Thursday, July 22, 2010

Code of Ethics - Article 2

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 #2-7: Obligation to Determine Pertinent Facts
Realtor® A, a home builder, showed one of his newly constructed houses to Buyer B. In discussion, the buyer observed that some kind of construction was beginning nearby. He asked Realtor® A what it was. “I really don’t know,” said Realtor® A, “but I believe it’s the attractive new shopping center that has been planned for this area.” Following the purchase, Buyer B learned that the new construction was to be a bottling plant and that the adjacent area was zoned industrial.

Charging that the proximity of the bottling plant would have caused him to reject purchase of the home, Buyer B filed a complaint with the Board of Realtors® charging Realtor® A with unethical conduct for failing to disclose a pertinent fact. The Grievance Committee referred the complaint for a hearing before a Hearing Panel of the Professional Standards Committee.

During the hearing, Realtor® A’s defense was that he had given an honest answer to Buyer B’s question. At the time he had no positive knowledge about the new construction. He knew that other developers were planning an extensive shopping center in the general area, and had simply ventured a guess. He pointed out, as indicated in Buyer B’s testimony, that he had prefaced his response by saying he didn’t know the answer to this question.

The Hearing Panel concluded that Buyer B’s question had related to a pertinent fact; that Realtor® A’s competence required that Realtor® A know the answer or, if he didn’t know the answer, he should not have ventured a guess, but should have made a commitment to get the answer. The Hearing Panel also noted that although Realtor® A had prefaced his response with “I don’t know,” he had nonetheless proceeded to respond and Buyer B was justified in relying on his response. Realtor® A was found to have violated Article 2.

Thursday, July 15, 2010

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 #1-26: Subordination of Client’s Interests to REALTOR®’s Personal Gain
REALTOR® B was a sales associate with XYZ, REALTORS®. To promote XYZ’s in-house listings, the firm’s principals offered $1,000 bonuses to the company’s sales associates at time of closing on each of XYZ’s listings they sold.

Dr. Z, a recent transferee to the town, entered into a buyer representation agreement with XYZ through REALTOR® B.

Dr. Z explained he had specific needs, foremost of which was any home he purchased be convenient for and readily accessible by Dr. Z’s spouse who was physically challenged. “Part of my wife’s physical conditioning program is swimming,” said Dr. Z, “so in addition to everything else, I am looking for a home with a pool or room to build a pool.”

REALTOR® B knew there were a number of homes for sale meeting most of Dr. Z’s general specifications, several of which were listed with XYZ.

Over the next few days, REALTOR® B showed Dr. Z several properties in the Blackacre subdivision, all of which were listed with XYZ, including one with an outdoor swimming pool. Not included among the properties shown to Dr. Z were several similar properties in Blackacre listed with other firms, including one with an indoor pool.

After considering the properties shown to him by REALTOR® B, Dr. Z made an offer on the home with the outdoor pool. His offer was accepted and the transaction closed shortly thereafter.

Several months later, REALTOR® B received notice of an ethics complaint filed against him by Dr. Z. Dr. Z had learned about the home with the indoor pool from a colleague at the hospital who lived on the same block. The complaint alleged that REALTOR® B had put his interests, and those of his firm, ahead of Dr. Z’s by promoting XYZ’s listings exclusively and by not telling Dr. Z about a similarly-priced property with an indoor pool, which suited his family’s needs better than the property he had purchased. The complaint went on to indicate that REALTOR® B had received a bonus for selling one of XYZ’s listings and that Dr. Z suspected that REALTOR® B’s failure to tell him about the home with the indoor pool was motivated by the opportunity to receive a bonus.

At the hearing, REALTOR® B defended his actions stating that properties rarely meet all of potential purchasers desires; that he had made Dr. Z aware of several properties that met most of his requirements, including one with an outdoor pool; and that Dr. Z must have been satisfied with REALTOR® B’s service since he had purchased a home.

Upon questioning by Dr. Z’s attorney, REALTOR® B acknowledged that he knew about but had not shown the house with the indoor pool to Dr. Z. He conceded that a pool that could be used year round was better suited to the family’s needs than one that could be used only four months each year. He also admitted his failure to tell Dr. Z about the house with the indoor pool had at least in part been motivated by the bonus offered by his firm. “But,” he argued, “aside from the indoor pool, that house was no different than the one Dr. Z bought.”

The Hearing Panel concluded that REALTOR® B had been fully aware that one of Dr. Z’s prime concerns was his wife’s ongoing physical conditioning needs and REALTOR® B’s decision to show Dr. Z only properties listed with XYZ and to not tell him about the home with the indoor pool had been motivated by the possibility of earning an in-house bonus. The Hearing Panel determined that REALTOR® B had placed his interests ahead of those of his client and had violated Article 1.