The Code of Ethics: Your Promise of Professionalism

Student Manual

The REALTORS® Code of Ethics Quadrennial Member Education Program This is a certified 3 Hr. C.E. Credit Course

Meet Your Instructors

Bob Memoli CRB, GRI, SFR, SRES Broker-Realtor®

Victoria Barley PA, GRI Realtor®

The Code of Ethics Your Promise of Professionalism

The REALTOR® Code of Ethics Quadrennial Member Education Program

Icebreaker Exercise The instructor will tell you how to form groups. In your group, you should: 1. Introduce yourselves if you do not already know each other. 2. Select a spokesperson. 3. You will have received a copy of the REALTOR® Code of Ethics. Your group will be asked to summarize or "paraphrase" several Articles of the Code of Ethics and/or parts of the Preamble. Use the grid below to paraphrase the Articles you have been assigned. Your spokesperson will be asked to share your answers.

Preamble or

Article Paraphrase or Summary

Preamble

Article 1

Article 2

Article 3

Article 9

Article 11

Article 12

Article 16

Article 17

History of the Code of Ethics

Pre -1900

* No licensing of real estate practitioners

* Speculation, exploitation, and disorder

* Caveat emptor governed transactions

NATIONAL ASSOCIATION OF REALTORS® Formed in 1908

Known then as the National Association of Real Estate Exchanges

Code of Ethics Adopted in 1913

* Established professional standards for conduct

* First ethical code for business after medicine, engineering, and law

* Focused on: – service to the public – commitment to professionalism

* Included “Duties to Clients” and “Duties to Other Brokers”

Under all is the land...

Preamble to the Code of Ethics Breakout

The REALTORS®’ Code of Ethics

* Protects the buying and selling public.

* Promotes a competitive real estate market place.

* Enhances the integrity of the industry.

* Is our promise of performance. * Is our promise of professionalism.

Structure of the Code of Ethics

Three Sections

* Duties to Clients and Customers

* Duties to the Public

* Duties to Other REALTORS®

[Type a quote from the document or the summary of an interesting point. You

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The Golden Rule . . .

Whatsoever ye would that others

should do to you, do ye even so to them.

The Code of Ethics was the basis for later-adopted

license laws.

The Code Ethics

Since its inception, the Code has required:

* arbitration of contractual disputes between/among REALTORS®

* respect for other brokers’ exclusive relationships with clients

* cooperation between/among REALTORS®

Business Ethics, NAR Code of Ethics, and

Pathways to Professionalism

Business Ethics

* Industry codes * Company policies * Individual moral values

* Business ethics and legal standards

REALTORS® Share One Common Characteristic

Regardless of real estate business specialty (such as appraisal, property management, etc.), all REALTORS® are bound by the Code of Ethics.

The Code and the Law

The Code of Ethics: * must be reasonably construed

with the law * imposes duties above and in addition to duties imposed by law or regulation * restates certain fundamental legal principles

How the Code of Ethics Evolves

* Amendments made during Midyear Meetings and REALTORS® Conference and Expo.

* Revisions require approval by NAR Professional Standards Committee and Board of Directors.

* Interpretations and Procedures Subcommittee of the Professional Standards Committee recommend many of the changes.

Professional

Courtesies

Pathways to Professionalism

Three Sections * Respect for Public

* Respect for Property

* Respect for Peers

Enforcement of the Code of Ethics

Enforcement of the Code of Ethics

* An association where someone holds membership or gains MLS access has jurisdiction to process ethics complaints and arbitration requests filed against that individual.

* Associations do not determine violations of law and regulation.

Enforcement of the Code of Ethics

* Every association is responsible for enforcing the Code.

* This includes providing mediation and conducting ethics and arbitration hearings.

* Only REALTORS® and REALTOR-ASSOCIATES® subject to the Code.

WWhhoo can file an ethics complaint?

Association Dispute Resolution

* Ethics complaints * Grievance * Mediation – Informal * Arbitration - Formal

Contractual Disagreements

or

Specific Non-Contractual Disputes between REALTORS® of Different Firms

Grievance Committee in Ethics

Is there a potential violation of the Code of Ethics?

Informal Dispute Resolution Mediation

* Voluntary process in arbitration.

* Disputing parties meet with a mediator appointed by the association.

* Parties create a mutually acceptable resolution of the dispute, rather than go before an arbitration hearing panel.

Mediation

* Preferred dispute resolution tool by the REALTOR® organization.

* Must be available to all REALTORS®.

* Must offer Mediation to disputants before review of Arbitration requests.

Mediation

If a resolution is reached, Parties sign an agreement Containing the terms of the settlement, and no arbitration hearing is held.

Mediation Versus Arbitration

Mediation Arbitration

Low-cost Moderate cost

Little delay Moderate delay

Maximum range of solutions Win/lose/split

Parties control outcome Arbitrators control outcome

Uncertain closure Definite closure

Maintain/improve relationships May harm relationships

Ethics Hearing Panel

* Following a hearing, panel decides whether the Code of Ethics has been violated, proven through clear, strong, and convincing evidence.

* If a Code violation is found, then the panel also determines the discipline.

Authorized Discipline

* Letter of warning * Letter of reprimand * Education * Fine, not to exceed $5,000 * Probation of one year or less * Suspension of not less than 30 days,

nor more than one year * Expulsion from membership for one to

three years * Suspension or termination of MLS

privileges

Filing an Arbitration Request

* Arbitration is conducted under Article 17 of the Code of Ethics and under a state’s arbitration statute (if any).

* Article 17 provides that arbitration occurs under the following circumstances . . .

Arbitration and Article 17

* Contractual or specific non-contractual disputes, as defined by Standard of Practice 17-4

* Between REALTORS® (principals)

* Arising out of their relationship as REALTORS®

Grievance Committee in Arbitration

Is there an arbitrable issue? (That is, a money dispute, typically concerning which REALTOR® is entitled to the cooperative commission in a transaction).

Arbitration Hearing Panel

* Conducts full “due process” hearing.

* Comprised of members from an association’s professional standards committee.

* After a hearing, panel decides which party is entitled to the award, based on a preponderance of the evidence.

Payment of an Arbitration Award

* An unpaid award typically may be judicially enforced.

* Some associations require that award monies be deposited with the association, pending review of the hearing process or during a legal challenge.

Concepts of Procuring Cause in Arbitration

Arbitration Guidelines

* Found in the Code of Ethics and Arbitration Manual.

* Guide hearing panels in resolving arbitrable issues.

* Focus primarily on procuring cause as the basis for resolving most commission disputes.

Procuring Cause

The proximate cause; the cause originating a series of events which, without break in their continuity, result in the accomplishment of the prime object.

– Black’s Law Dictionary, Fifth Edition

King Pithla’s Description

A series of event could involve many things: * Presenting the property * Showing the property * Promoting the benefits of the property * Discussing financing with the buyer * Discussing possible terms * Writing the offer * Working the offer to acceptance * Help obtain the financing * Managing the non-legal aspects of post-contract to closing * Close the transaction

The more of these events performed, the more preponderance of evidence would be on behalf of the REALTOR®. Arbitration panels determine which REALTOR® in the dispute shows preponderance of evidence of procuring cause.

Procuring Cause Factors

* No pre-determiners.

* Consider the entire course of events.

* Writing an offer, making the first showing, or an agency relationship, in and of themselves, do not necessarily determine procuring cause or entitlement.

Procuring Cause

It is the squirrel that shakes the branch and not the squirrel that gathers the nut.

– Arkansas Supreme Court

Summaries and Case Studies of Selected Articles of the Code of Ethics

Breakout

Listing Sales Associate’s Refusal to Submit My Offer

Case Study 1

* Cooperating broker Fred is upset because the listing broker, Janet, refused to submit his offer without proof showing the buyer is prequalified to purchase the property because her seller did not want to see offers unless the buyer was prequalified. Standard of Practice 1-7 says, the listing sales associate shall present all offers and, therefore, he is required to submit my offer with or without proof the buyer is prequalified. Janet explained to Fred that her seller was adamant about not wanting to waste his time looking at offers from unqualified buyers and he wanted proof that the buyer was prequalified by a lender. Regardless, Fred felt Jane was in violation of Article 1, Standard of Practice 1-7.

* Is this a possible violation of the Code of Ethics based on the face of the complaint?

* Describe concepts established in Articles 1, 2, 12, and 17 and possible violations of them.

Going to the Seller’s Lender

Case Study 2

* There are several offers on a short sale property my buyer wants to purchase. My buyer is very anxious because there are a number of buyers competing for the same property. She feels by making a full-price cash offer, she should be the top contender for the property. She presented a full-price cash offer, on another short sale and a less attractive offer was accepted. This time she wants to make sure the lender sees her offer and wants me to go directly to the lender. I don’t see this as a problem since I am not going directly to the listing broker’s seller.

* Is this a possible violation of the Code of Ethics based on the face of the complaint?

Modifying the Offer of Compensation

Case Study 3

* Broker Sally’s buyer was very impressed with Sally’s hard work in trying to negotiate a very difficult transaction and feels Sally should be compensated above what the listing broker offered in the MLS. The buyer asks Sally to include in the offer the buyer’s request for the seller to compensate Sally an additional x% over what the listing broker offered in the MLS. The listing broker was furious and feels Broker Sally is trying to modify the offer of compensation which is clearly a violation of Article 16 Standard of Practice 16-16.

* Is this a possible violation of the Code of Ethics based on the face of the complaint?

* Describe concepts established in Articles 1, 2, 12, and 17 and possible violations of them.

Disclaimers Accompanying Solicitations

Case Study 4

* Realtor Fred exclusively works the Greenbrier subdivision and has a number of listings in that area. Fred was furious when Realtor George mailed out prospecting solicitations to all of the residents in the Greenbrier area. George knew this was Fred’s area in the first place, but he is supposed to include a disclaimer that states, “if you are currently listed with another sales associate, please disregard.” This is an obvious violation of the Code of Ethics.

* Is this a possible violation of the Code of Ethics based on the face of the complaint?

My Buyer Was Contacted by the Listing Sales Associate

Case Study 5

* I have been working withy MY buyer, Eunice, for years and recently we started looking at properties because Eunice is ready to downsize. I told Eunice I would be out of town for a couple of days and would be back on Wednesday. On Tuesday, Eunice spotted an open house and the listing sales associate. Eunice advised the listing agent that she was working with another REALTOR®. The sales associate continued to work with Eunice and wrote the offer that was accepted. I feel it is unethical for the listing sales associate to continue to work with My buyer after My buyer told her she was working with me.

* Is this a possible violation of the Code of Ethics based on the face of the complaint?

Changing the Offer of Compensation

Case Study 6

* I started working on a listing and the offer of compensation was X% in the MLS. I submitted my offer and found out the offer of compensation had changed. The listing broker changed the offer before my offer was submitted. I didn’t think it was necessary to check the MLS on a daily basis. It doesn’t matter anyway; I should be paid what was offered in the MLS at the time negotiations began. I think this is a violation of the Code of Ethics.

* Is this a possible violation of the Code of Ethics based on the face of the complaint?

The Elusive Listing Sales Associate

Case Study 7

* I submitted an offer over two weeks ago and the listing sales associate has disappeared into thin air. He doesn’t call me back, email me, nothing. I tried calling the broker and all I get is the run around from the mystery person who answers the telephone. My buyer thinks I’m inept because I can’t find out what has happened to this offer. If I don’t find out something soon, the buyer’s going to walk. I can’t contact the seller or I’ll be in violation of the Code. I think it’s a violation of the Code that this broker and his sales associate won’t communicate the status of my offer.

* Is this a possible violation of the Code of Ethics based on the face of the complaint?

Frequent Flyer Ethics Quiz

Is this a violation of the Code of Ethics or not?

Case Study 8

* John, a new Realtor, is excited about setting up his new website. The challenge is to come up with a catchy URL that promotes that he is the “go-to real estate guy “in the Orange Blossom area. He decides on, “Orange Blossom MLS.com.” It covers his market area and will definitely attract attention which it did. A complaint has been filed citing Standard of Practice 12-10.

* Do you think John should be in violation of the Code?

Is this a violation of the Code of Ethics or not?

Case Study 9

* Sandy Keeps a close eye on the listings in the MLS especially the ones that have been temporarily withdrawn from the market. The minute she sees one of these, she calls the seller to solicit the listing. She was flabbergasted when she received a letter from the Grievance Committee asking her to respond to an ethics complaint filed against her citing Article 16.

* Is Sandy in violation of the Code of Ethics?

Is this a violation of the Code of Ethics or not?

Case Study 10

* Realtor Tom, a broker, is named as a respondent in an arbitration request. He refused to respond to the request for arbitration or participate in the hearing. The complainant, Realtor Sue, files a complaint naming Article 17.

* Is this a violation?

Is this a violation of the Code of Ethics or not?

Case Study 11

* Realtor Liz’s husband wants to sell his commercial property located in a popular downtown area. After the property was listed, it sold in no time. Realtor Jenny who sold the listing found out through a mutual friend that Liz’s husband owned the property and never disclosed this to her buyer.

* Jenny files a complaint against Liz, is this a possible violation of Article 4?

Is this a violation of the Code of Ethics or not?

Case Study 12

* Fran loves to write her blog about real estate in her area. The blog has generated good leads for her. After the county tax assessments were mailed out, Fran though it would be a great time to talk about the property values in her area. She published a “recently sold” list and included the disclosure required by the MLS that clearly states the comp information came from the MLS data and the period of time when the transactions had closed. Realtor Tommy was upset because one of the listings she discussed in her blog was his. He filed an ethics complaint claiming she violated Article 12. Fran couldn’t believe it wasn’t an advertisement, it just was a blog on real estate news.

* Could Fran be in violation of the Code?

Is this a violation of the Code of Ethics or not?

Case Study 13

* Kathy was thrilled with her very first sale of Realtor Andy’s listing that she sent out postcards to the neighborhood before the property closed. Another agent in Kathy’s office was mortified by this newbie’s gall to advertise prematurely, what if the deal falls through, then, what? To teach Kathy a lesson, her fellow agent filed a complaint citing Article 12

* Is this a possible violation?