Article 1

by Michele McCaskill | Aug 7, 2023 | Canopy Realtor® Association

 

Article 1 of the Realtor® Code of Ethics (the “Code”) falls under the first of the three categories of organization under the Code: “Duties to Clients and Customers.”  Article 1 requires Realtors®, in the representation of others, to protect and promote the interests of their client primarily, and to treat ALL parties HONESTLY. 

 

The language of this Article is very clear and leaves little room for debate – Realtors® are required, first and foremost, to protect and promote their client’s best interests – not their own, AND to treat ALL parties HONESTLY. 

 

Treating all parties honestly means that Realtors® may not lie, tell half-truths or skirt the truth altogether.  For example, Realtors® acting as listing agents, may not deliberately mislead owners as to the market value of their home (Standard of Practice (“SOP”) 1-3).  See Case Interpretation #1-5 below.   Listing agents are also required, as illustrated in SOP 1-6 to submit all offers and counter-offers objectively and as quickly as possible.”  SOP 1-7 goes on to state that Realtors® shall continue to submit all offers and counter-offers until the closing or lease execution unless the seller/landlord waives this obligation in writing. 

 

Realtors® are further prohibited from choosing which offers to share with clients.  The Code is clear that all offers are to be presented and that when a cooperating broker requests, in writing, confirmation that an offer was presented, SOP 1-7 states the listing broker SHALL provide written affirmation to the cooperating broker that the offer was submitted or that the seller/landlord waived the obligation to have the offer presented.  A Realtor® who fails to do as is required under the Code, has not fulfilled their obligation under Article 1 and would likely be found to be in violation. 

 

SOP 1-15 further illustrates that Realtors®, in response to inquiries from buyers or cooperating brokers, are, with the seller’s approval, required to disclose the existence of other offers on the property. The terms of those offers, however, are strictly confidential and should not be disclosed unless you have been given express authority from the seller, to disclose the terms. 

 

Realtors® working as buyer agents have an implied duty, under Article 1, to present to their clients ALL properties that meet their client’s criteria and not just those properties where the listing brokerage might be offering a larger commission. 

 

It is as important now as it ever was, to ensure that Realtors® are not basing the presentation of property listings on the compensation the listing brokerage is offering.  A Realtors® primary duty is to their client – to find them the right home based on their specific preferences and budget.  It would likely be a violation of the Code to let an offer of compensation be the determining factor in presenting a particular home to a client for consideration. 

 

Keep in mind that there are many behaviors that could subject a Realtor® to sanctions for violating Article 1 of the Code.  The SOPs that follow the language of the Article are provided to illustrate what would be considered a violation of the Code.  Policy Statement 57 of the Code of Ethics and Arbitration Manual provides: 

 

57. Case Interpretations are Official Policy

 

The Case Interpretation of the Code of Ethics approved by the National Association’s Professional Standards Committee and published in Interpretation of the Code of Ethics illustrate and explain the principles articulated in the Articles and Standards of Practice. While a Realtor® cannot be found in violation of a Standards of Practice or a Case Interpretation, both are official statements of National Association policy and are not merely advisory. Both can be cited by complainants in support of alleged violations of Articles and by hearing panels in support of decisions that an Article(s) has been violated. (Adopted 11/10) 

 

The SOPs are not exhaustive and other behaviors could lead to a violation of Article 1. What follows are two case interpretations provided by the National Association of Realtors® which offer examples of the practical application of the Code in professional standards enforcement. 

 

Case #1-2: Honest Treatment of All Parties

(Originally Case #7-2. Revised May, 1988. Transferred to Article 1 November, 1994. Cross-reference Case #2-18. Revised May 2017 and November, 2022.)

 

As the exclusive agent of Client A, REALTOR® B offered Client A’s house for sale, advertising it as being located near a public transportation stop. Prospect C, who explained that his daily schedule made it necessary for him to have a house near the public transportation stop, was shown Client A’s property, liked it, and made a deposit. Two days later, REALTOR® B read a notice that the transportation running near Client A’s house was being discontinued. He informed Prospect C of this, and Prospect C responded that he was no longer interested in Client A’s house since the availability of public transportation was essential to him. REALTOR® B informed Client A and recommended that Prospect C’s deposit be returned.

 

Client A reluctantly complied with REALTOR® B’s recommendation, but then complained to the Association of REALTORS® that REALTOR® B had not faithfully protected and promoted his interests; that after Prospect C had expressed his willingness to buy, REALTOR® B should not have made a disclosure that killed the sale since the point actually was not of major importance. The new transportation route, he showed, would put a stop within six blocks of the property.

 

In a hearing before a Hearing Panel of the Association’s Professional Standards Committee, REALTOR® B explained that in advertising Client A’s property, the fact that a transportation stop was less than a block from the property had been prominently featured. He also made the point that Prospect C, in consulting with him, had emphasized that Prospect C’s physical disability necessitated a home near a transportation stop. Thus, in his judgment, the change in routing materially changed the characteristics of the property in the eyes of the prospective buyer, and he felt under his obligation to give honest treatment to all parties in the transaction, that he should inform Prospect C, and that in so doing he was not violating his obligation to his client.

 

The Hearing Panel concluded that REALTOR® B had not violated Article 1, but had acted properly under both the spirit and the letter of the Code of Ethics. The panel noted that the decision to refund Prospect C’s deposit was made by the seller, Client A, even though the listing broker, REALTOR® B, had suggested that it was only fair due to the change in circumstances. 

 

Case #1-5: Promotion of Client’s Interests

(Originally Case #7-6. Revised May, 1988. Transferred to Article 1 November, 1994. Revised November, 2022.)

 

Client A gave an exclusive listing on a house to REALTOR® B, stating that he thought $399,000 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 Client A had insisted on the list price and it was now clear that it was overpriced since there had been few showings and no offers.

 

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: “Yes it’s still on the market.” After some additional conversation, the associate told Client A that she had heard at a sales meeting that the price was too high so it wasn’t getting much activity. The associate then asked if Client A would be interested in some other similar properties which were listed at lower prices.

 

Client A wrote to the Association of REALTORS® 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 Association’s Professional Standards Committee, REALTOR® B’s response was that Client A had emphatically insisted that he wanted $399,000 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.

 

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.