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National Association of REALTORS¨' Code of Ethics
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Code of Ethics Case Interpretations
Used by permission National Association of REALTORS¨
ARTICLE 1
Case #1-7: Obligation to Protect ClientÕs Interests
(Originally Case #7-8. Reaffirmed May, 1988. Transferred to Article 1 November, 1994. Revised November, 2001.)
Client A, an army officer, was transferred to a new duty station and listed his home for sale with REALTOR¨ B as the exclusive agent. He moved to his new station with the understanding that REALTOR¨ B, as the listing broker, would obtain a buyer as soon as possible. After six weeks, during which no word had come from REALTOR¨ B, the client made a weekend visit back to his former community to inspect his property. He learned that REALTOR¨ B had advertised the house: ÒVacantÑOwner transferred,Ó and found an ÒopenÓ sign on the house but no representative present. Upon inquiry, Client A found that REALTOR¨ B never had a representative at the property but continually kept an ÒopenÓ sign in the yard. Client A discovered that the key was kept in a combination lockbox, and when REALTOR¨ B received calls from potential purchasers about the property, he simply gave callers the address, advised that the key was in the lockbox, gave them the combination, and told them to look through the house by themselves and to call him back if they needed other information or wanted to make an offer.
Client A filed a complaint with the Board of REALTORS¨ detailing these facts, and charging REALTOR¨ B with failure to protect and promote a clientÕs interests by leaving Client AÕs property open to vandalism, and by not making appropriate efforts to obtain a buyer.
REALTOR¨ BÕs defense during the hearing was that his advertising of the property was evidence of his effort to sell it. He stated, without being specific, that leaving keys to vacant listed property in lockboxes and advising callers to inspect property on their own was a Òcommon local practice.Ó
The Hearing Panel concluded that REALTOR¨ B was in violation of Article 1 of the Code of Ethics because he had failed to act in a professional manner consistent with his obligations to protect and promote the interests of his client.
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ARTICLE 2
Case #2-9: REALTOR¨Õs Responsibility for REALTOR-ASSOCIATE¨Õs Statement
(Reaffirmed Case #9-15 May, 1988. Transferred to Article 2 November, 1994.)
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¨ CÕs 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 Òa visible gas pipeline easement extended to the property but did not go onto any part of the property.Ó 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 BoardÕs 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¨ DÕs 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.
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ARTICLE 3
Case #3-7: Time at Which Modification to Offer of Compensation is Communicated is a Determining Factor
(Revised Case #22-7 May, 1988. Transferred to Article 3 November, 1994. Cross-reference Case #2-14. Revised November, 2001.)
REALTOR¨ A listed Seller XÕs home and filed the listing with the MLS. The property data sheet indicated the compensation REALTOR¨ A was offering to the other Participants if they were successful in finding a buyer for Seller XÕs home.
During the next few weeks, REALTOR¨ A authorized several Participants of the Multiple Listing Service, including REALTOR¨ C, to show Seller XÕs home to potential buyers. Although several showings were made, no offers to purchase were forthcoming. REALTOR¨ A and Seller X, in discussing possible means of making the property more salable, agreed to reduce the listed price. REALTOR¨ A also agreed to lower his commission. REALTOR¨ A changed his compensation offer in the MLS and then called the MLS Participants who had shown Seller XÕs property to advise them that he was modifying his offer of compensation to cooperating brokers. Upon receiving the call, REALTOR¨ C responded that he was working with Prospect Z who appeared to be very interested in purchasing the property and who would probably make an offer to purchase in the next day or two. REALTOR¨ C indicated that he would expect to receive the compensation that had been published originally in the MLS and not the reduced amount now being offered to him, since he had already shown the property to Prospect Z and expected an offer to purchase would be made shortly. REALTOR¨ A responded that since Prospect Z had not signed an offer to purchase, the modified offer of compensation would be applicable.
The following day, REALTOR¨ C wrote an offer to purchase for Prospect Z. The offer was submitted to the Seller by REALTOR¨ A and was accepted. At the closing, REALTOR¨ A gave REALTOR¨ C a check for services in an amount reflecting the modified offer communicated to REALTOR¨ C by phone. REALTOR¨ C refused to accept the check indicating that he felt REALTOR¨ AÕs actions were in violation of the Code of Ethics. REALTOR¨ C filed a complaint with the BoardÕs Grievance Committee alleging violation of Articles 2 and 3 on the part of REALTOR¨ A citing Standard of Practice 3-2 in support of the charge.
During the hearing, REALTOR¨ C stated that REALTOR¨ AÕs modification of the compensation constituted a misrepresentation through concealment of pertinent facts since he had not provided REALTOR¨ C with specific written notification of the modification prior to the time REALTOR¨ C began his efforts to interest the purchaser in the listed property. REALTOR¨ A defended his actions by indicating that timely notice of the modification of compensation offered had been provided to REALTOR¨ C by telephone prior to REALTOR¨ C obtaining a signed offer to purchase. REALTOR¨ A also indicated that his modified offer of compensation had been bulletined to all Participants through the MLS. REALTOR¨ A also noted that in accordance with Standard of Practice 3-2, the modified compensation offer had been communicated to REALTOR¨ C prior to the time the purchaser signed an offer to purchase. REALTOR¨ A also commented that had REALTOR¨ C produced the signed offer to purchase prior to REALTOR¨ A communicating the modified offer, then REALTOR¨ A would have willingly paid the amount originally offered.
Based on the evidence presented to it, the Hearing Panel concluded that REALTOR¨ A had acted in accordance with the obligation expressed in Standard of Practice 3-2 and consequently was not in violation of Articles 2 or 3.
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ARTICLE 4
Case #4-5: Fidelity to Client
(Revised Case #13-7 May, 1988. Transferred to Article 4 November, 1994. Cross-reference Case #1-4.)
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¨ BÕs 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 clientÕs 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 BoardÕs Professional Standards Committee, REALTOR¨ BÕs defense was that in his observation of real estate transactions there can be two legitimate prices of propertyÑthe 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 clientÕs interest; and that he had violated Articles 1 and 4 of the Code of Ethics.
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ARTICLE 5
Case #5-1: Contemplated Interest in Property Appraised
(Reaffirmed Case #12-2 May, 1988. Transferred to Article 5 November, 1994.)
Seller A and Buyer B were negotiating the sale of an apartment building, but couldnÕt agree on the price. Finally, they agreed that each would engage an appraiser and they would accept the average of the two appraisals as a fair price. Seller A engaged REALTOR¨ C as his appraiser, and Buyer B engaged REALTOR¨ D. Both REALTORS¨ were informed of the agreement of the principals. The two appraisal reports were submitted. The principals averaged the two valuations and made the transaction at the price determined.
Six months later, it came to the attention of Seller A that REALTOR¨ C was managing the building that he had appraised. Upon making further inquiries he learned that REALTOR¨ C for several years had managed five other buildings owned by Buyer B, and that he had been Buyer BÕs property manager at the time he accepted the appraisal assignment from Seller A.
At this point Seller A engaged REALTOR¨ E to make an appraisal of the building he had sold to Buyer B. REALTOR¨ EÕs valuation was approximately 30% higher than that arrived at six months earlier by REALTOR¨ C.
These facts were set out in a complaint against REALTOR¨ C made by Seller A to the local Board of REALTORS¨. The complaint charged that since REALTOR¨ C was an agent of Buyer B; since he managed all of Buyer BÕs properties; since he had become manager of the property he had appraised for Seller A in connection with a sale to Buyer B; and since he had not disclosed his relationship to Buyer B, he had acted unethically, and in the interest of his major client had placed an excessively low valuation on the property he had appraised for Seller A.
At the hearing, Seller A also brought in a witness who stated that he had heard Buyer B say that he had made a good buy in purchasing Seller AÕs building because Seller AÕs appraiser was his (Buyer BÕs) property manager.
Buyer B, appearing as a witness for REALTOR¨ C, disputed this and protested that he had paid a fair price. He substantiated REALTOR¨ CÕs statement that management of the building formerly owned by Seller A was never discussed between them until after it had been purchased by Buyer B.
It was concluded by the Hearing Panel that whether or not management of the building was discussed between Buyer B and REALTOR¨ C prior to its purchase by Buyer B, REALTOR¨ C had a logically contemplated interest in it as a property manager in view of the fact that he had served as property manager for all other properties owned by Buyer B. In view of this contemplated interest, he was bound by the terms of Article 5 to disclose this interest to his appraisal client, Seller A. He had failed to do this, and so was found in violation of Article 5 of the Code of Ethics.
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ARTICLE 6
Case #6-4: Acceptance of Rebates from Contractors
(Revised Case #16-4 May, 1988. Transferred to Article 6 November, 1994.)
REALTOR¨ A, who managed a 30-year-old apartment building for Client B, proposed a complete modernization plan for the building, obtained Client BÕs approval, and carried out the work. Shortly after completion of the work, Client B filed a complaint with the Board of REALTORS¨ charging REALTOR¨ A with unethical conduct for receiving rebates or ÒkickbacksÓ from the contractors who did the work.
At the hearing, Client B presented written statements from the contractors to substantiate his charges.
REALTOR¨ A defended himself by stating that he had carried out all work involving the preparation of specifications, solicitation of bids, negotiations with the contractors, scheduling work, and supervising the improvement program; that he had presented all bids to the owner who had authorized acceptance of the most favorable bids; and that he and Client B had agreed on an appropriate fee for this service.
REALTOR¨ A also presented comparative data to show that Client B had received good value for his money.
After all of the contracts were signed and the work was under way, REALTOR¨ A found that his fee was inadequate for the time the work required; that he needed additional compensation but didnÕt want to add to his clientÕs costs; and that when he explained his predicament to the contractors and asked for moderate rebates, they agreed.
Questioning by panel members revealed that the contractors felt that since they were being asked for rebates by the man who would supervise their work, they felt that they had no choice but to agree.
The Hearing Panel concluded that REALTOR¨ A was in violation of Article 6 of the Code of Ethics and that if he had miscalculated his fee with Client B, his only legitimate recourse would have been to renegotiate this fee with Client B.
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ARTICLE 7
Case #7-1: Acceptance of Compensation from Buyer and Seller
(Adopted as Case #8-3 May, 1988. Transferred to Article 7 November, 1994.)
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 AÕs price range, heÑthe buyerÑwould pay a finderÕs 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 AÕs 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 AÕs price. The sale was made and REALTOR¨ B collected a commission from Seller C and a finderÕs fee from Buyer A which was not disclosed to Seller C, REALTOR¨ BÕs client.
Several weeks later, Seller C learned about the finderÕs 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 AÕs 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¨ BÕs defense was that he had served both buyer and seller faithfully; that he had not accepted Seller CÕs 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 BoardÕs 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.
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ARTICLE 8
Case #8-2: Request for Investigation Filed by Board with the State Real Estate Commission
(Originally Case #15-7. Revised and transferred to Article 18 as Case #18-4 May, 1988. Transferred to Article 8 November, 1994. Revised November, 2001.)
REALTOR¨ A listed Client BÕs residential property and sold it to Buyer C, who made a substantial deposit subject only to Buyer CÕs obtaining a mortgage on terms and conditions not exceeding a specified rate of interest within 60 days.
REALTOR¨ A assisted Buyer C by introducing him to officials of a lending institution, and after processing of his application for a mortgage, a written mortgage commitment was made by the lending institution which met the terms and conditions of the sales agreement. However, shortly after the mortgage commitment was received by Buyer C, REALTOR¨ A received a certified, return receipt requested letter from Buyer C, advising that Buyer C had changed his mind and would not go through with the sale. REALTOR¨ A discussed the matter by phone, but Buyer C said he would rather forfeit his deposit and definitely would not complete the sale, even at the risk of the seller suing for specific performance.
REALTOR¨ A then advised Client B of Buyer CÕs refusal to go through with the sale and Client B told REALTOR¨ A that he did not wish to sue Buyer C, but would just accept a portion of the forfeited deposit as specified in the listing agreement between Client B and REALTOR¨ A.
REALTOR¨ A then obtained a written release from the sale from Client B and Buyer C, and promised to send Client B a check for the portion of the forfeited deposit due to Client B as specified in the listing agreement. However, REALTOR¨ A failed to send Client B a check and Client B filed a complaint with the Executive Officer of the Board alleging a violation of Article 8 of the Code of Ethics.
At the hearing, Client B stated that he had no complaint about REALTOR¨ AÕs services to him except REALTOR¨ AÕs failure to provide Client B with the portion of the forfeited deposit due him, and that after several telephone calls and letters, REALTOR¨ A had told Client B that he would provide the forfeited monies due Client B Òjust as soon as he could.Ó Client B said REALTOR¨ A told him he had some unexpected expenses and therefore Client B would have to wait until REALTOR¨ A obtained other funds which he expected to receive shortly.
REALTOR¨ A admitted the facts as related and further admitted that he had not placed the deposit received from Buyer C into an escrow account, but had placed it in his general funds. He said that unexpected expenditures had caused a deficit balance in these funds, and he would pay Client B as soon as he could.
The Hearing Panel concluded that REALTOR¨ A was in violation of Article 8 of the Code of Ethics and recommended that the decision, when final, be forwarded to the State Real Estate Commission as a possible violation of the public trust.
The Board of Directors affirmed the decision of the Hearing Panel; ordered implementation of the recommended sanction; and requested that the President forward, with advice of Board legal counsel, the final decision to the State Real Estate Commission as a possible violation of the public trust.
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ARTICLE 10
Case #10-4: Use of ÒChoose Your NeighborÓ Marketing Letters
(Adopted November, 1987.)
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 BoardÕs MLS, did not place a ÒFor SaleÓ 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 Òfit into the neighborhoodÑpeople with the same socioeconomic backgroundÓ as the other residents of the subdivision.
Based on his conversation with Seller X, REALTOR¨ AÕs only marketing effort was mailing a letter to the other residents of the subdivision, inviting them Ò. . . 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.Ó
REALTOR¨ AÕs 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 BoardÕs MLS for information on the property, had driven past the house to look for a ÒFor SaleÓ 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¨ AÕs marketing strategy was to limit access to the property to individuals preselected by the current residents. ÒIn my mind,Ó said REALTOR¨ B, Òthis 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 houseÕs 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.Ó
REALTOR¨ A defended his actions by advising the panel that he was acting on Seller XÕs 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 ÒsuitableÓ 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 panelÕs opinion, that the exclusive use of ÒChoose Your NeighborÓ letters to market the property was designed to circumvent the requirements of Article 10.
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ARTICLE 11
Case #11-10: REALTOR¨Õs Obligation to Disclose Present or Contemplated Interests
(Adopted May, 1997. Revised November, 2000.)
Client A, an owner, needed to sell a property. She approached REALTOR¨ B to list the property. They agreed to the terms of the listing and the property was listed.
An offer was made and was accepted by Client A. After the prospective purchaser completed the loan application, REALTOR¨ B was contacted to appraise the property. When the lender was preparing the closing statement, the lender became aware that the listing broker was also the appraiser and filed a complaint with the Board of REALTORS¨ alleging that REALTOR¨ B had failed to disclose in the appraisal that he had an interest in the property, specifically seeing that the sale closed. The complaint was referred by the Grievance Committee for hearing before a panel of the BoardÕs Professional Standards Committee.
At the hearing, REALTOR¨ B protested that the lender was misreading Article 11, as interpreted by Standard of Practice 11-1, claiming that Òany present or contemplated interestÓ referred only to an ownership interest. REALTOR¨ B concluded that the listing commission had been earned when a ready, willing, and able purchaser contracted to purchase the property and that the appraisal process was separate and distinct from the brokerage process.
The Hearing Panel concluded that REALTOR¨ BÕs defense was specious and because he was the listing agent REALTOR¨ B was biased in favor of Client A since a successful transaction would benefit REALTOR¨ B in the form of a commission.
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ARTICLE 12
Case #12-12: Advertising in the Guise of News
(Adopted April, 1994. Revised November, 1995.)
Shortly after mailing his ÒHomeowners Neighborhood NewsletterÓ to local residents, several complaints were filed against REALTOR¨ B claiming that he had engaged in deceptive advertising in violation of Article 12Õs Òtrue pictureÓ directive. These complaints were reviewed by the Grievance Committee which determined that a hearing should be held and that all of the related complaints would be consolidated in a single hearing. The appropriate notices were sent and the hearing was convened.
REALTOR¨ A, one of the complainants, introduced REALTOR¨ BÕs ÒHomeowners Neighborhood NewsletterÓ into evidence pointing out that, on the first page, REALTOR¨ B had prominently shown pictures of, and addresses for, ten homes in an exclusive area of town labeling each as ÒRecently Sold.Ó REALTOR¨ A, the listing broker for several of these properties, stated that, in his opinion, the average reader would readily conclude that REALTOR¨ B, by advertising this way, was claiming to have listed and sold the properties and that his claims violated Article 12, as interpreted by Standard of Practice 12-7. In response, REALTOR¨ B indicated that Article 12 was limited in scope to Ò. . . advertising and representations to the publicÓ and that his ÒHomeowners Neighborhood NewsletterÓ was not, in fact, advertising but rather a well-intentioned effort to make homeowners aware of current market values. ÒSale prices in our county become a matter of public record once a deed of sale is recorded,Ó REALTOR¨ B argued, Òand anyone who wants to find out about recent sales can get that information from the recorderÕs office.Ó ÒAll I am doing,Ó he continued, Òis reporting newsÑand saving residents the time and effort of retrieving this information on their own. If someone appreciates my efforts and later buys or sells through me, so much the better, but that is not the reason for my newsletter.Ó
After hearing from the complainants and the respondent, and after reviewing the content of the newsletter, the Hearing Panel concluded that it did, in fact, violate Article 12 since, while the information regarding the properties themselves was accurate, its cumulative effect was to convey the impression that REALTOR¨ B had listed and/or sold the properties when he had not. The fact that he had been the cooperating broker in one of the transactions did not give him the right to claim, directly or indirectly, that he had ÒsoldÓ any of the other properties because in no instance had he been the listing broker. The Hearing Panel did not accept REALTOR¨ BÕs claim that his newsletter was exempt from scrutiny under Article 12 in that he was disseminating news and not engaging in advertising. They noted that the name, address, and phone number of REALTOR¨ BÕs firm appeared prominently in several places; that a considerable portion of the newsletter was devoted to services available from REALTOR¨ BÕs firm and the advantages of doing business with REALTOR¨ B; and concluded that while the newsletter might, in fact, include an element of ÒnewsÓ a primary purpose of it was to advertise REALTOR¨ B and his firm and, consequently, that it was subject to scrutiny under Article 12.
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ARTICLE 13
Case #13-3: REALTOR¨Õs Obligation to Recommend Counsel When Needed
(Reaffirmed Case #17-3 May, 1988. Transferred to Article 13 November, 1994.)
REALTOR¨ A was the listing broker for 25 acres of land owned by Client B. Shortly after REALTOR¨ AÕs 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 ownerÕs 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¨ AÕs 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¨ AÕs 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 Òunauthorized practice of lawÓ within the meaning of Article 13.
However, the panel noted that a REALTOR¨ is obligated to Òrecommend that legal counsel be obtained when the interest of any party to the transaction requires it.Ó
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 Òstatement of lawÓ 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.
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ARTICLE 14
Case #14-1: Establishing Procedure to be Followed in Handling Complaints
(Revised Case #15-1 May, 1988. Transferred to Article 14 November, 1994. Revised November, 1996. Revised November, 2001.)
A Board of REALTORS¨ received a complaint from REALTOR¨ AÕs client charging REALTOR¨ A with a violation of Article 1 of the Code of Ethics. The complaint was referred to the Chairperson of the BoardÕs Grievance Committee, who sent a copy of it to REALTOR¨ A with a request that he respond and provide a specific document about the matter to the Grievance Committee for its preliminary review.
REALTOR¨ A responded with a denial of the charge, and a statement that he would appear at any hearing on the appointed date and would, at that time, present all pertinent facts. He went on to indicate that on the advice of legal counsel he was unwilling to place the requested document in the hands of the Grievance Committee in advance of any hearing.
The Grievance Committee then initiated its own complaint charging REALTOR¨ A with a violation of Article 14 for refusing to place the requested document before a proper tribunal.
A hearing of the Grievance CommitteeÕs complaint was held before a Hearing Panel of the Professional Standards Committee. At the hearing, REALTOR¨ A again stated that it was his intention to respond specifically and factually to the charge of violating Article 1 if the complaint came before an ethics Hearing Panel and at that time he would submit all pertinent facts, including the document in question.
It was the conclusion of the Hearing Panel that REALTOR¨ AÕs defense against the charge of violating Article 14 was not valid; and that the Grievance Committee could require advance submission of specific documents to the Grievance Committee based on the BoardÕs professional standards procedures which authorized the Grievance Committee to request specific documents to enable the Grievance Committee to make determinations whether complaints warranted hearing. The panel found REALTOR¨ A in violation of Article 14 and directed him to give the requested documentation to the Grievance Committee in connection with its review of the charge of violating Article 1.
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ARTICLE 15
Case #15-2: Intentional Misrepresentation of a CompetitorÕs Business Practices
(Adopted Case #23-2 November, 1992. Transferred to Article 15 November, 1994. Revised November, 2001.)
Following a round of golf early one morning, Homeowner A approached REALTOR¨ X. ÒWeÕve outgrown our home and I want to list it with you,Ó said Homeowner A. ÒIÕm sorry,Ó said REALTOR¨ X, Òbut I represent buyers exclusively.Ó ÒThen how about REALTOR¨ Z?,Ó asked Homeowner A, ÒIÕve heard good things about him.Ó ÒI donÕt know if I would do that,Ó said REALTOR¨ X, Òwhile he does represent sellers, he doesnÕt cooperate with buyer brokers and, as a result, sellers donÕt get adequate market exposure for their properties.Ó
Later that day, Homeowner A repeated REALTOR¨ XÕs remarks to his wife who happened to be a close friend of REALTOR¨ ZÕs wife. Within hours, REALTOR¨ Z had been made aware of REALTOR¨ XÕs 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¨ ZÕs complaint was considered by the Grievance Committee which determined that an ethics hearing should be held.
At the hearing REALTOR¨ Z stated, ÒI have no idea what REALTOR¨ X was thinking about when he made his comments to Homeowner A. I always cooperated with other REALTORS¨.Ó REALTOR¨ X replied, ÒThatÕs 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.Ó 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¨ ZÕs questions, REALTOR¨ X acknowledged that he had shown his buyer-client REALTOR¨ ZÕs 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¨ ZÕs 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¨ ZÕs refusal to pay requested compensation as a Òrefusal to cooperateÓ and to make the assumption and subsequent statement that REALTOR¨ Z Òdid not cooperate with buyer agentsÓ was false, misleading, and not based on factual information. Consequently, REALTOR¨ X was found in violation of Article 15.
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ARTICLE 16
Case #16-18: Assumed Consent for Direct Contact
(Reaffirmed Case #22-2 May, 1988. Transferred to Article 3 November, 1994. Transferred to Article 16 November, 2001.)
REALTOR¨ A, who held an exclusive listing of Client BÕs property, invited REALTOR¨ C to cooperate with him. When REALTOR¨ C, shortly thereafter, received an offer to purchase the property and took it to REALTOR¨ A, the latter took REALTOR¨ C with him to present the offer to Client B, and negotiations for the sale were started. The next day, REALTOR¨ C called on Client B alone, recommended that he accept the offer which was at less than the listed price, and Client B agreed. The contract was signed and the sale was made.
These facts were detailed in a complaint by REALTOR¨ A to the Board of REALTORS¨ charging REALTOR¨ C with unethical conduct in violation of Article 16, having made his second contact with the client without his, REALTOR¨ AÕs, consent.
At the subsequent hearing, REALTOR¨ C defended his actions on the basis that since he had been invited to cooperate with REALTOR¨ A, and particularly since REALTOR¨ A had invited him to be present when his offer was presented to the seller, REALTOR¨ C had assumed that he had REALTOR¨ AÕs consent for subsequent direct contacts with Client B. He stated further that he had a good reason for going alone because in his first visit to the client, REALTOR¨ A had undertaken to present his, REALTOR¨ CÕs, offer without fully understanding it and had made an inept presentation. Questioning by members of the Hearing Panel revealed that there had been some important considerations that REALTOR¨ A had not understood or explained to the client.
The conclusion of the panel was that the consent of the listing broker required by Article 16, as interpreted by Standard of Practice 16-13, cannot be assumed, but must be expressed; and that REALTOR¨ C had violated Article 16 by negotiating directly with REALTOR¨ AÕs client without REALTOR¨ AÕs consent.
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ARTICLE 17
Case #17-1: Obligation to Submit to Arbitration
(Revised Case #14-2 May, 1988. Transferred to Article 17 November, 1994. Revised November, 1995. Revised November, 2001.)
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 CommitteeÕs 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¨ AÕs 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 BoardÕs 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 BoardÕs 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 BoardÕs arbitration process would have been ultimately complied with.
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