaint against REALTOR® B charging a violation of Article 11 in having undertaken an appraisal that was outside the field of his experience and competence.

At the hearing, at which a written statement by Client A was entered into the record, all the facts set out above were established.

Questioning revealed that REALTOR® B had engaged in very little appraisal work, and never before with respect to any kind of property except single family houses, that he had not obtained qualified assistance, and that he had not acquainted Client A with the limited extent of his experience.

It was the conclusion of the Hearing Panel that REALTOR® B was in violation of Article 11 because he had undertaken an appraisal for which he was not qualified, without obtaining competent assistance and without advising his client as to the facts respecting his limited experience as an appraiser.

Code of Ethics - Article 10 - Case Interpretations

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 10 – REALTORS® shall not deny equal professional services to any person for reasons of race, color, religion, sex, handicap, familial status, or national origin. REALTORS® shall not be parties to any plan or agreement to discriminate against a person or persons on the basis of race, color, religion, sex, handicap, familial status, or national origin.

REALTORS® in their real estate employment practices, shall not discriminate against any person or persons on the basis of race, color, religion, sex, handicap, familial status, or national origin.

Case #10-4: Use of “Choose Your Neighbor” Marketing Letters

REALTOR® A listed a property in a new subdivision. At the instruction of his client, Seller X, REALTOR® A did not file information on the listing with his Board’s MLS, did not place a “For Sale” sign on the property and did not advertise the property in the local newspaper. Seller X had told REALTOR® A that he wanted the sale handled quietly, with the new purchasers being people who would “fit into the neighborhood—people with the same socioeconomic background” as the other residents of the subdivision.

Based on his conversation with Seller X, REALTOR® A’s only marketing effort was mailing a letter to the other residents of the subdivision, inviting them “. . . to play a part in the decision of who your next neighbor will be. If you know of someone who you would like to live in the neighborhood, please let them know of the availability of this home, or call me and I will be happy to contact them and arrange a private showing.”

REALTOR® A’s marketing strategy came to the attention of REALTOR® B, whose mother lived in the subdivision. REALTOR® B filed a complaint charging REALTOR® A with a violation of Article 10 of the Code of Ethics.

At the hearing, REALTOR® B told the Hearing Panel of receiving a copy of the marketing letter from his mother, who had recently moved to the subdivision. REALTOR® B advised the panel that he had checked the Board’s MLS for information on the property, had driven past the house to look for a “For Sale” sign and had scanned the Sunday real estate section of the local newspaper for information on the property. Finding no mention of the property in either the MLS or the newspaper and noting the absence of a sign on the property, REALTOR® B concluded that REALTOR® A’s marketing strategy was to limit access to the property to individuals preselected by the current residents. “In my mind,” said REALTOR® B, “this could only mean one thing. REALTOR® A was deliberately discriminating against home seekers from other areas, or those with different backgrounds, who would never have the opportunity to learn about the house’s availability. Obviously, REALTOR® A was directing all of his marketing energies into finding purchasers who would not disrupt the ethnic and economic character of the neighborhood.”
REALTOR® A defended his actions by advising the panel that he was acting on Seller X’s instructions. Seller X appeared as a witness for REALTOR® A and confirmed this fact, adding that he and the other residents of his block had an informal agreement that they would try to find “suitable” purchasers for their homes if they ever decided to sell. Seller X felt that by broadening the marketing campaign to include all residents of the subdivision he had increased the chances of finding such potential purchasers.

The Hearing Panel found REALTOR® A in violation of Article 10 of the Code of Ethics. In their decision, the panel advised REALTOR® A that no instruction from a client could absolve a REALTOR® from the obligation to market properties without regard to race, color, religion, sex, handicap, familial status, or country of national origin, as expressed in Article 10. There was no doubt, in the panel’s opinion, that the exclusive use of “Choose Your Neighbor” letters to market the property was designed to circumvent the requirements of Article 10.

Code of Ethics - Article 8 - Case Interpretations

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 8 – REALTORS® shall keep in a special account in an appropriate financial institution, separated from their own funds, monies coming into their possession in trust for other persons, such as escrows, trust funds, clients’ monies, and other like items.

Case #8-1: Failure to Put Deposit in Separate AccountREALTOR® A, a listing broker, obtained a signed offer to purchase, together with Buyer C’s check for $5,000 as an earnest money deposit. Buyer C’s offer was subject to the sale of his current residence. REALTOR® A presented the offer to Seller B who accepted it. REALTOR® A then inadvertently deposited the earnest money check in his personal checking account. Since Buyer C’s offer was contingent on the sale of his current home, Seller B’s house remained on the market. A week later, REALTOR® A received another offer to purchase Seller B’s house from another broker and presented it to the seller as a back-up offer. Buyer C was informed about this new offer and reluctantly concluded that he would be unable to waive the sale contingency or proceed with the purchase of Seller B’s house. He then asked REALTOR® A for his $5,000 check back. REALTOR® A explained that he had mistakenly deposited Buyer C’s check in his personal bank account which had been attached since he received Buyer C’s offer, and he was temporarily unable to refund the deposit to Buyer C.

Buyer C filed a complaint with the Board of REALTORS®, which was received by the Grievance Committee. The Grievance Committee concluded that the complaint warranted a hearing and referred it to the Professional Standards Committee. At hearing, REALTOR® A explained that his bank account had been unexpectedly attached following the loss of a civil suit which he was appealing; that his deposit of Buyer C’s check in his personal account was a simple error in handling deposit slips; that he was arranging for the prompt release of his account; and that everything would be straightened out in three or four days, which should not be of great inconvenience to Buyer C.

It was the conclusion of the Hearing Panel that REALTOR® A was in violation of Article 8 of the Code of Ethics for having failed to put Buyer C’s earnest money deposit in a special account separate from his personal funds.

Code of Ethics - Article 7 - Case Interpretations

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.
Article 7 – In a transaction, REALTORS® shall not accept compensation from more than one party, even if permitted by law, without disclosure to all parties and the informed consent of the REALTOR®’s client or clients.

Case #7-1: Acceptance of Compensation from Buyer and Seller Buyer A engaged REALTOR® B to locate a small commercial property. Buyer A explained his exact specifications indicating that he did not wish to compromise. They agreed that if REALTOR® B could locate such a property within Buyer A’s price range, he—the buyer—would pay a finder’s fee to REALTOR® B.

Two weeks later, REALTOR® B called Buyer A to advise that Seller C had just listed a property with him that met all of Buyer A’s specifications except that the listed price was a bit higher than Buyer A wanted to pay. Buyer A inspected the property and liked it, but said he would adhere to his original price range. REALTOR® B called Buyer A three days later to say that Seller C had agreed to sell at Buyer A’s price. The sale was made and REALTOR® B collected a commission from Seller C and a finder’s fee from Buyer A which was not disclosed to Seller C, REALTOR® B’s client.

Several weeks later, Seller C learned about the finder’s fee that REALTOR® B had collected from Buyer A and filed a complaint with the Board of REALTORS® charging REALTOR® B with duplicity and unprofessional conduct. The complaint specified that when REALTOR® B had presented Buyer A’s offer at less than the listed price, he, the seller, was reluctant to accept it, but REALTOR® B had convinced him that the offer was a fair one and not likely to be improved upon in the current market; and that REALTOR® B had dwelt at length on certain disadvantageous features of the property in an attempt to promote acceptance of the offer. The complaint charged that REALTOR® B had actually been the agent of the buyer while holding himself out as the agent of the seller. Further, Seller C asserted that REALTOR® B had never mentioned that he was representing the buyer or intended to be compensated by the buyer.

At the hearing, REALTOR® B’s defense was that he had served both buyer and seller faithfully; that he had not accepted Seller C’s listing until after he had agreed to assist Buyer A in locating a property; and that in his judgment the listed price was excessive and the price actually paid was a fair price.

A Hearing Panel of the Board’s Professional Standards Committee, which heard the complaint, concluded that REALTOR® B had acted in violation of Article 7 of the Code of Ethics. His efforts to represent the buyer and the seller at the same time, and the fact that he intended to be compensated by both parties, should have been fully disclosed to all parties in advance.

Code of Ethics - Article 6 - Case Interpretations

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 6 - REALTORS® shall not accept any commission, rebate, or profit on expenditures made for their client, without the client’s knowledge and consent.
When recommending real estate products or services (e.g., homeowner’s insurance, warranty programs, mortgage financing, title insurance, etc.), REALTORS® shall disclose to the client or customer to whom the recommendation is made any financial benefits or fees, other than real estate referral fees, the REALTOR® or REALTOR®’s firm may receive as a direct result of such recommendation.

Case #6-6: Disclose Affiliated Business Relationships Prior to Recommending Real Estate-Related Products or Services - REALTOR® Z, a broker and sole proprietor, had invested considerable time, money and energy into developing her website. Seeking to recoup some of her costs, she approached virtually every provider of real estate-related products and services in her area, including financial institutions, title insurance companies, home inspectors, mortgage brokers, insurance agencies, appraisers, exterminators, decorators, landscapers, furniture and appliance dealers, rug and carpet dealers, moving companies, and others about advertising on her home page. As a condition of having a link to their own sites appear on her home page, REALTOR® Z required that a fee be paid to her each time a consumer “clicked through” from her site to an advertiser’s.

Ads for providers of real estate-related products and services who agreed to REALTOR® Z’s terms appeared on her home page under the heading “Preferred Providers”. Immediately under that heading read “These vendors provide quality goods and services. Please patronize them.”

Buyer A frequented REALTOR® Z’s website seeking information about available properties. Using that website, he became aware of a property on Elm Street that he made an offer on through REALTOR® Z, which was accepted by the seller. The sale closed shortly afterwards.

Buyer A was an avid remodeler and, using REALTOR® Z’s website, linked to the Real Rug company website, among others. Interested by what he found there, he subsequently visited their showroom in person and purchased wall-to-wall carpeting and several expensive area rugs.

Given the size of Buyer A’s order, one of the owners of Real Rug came to oversee the delivery and installation. In the course of conversation with Buyer A, he commented favorably on the amount of referral business received from REALTOR® Z’s website. “And to think I only pay a small fee for each customer who’s referred to me by REALTOR® Z,” he added.

Buyer A was somewhat surprised that REALTOR® Z would receive money for referring clients and customers to providers of real estate-related products and services and contacted the local association of REALTORS®. The association provided him with a copy of the Code of Ethics. Reading it carefully,
Buyer A concluded that REALTOR® Z’s actions might have violated Article 6, and he filed an ethics complaint against REALTOR® Z.

At the hearing, REALTOR® Z defended herself and her website, stating that the advertisements for real estate-related products and services on her website were simply that, only advertisements and not recommendations or endorsements of the products and services found there. She acknowledged she collected a fee each time a visitor to her website clicked on the links found under “Preferred Providers” but claimed that simply referring to those advertisers as “preferred” did not constitute a recommendation or endorsement of the products and/or the services offered.

The hearing panel disagreed with REALTOR® Z’s reasoning, pointing out that a reasonable consumer would certainly conclude that referring to a provider of real estate-related products or services as being “preferred” by a REALTOR® constituted a recommendation or endorsement. Further, since REALTOR® Z received a fee each time a consumer “clicked through” to one of REALTOR® Z’s “Preferred Providers”, REALTOR® Z received a referral fee, and disclosure of that fee was required under Article 6. REALTOR® Z was found in violation of Article 6.

Code of Ethics - Article 4 - Case Interpretations

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 4– REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative.

Case #4-4: Responsibility for Subordinates - REALTOR-ASSOCIATE® B, a sales associate in REALTOR® A’s office, exclusively listed a suburban house and subsequently convinced the seller to accept $20,000 less than the listed price. Several weeks after the transfer of title, the seller filed a written complaint with the Board, charging REALTOR-ASSOCIATE® B with a violation of Article 4 in that REALTOR-ASSOCIATE B had sold the property to his mother without disclosing this relationship to his client, the seller, and that REALTOR-ASSOCIATE® B got the price reduced for his mother’s benefit.

The complaint was reviewed by the Grievance Committee which, with the complainant’s concurrence, named REALTOR® A as an additional respondent.

At the hearing, REALTOR-ASSOCIATE® B stated that he saw nothing wrong in selling the property to his mother and that the seller would have accepted the contract at the reduced price, even if the buyer had not been REALTOR-ASSOCIATE® B’s mother. REALTOR® A stated that REALTOR-ASSOCIATE® B was an independent contractor licensed with him. REALTOR® A acknowledged that he was accountable under the Code for the actions of other REALTORS® and REALTOR-ASSOCIATEs® associated with him but shared with the panel information on his firm’s orientation program. He noted that he required each licensee joining his firm to complete board-sponsored Code training. In addition, he required everyone in his firm to read Professionalism in Real Estate Practice, and produced a form signed by REALTOR-ASSOCIATE® B stating that he had carefully read and understood his personal obligation under the Code of Ethics.

The panel found that REALTOR-ASSOCIATE® B should have made his relationship to the buyer, his mother, unmistakably clear to the seller. He should have disclosed in writing that the buyer was his mother so there would have been no misunderstanding.

The Hearing Panel found REALTOR-ASSOCIATE® B in violation of Article 4.

The Hearing Panel noted that REALTORS® are not presumed to be in violation of the Code of Ethics in cases where REALTORS® or REALTOR-ASSOCIATEs® associated with them are found in violation. Rather, their culpability, if any, must be determined from the facts and circumstances of the case in question. It was the conclusion of the Hearing Panel that REALTOR® A had made reasonable efforts to ensure that REALTOR-ASSOCIATE® B was familiar with the Code and its obligations, and that it would have been unreasonable to expect REALTOR® A to have known the purchaser was REALTOR-ASSOCIATE® B’s mother. Consequently, REALTOR® A was found not to have violated Article 4.

Code of Ethics - Article 3 - Case Interpretations

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 3
REALTORS® shall cooperate with other brokers except when cooperation is not in the client’s best interest. The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise compensate another broker.

Case #3-9: REALTOR®’s Obligation to Disclose True Nature of Listing Agreement
REALTOR® A listed the home of Seller X and filed the listing with the Board’s MLS categorizing it as an exclusive right to sell listing. REALTOR® A did not disclose that there was a dual rate commission arrangement on this listing, even though the listing contract provided that, should the seller be the procuring cause of sale, the listing broker would receive a commission of $500.00, an amount intended to compensate REALTOR® A for his marketing costs.

REALTOR® B, a cooperating broker, showed the property several times. Eventually, REALTOR® B brought a signed purchase agreement to REALTOR® A. REALTOR® A returned the purchase agreement the next day, informing REALTOR® B that the seller had rejected the offer. Several weeks later, REALTOR® B learned that the property had been sold, and that the buyer was Seller X’s nephew.

Several months later, REALTOR® B met Seller X at a fund-raising event. Seller X thanked her for her efforts, and told her that, under “normal circumstances,” he might have seriously considered the offer she had produced. When asked why the circumstances surrounding this transaction were “unusual,” Seller X responded telling her of his agreement “with REALTOR® A to pay a $500.00 commission if Seller X found the buyer. And when my nephew decided to buy the house, I jumped at the chance to save some money.”

When REALTOR® B learned of this arrangement, she filed a complaint with the Board of REALTORS® alleging that REALTOR® A had violated Article 3 of the Code of Ethics. The Executive Officer of the Board referred the complaint to the Grievance Committee, and, after its review, the Grievance Committee referred the complaint back to the Executive Officer indicating that an ethics hearing should be scheduled.

At the hearing, REALTOR® B, in stating her complaint to the Hearing Panel, said that REALTOR® A’s failure to disclose the actual terms and conditions of his listing with Seller X was a misrepresentation. She explained that, had she been aware of this arrangement, she might have decided not to accept REALTOR® A’s offer of cooperation, since it might put potential purchasers she would produce in a possibly unfair position.

REALTOR® A, speaking in his own defense, stated no commission differential would have resulted if the buyer had been procured by either the listing broker or a cooperating broker so whatever other arrangements he had with Seller X were personal and, as listing broker, it was his right to establish the terms and conditions of his relationship with his client.

After careful deliberation, the Hearing Panel concluded that while it was REALTOR® A’s right to establish the terms and conditions of the listing contract, the existence of his “special” arrangement with Seller X should have been disclosed as a dual or variable rate commission, since without knowledge of it, cooperating brokers would be unable to make knowledgeable decisions regarding acceptance of the listing broker’s offer to cooperate.

The Hearing Panel concluded that REALTOR A had in fact concealed and misrepresented the real facts of the transaction and was in violation of Article 3 of the Code of Ethics as interpreted by Standard of Practice 3-4.

Code of Ethics - Article 2 - Case Interpretations

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 2REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non-agency relationships as defined by state law.

Case #2-9: REALTOR®’s Responsibility for REALTOR-ASSOCIATE®’s Statement REALTOR-ASSOCIATE® D, associated with the firm of REALTOR® A, obtained an offer to buy a property at less than the listed price. The offer was rejected. The property had been exclusively listed by REALTOR® B and had been published through the Multiple Listing Service of the local Board of REALTORS®. The owner received no further offers and at the expiration of the exclusive listing with REALTOR® B, he approached REALTOR® C and exclusively listed the property with him.

About this time, REALTOR-ASSOCIATE® D terminated his association with REALTOR® A and became affiliated with REALTOR® C’s organization.

The prospect who had made the unsuccessful offer on the property continued to seek the assistance of REALTOR-ASSOCIATE® D and made another offer on the property, this time at the full listed price. REALTOR-ASSOCIATE® D and REALTOR® C, the listing broker, submitted this offer to the owner, and it was accepted.

A few months following the sale, the purchaser complained to the Board of REALTORS® that REALTOR-ASSOCIATE® D had made a statement that “a visible gas pipeline easement extended to the property but did not go onto any part of the property.” The complainant presented evidence that the easement, in fact, crossed the property, and the complainant charged REALTOR® C and REALTOR-ASSOCIATE® D with misrepresentation.

The complaint was reviewed by the Grievance Committee and then referred to the Board’s Professional Standards Committee which promptly scheduled a hearing and asked REALTOR® C and REALTOR-ASSOCIATE® D to be present to answer charges of unethical conduct in violation of Article 2 of the Code of Ethics.

At the hearing, REALTOR-ASSOCIATE® D confirmed that he had made the statement attributed to him; that he thought it was correct because the information had been given to him by a neighboring property owner. Questioning revealed that REALTOR-ASSOCIATE® D had made no effort to verify the information from authoritative sources. REALTOR® C protested he knew nothing about the matter; that he had not been present when REALTOR-ASSOCIATE® D made the statement; that he was not responsible for the oral statements made by a REALTOR-ASSOCIATE®; and that REALTOR-ASSOCIATE® D’s first contact with the buyer had occurred while REALTOR-ASSOCIATE® D was associated with REALTOR® A.

It was concluded by the Hearing Panel that REALTOR® C and REALTOR-ASSOCIATE® D were in violation of Article 2 of the Code of Ethics in a way that materially imposed upon the buyer, who actually received measurably less in his package of ownership rights when he purchased the property than he was led to believe he was buying. Since it had been demonstrated that REALTOR-ASSOCIATE® D made the statement containing misinformation on a pertinent fact while he was affiliated with REALTOR® C, and in view of the fact that REALTOR® C was the exclusive agent of the seller at the time, REALTOR® C was held to be responsible.

He was advised that a REALTOR® is definitely responsible for pertinent statements of his salespersons in real estate transactions.

REALTOR® C and REALTOR-ASSOCIATE® D were found in violation of Article 2.

Code of Ethics - Article 1 - Case Interpretation

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 1 - When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly.

Case #1-4: Fidelity to Client - Client A contacted REALTOR® B to list a vacant lot. Client A said he had heard that similar lots in the vicinity had sold for about $50,000 and thought he should be able to get a similar price. REALTOR® B stressed some minor disadvantages in location and grade of the lot, and said that the market for vacant lots was sluggish. He suggested listing at a price of $32,500 and the client agreed.
In two weeks, REALTOR® B came to Client A with an offer at the listed price of $32,500. The client raised some questions about it, pointing out that the offer had come in just two weeks after the property had been placed on the market which could be an indication that the lot was worth closer to $50,000 than $32,500. REALTOR® B strongly urged him to accept the offer, stating that because of the sluggish market, another offer might not develop for months and that the offer in hand simply vindicated REALTOR® B’s own judgment as to pricing the lot. Client A finally agreed and the sale was made to Buyer C.
Two months later, Client A discovered the lot was no longer owned by Buyer C, but had been purchased by Buyer D at $55,000. He investigated and found that Buyer C was a brother-in-law of REALTOR® B, and that Buyer C had acted on behalf of REALTOR® B in buying the property for $32,500.
Client A outlined the facts in a complaint to the Board of REALTORS®, charging REALTOR® B with collusion in betrayal of a client’s confidence and interests, and with failing to disclose that he was buying the property on his own behalf.
At a hearing before a panel of the Board’s Professional Standards Committee, REALTOR® B’s defense was that in his observation of real estate transactions there can be two legitimate prices of property—the price that a seller is willing to take in order to liquidate his investment, and the price that a buyer is willing to pay to acquire a property in which he is particularly interested. His position was that he saw no harm in bringing about a transaction to his own advantage in which the seller received a price that he was willing to take and the buyer paid a price that he was willing to pay.
The Hearing Panel concluded that REALTOR® B had deceitfully used the guise of rendering professional service to a client in acting as a speculator; that he had been unfaithful to the most basic principles of agency and allegiance to his client’s interest; and that he had violated Articles 1 and 4 of the Code of Ethics.

Code of Ethics - Article 17

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 17 – In the event of contractual disputes or specific non-contractual disputes as defined in Standard of Practice 17-4 between REALTORS® (principals) associated with different firms, arising out of their relationship as REALTORS®, the REALTOR® shall submit the dispute to arbitration in accordance with the regulations of their Board or Boards rather than litigate the matter.
In the event clients of REALTORS® wish to arbitrate contractual disputes arising out of real estate transactions, REALTORS® shall arbitrate those disputes in accordance with the regulations of their Board, provided the clients agree to be bound by the decision.
The obligation to participate in arbitration contemplated by this Article includes the obligation to REALTORS® (principals) to cause their firms to arbitrate and be bound by any award.

Case #17-1: Obligation to Submit to Arbitration
REALTOR® A and REALTOR® B had been engaged in a cooperative transaction that resulted in a dispute regarding entitlement to compensation. Rather than requesting arbitration before the Board of REALTORS®, REALTOR® A filed suit against REALTOR® B for payment of the compensation he felt REALTOR® B owed him. Upon receiving notification of the lawsuit, REALTOR® B filed a request for arbitration with the Board, which was reviewed by the Grievance Committee and found to be a mandatory arbitration situation. REALTOR® A was advised of the Grievance Committee’s decision, but refused to withdraw from the lawsuit. Thereupon, REALTOR® B filed a complaint with the Board charging a violation of Article 17 as supported by Standard of Practice 17-1.
REALTOR® A was directed to be present at a hearing on the complaint before the Board of Directors. Evidence that REALTOR® B had sought REALTOR® A’s agreement to submit the dispute to arbitration was presented at the hearing. REALTOR® A defended his action in filing the suit and refusing to submit to arbitration by asserting that under laws of the state, the Board of REALTORS® had no authority to bar his access to the courts or to require him to arbitrate his dispute with REALTOR® B.
The Board of Directors concluded that REALTOR® A was correct as to his legal right and as to the Board’s lack of any right to prevent him from filing a suit. It was pointed out to REALTOR® A, however, that the Board of REALTORS® is a voluntary organization, whose members accept certain specified obligations with respect to their relations with other REALTORS®, and that if he wished to continue as a member of the Board he would be obliged to adhere to the Board’s requirements as to arbitration.
Because REALTOR® A would not withdraw the litigation; the Board of Directors concluded that REALTOR® A was in violation of Article 17 for refusing to arbitrate in a mandatory arbitration situation. However, it was noted that if REALTOR® A had filed litigation against REALTOR® B, and had REALTOR® B then requested arbitration with the Grievance Committee determining that an arbitrable issue of a mandatory nature existed, REALTOR® B might have successfully petitioned the court to remand the matter to the Board for arbitration, and there would have been no finding of a violation of Article 17 since the Board’s arbitration process would have been ultimately complied with.

Code of Ethics - Article 16

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 16 – REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with clients.

Case #16-16: Buyer Agent’s Demand that Listing Agent Reduce CommissionREALTOR® B contacted REALTOR® A, the listing broker, and notified her that he was a buyer’s agent and was interested in showing one of her listings to his client, a prospective purchaser. REALTOR® A made an appointment for REALTOR® B and his client to view the property. Shortly thereafter, REALTOR® B presented REALTOR® A with a signed offer to purchase from his client which was contingent on REALTOR® A’s willingness to reduce her commission by the amount she had offered through the MLS to subagents and on the seller’s willingness to compensate the buyer for the commission the buyer owed to REALTOR® B, his agent. REALTOR® A presented the offer to her client, the seller, explaining that she would not agree to reduce the previously agreed commission as specified in their listing contract.

REALTOR® A then filed a complaint with the local Board charging REALTOR® B with violating Article 16 as interpreted by Standard of Practice 16-16. In her complaint, REALTOR® A stated that REALTOR® B had interfered in her agency relationship with the seller by encouraging the buyer to condition acceptance of his offer on the renegotiation of REALTOR® A’s commission arrangement with her client, the seller.

REALTOR® B defended his action arguing that REALTOR® A’s refusal to reduce her commission by an amount equal to what she had offered other brokers for subagency services would have placed the seller in the position of having to pay an excessive amount of commission if he had accepted the offer agreeing to contribute to the buyer broker’s compensation. In addition, REALTOR® B felt that it was his duty to his client to get the best price for the property by encouraging the buyer to reduce the costs of sale wherever practical. The Hearing Panel concluded that REALTOR® B’s actions to encourage his buyer-client to pressure the seller to try to modify the listing agreement with REALTOR® A was an unwarranted interference in their contractual relationship.

The Hearing Panel noted that Article 16, as interpreted by Standard of Practice 16-16, required REALTOR® B to determine, prior to presenting an offer to REALTOR® A and her seller-client, whether REALTOR® A was willing to contribute to REALTOR® B’s commission, either directly or by reducing the commission as agreed to in the listing contract and, if so, the terms and amount of such contributions. It was the decision of the Hearing Panel that REALTOR® B had violated Article 16.

Code of Ethics - Article 15

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 15 – REALTORS® shall not knowingly or recklessly make false or misleading statements about competitors, their business, or their business practices.
• Standard of Practice 15-1 – REALTORS® shall not knowingly or recklessly file false or unfounded ethics complaints.
• Standard of Practice 15-2 – The obligation to refrain from making false or misleading statements about competitors, competitors’ businesses, and competitors’ business practices includes the duty to not knowingly or recklessly publish, repeat, retransmit, or republish false or misleading statements made by others. This duty applies whether false or misleading statements are repeated in person, in writing, by technological means (e.g., the Internet), or by any other means.
• Standard of Practice 15-3 – The obligation to refrain from making false or misleading statements about competitors, competitors’ businesses, and competitors’ business practices includes the duty to publish a clarification about or to remove statements made by others on electronic media the REALTOR® controls once the REALTOR® knows the statement is false or misleading.

Case #15-2: Intentional Misrepresentation of a Competitor’s Business Practices Following a round of golf early one morning, Homeowner A approached REALTOR® X. “We’ve outgrown our home and I want to list it with you,” said Homeowner A. “I’m sorry,” said REALTOR® X, “but I represent buyers exclusively.” “Then how about REALTOR® Z?,” asked Homeowner A, “I’ve heard good things about him.” “I don’t know if I would do that,” said REALTOR® X, “while he does represent sellers, he doesn’t cooperate with buyer brokers and, as a result, sellers don’t get adequate market exposure for their properties.”

Later that day, Homeowner A repeated REALTOR® X’s remarks to his wife who happened to be a close friend of REALTOR® Z’s wife. Within hours, REALTOR® Z had been made aware of REALTOR® X’s remarks to Homeowner A earlier in the day. REALTOR® Z filed a complaint against REALTOR® X charging him with making false and misleading statements. REALTOR® Z’s complaint was considered by the Grievance Committee which determined that an ethics hearing should be held.

At the hearing REALTOR® Z stated, “I have no idea what REALTOR® X was thinking about when he made his comments to Homeowner A. I always cooperated with other REALTORS®.” REALTOR® X replied, “That’s not so. Last year you had a listing in the Multiple Listing Service and when I called to make an appointment to show the property to the buyer, you refused to agree to pay me.” REALTOR® Z responded that he had made a formal offer of subagency through the MLS with respect to that property but had chosen not to offer compensation to buyer agents through the MLS. He noted, however, that the fact that he had not made a blanket offer of compensation to buyer agents should not be construed as a refusal to cooperate and that he had, in fact, cooperated with REALTOR® X in the sale of that very property.

In response to REALTOR® Z’s questions, REALTOR® X acknowledged that he had shown his buyer-client REALTOR® Z’s listing and that the buyer had purchased the property. Moreover, REALTOR® X said, upon questioning by the panel members, he had no personal knowledge of any instance in which REALTOR Z had refused to cooperate with any other broker but had simply assumed that REALTOR® Z’s refusal to pay the compensation REALTOR® X had asked for was representative of a general practice on the part of REALTOR® Z.

The Hearing Panel, in its deliberations, noted that cooperation and compensation are not synonymous and though formal, blanket offers of cooperation and compensation can be communicated through Multiple Listing Services, even where they are not, cooperation remains the norm expected of REALTORS®. However, to characterize REALTOR® Z’s refusal to pay requested compensation as a “refusal to cooperate” and to make the assumption and subsequent statement that REALTOR® Z “did not cooperate with buyer agents” was false, misleading, and not based on factual information. Consequently, REALTOR® X was found in violation of Article 15.

Code of Ethics - Article 13

Professional Standards - As a REALTOR® member of the Marin Association of REALTORS®, you have agreed to abide by the NAR Code of Ethics. This Code of Ethics is comprised of a Preamble and 17 Articles. Most Articles have corresponding Standards of Practice that support and interpret the Article. In addition, Case Interpretations provided by NAR demonstrate the application of the Articles to particular situations.

Article 13 – REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it.

Case #13-3: REALTOR®’s Obligation to Recommend Counsel When Needed
REALTOR® A was the listing broker for 25 acres of land owned by Client B. Shortly after REALTOR® A’s sign was placed upon the property, Customer C called REALTOR® A and expressed interest in purchasing the property. After inspecting the property, Customer C made a full price offer. Surprised, Client B prepared a counter-offer at a higher price. REALTOR® A realized that he might have a legal claim for commission from Client B, but not wishing to jeopardize their relationship, agreed that he would go back to Customer C and attempt to negotiate a higher price. Upon being informed of the property owner’s change of mind and his requested higher price for the property, Customer C became upset and indicated his intent to consult his attorney to determine if he could force the seller to go through with the sales transaction at the price for which it had been originally offered. At this point REALTOR® A advised Customer C that, in his opinion, litigation would be lengthy and expensive and that in the final analysis the sale could not be enforced. On the basis of REALTOR® A’s advice Customer C agreed to the higher price, and the transaction was consummated. Shortly after, Customer C complained to the Board of REALTORS® that REALTOR® A had provided bad advice to him. The Secretary referred the complaint to the Grievance Committee which determined that a hearing should be held and referred the matter back to the Secretary to arrange such a hearing.

At the hearing, Customer C outlined his complaint to the Hearing Panel of the Professional Standards Committee. He indicated that he had intended to consult his attorney, however, because of the persuasive personality of REALTOR® A and REALTOR® A’s assurance that legal action would be an exercise in futility, he had not done so.

REALTOR® A advised the panel that he had told Customer C that he could consult his attorney, but that, in his opinion, it would be a waste of time. He defended what he had told Customer C stating that it was only his opinion, not intended as a conclusive statement of law, and, in fact, was a correct statement under the law of the state. The panel concluded that REALTOR® A, in pointing out the fact that legal action was likely to be time consuming and expensive, was stating a practical circumstance which Customer C should consider and was proper. The panel further concluded that the expression of an opinion as to the probable outcome of the case was not an “unauthorized practice of law” within the meaning of Article 13.

However, the panel noted that a REALTOR® is obligated to “recommend that legal counsel be obtained when the interest of any party to the transaction requires it.”

In this case, REALTOR® A was aware that the interest of Customer C required a legal opinion as to whether Customer C could compel Client B to convey title to the property and did not intend his personal opinion to represent a “statement of law” upon which Customer C could rely. Accordingly, REALTOR® A was obligated to affirmatively recommend that Customer C consult his attorney to definitively establish the legal rights in question.

Having failed to make such a recommendation, REALTOR® A was in violation of Article 13.