Disclaimer: This article does not constitute legal advice. Interpretations of the Realtor Code of Ethics may differ from state to state, so you should seek your own legal advice to ensure you follow the correct process.
NAR’s Realtor Code of Ethics, adopted in 1913, was one of the first codifications of ethical duties adopted by any business group.
Based on the concept of “let the public be served”, the code governs the dealings between Realtors, their clients, and the public interest.
Let’s explore the code of ethics, how it’s enforced, common violations, and the code’s influence on real estate. Keep reading, or jump to the section you’re looking for:
“I looked at the subdivision, and I looked at the analytics,” recalls Magua. “And I said, ‘No, I think you should wait. The market’s going down. Rent for a period, and you’ll get it for substantially less.'” He was honest, but there went Magua’s $12,000 commission.
This type of situation is one real estate professionals deal with often — the responsibility to give honest advice that goes against their own financial interests. In some cases, a deal falling through could mean a Realtor can’t afford their next car or mortgage payment. The stakes are high.
A common misconception among consumers is that real estate agent and realtor are interchangeable terms.
In other words, abiding by the Code of Ethics is required of all realtors — but not real estate agents in general. A real estate licensee agrees to follow the code at the time of their application to become a NAR member. Realtors also may be asked by their broker or team leader to sign more ethics paperwork when they sign on.
Local Realtor associations enforce the NAR Code of Ethics. At the same time, NAR controls its code of ethics.
In practice, Realtors are required to abide by the Code of Ethics as a way of doing business. The standard of conduct applies in a Realtor’s dealings with:
There are several common themes in the Code of Ethics that outline best practices for real estate as a whole. These themes include:
According to the code’s preamble, Realtors “pledge to observe [the code’s] spirit in all of their activities whether conducted personally, through associates or others, or via technological means and to conduct their business in accordance with the tenets.“
The philosophical and subjective nature of the preamble means that it cannot be used as grounds for disciplinary action against a Realtor. That’s what the 17 articles to follow are for.
Article 1: Protect the best interests of the client.
Article 2: No misrepresentation, exaggeration, or hiding facts about the property at hand.
Article 3: Realtors should cooperate with each other unless it’s not in the client’s best interests.
Article 4-5: Disclose any personal interest in a property.
Article 6-7: No recommending services for a kickback or collecting money under the table.
Article 8: Keep client funds separate from your own.
Article 9: All documents for the transaction should be presented to the buyer/seller in understandable terms.
Article 10: No denying services on the basis of discrimination.
Article 11: Provide clients with competent services only within a Realtor’s professional scope.
Article 12: No false or misleading advertising.
Article 13: Don’t break the law.
Article 14: Cooperate with the Realtor board’s investigative proceedings if charged with a violation.
Article 15: No false or misleading statements about other Realtors.
Article 16: Don’t solicit clients that have already signed an exclusive listing agreement with another Realtor.
Article 17: Contractual disputes will be mediated or arbitrated by the Realtor Board.
The Code of Ethics has three major sections:
Under each section is a list of articles and standards of practice, and this code is continually edited and updated.
This code outlines the values of Realtors in real estate. It covers the ethical principles and standards that NAR believes professionals should aim for.
“I try to keep to these standards, if not higher,” says Magua. “You’re dealing with people’s money. You’re dealing with probably their biggest asset. I’d always rather keep a good relationship with the client, be truthful, and keep to what my ethics tell me to do. I’m there to be a concierge. I’m there to direct. And I’m there to give unbiased good advice.”
Common real estate ethics complaints can include:
Complaints can also include requests to arbitrate money disputes. For example, commission disputes between Realtors of different firms.
The board will typically try to mediate contractual disputes before they go to arbitration. The exception to this is when both parties in the dispute advise against mediation in writing.
The code helps Realtors avoid legal battles by settling disputes through arbitration overseen by the association instead. The types of disputes that qualify for arbitration can be found in Article 17 of the Code.
Anyone with a complaint can bring their grievances to their local association. From there a few different bodies may get involved in reviewing the issue.
NAR’s Code of Ethics is an aspirational guide for any real estate professional. With these clear standards, any real estate agent can develop trust with members of their local community. With focus and effort, these guidelines can help you grow your real estate agency or brokerage.
Editor’s note: This post was originally published in February 2019 and has been updated for comprehensiveness.
