The Realtor Code of Ethics

Whether you’re getting ready to purchase a home or are thinking about placing your home on the market in the near future, you’ll want to have a professional realtor by your side who will be able to guide you through every step of the process. Before you choose a realtor, it’s important to understand that a realtor differs from a standard real estate agent due to obligations of membership with the National Association of Realtors (NAR).

Anyone who wishes to obtain such a membership is required to agree with the Realtor Code of Ethics, which includes 17 separate articles that are strictly enforced and must be adhered to by each realtor in their everyday business practice. These principles are meant to ensure that the customers are always treated fairly and that each and every Realtor of the NAR provides their services with honesty and integrity, which is what sets Realtors apart from standard agents.

These principles were first adopted in 1913 and have since become the guiding standard for people who want to become Realtors. The Realtor Code of Ethics extends to clients, customers, the public, and other realtors, which essentially means that Realtors must act with honesty and integrity at all times. To understand just how important these principles are to real estate agent in the industry, you will first need to know more about this Code of Ethics and what it represents.

Handshake closing escrow

National Association of Realtors

The NAR is currently the biggest trade association in the U.S. with over 1.3 million members. They are involved in every aspect of the real estate industry and are primarily known for having a stringent code of ethics that prospective realtors must subscribe to. The main goal of the NAR is to assist its members in becoming more successful and more profitable. In turn, their aim is to be viewed by real estate professionals as being crucial to their ongoing success. They want to influence the real estate industry, which they believe they have achieved by developing a set of standards for ethical, efficient, and effective business practices.

The history of this association is a lengthy one that first began in 1908 when the organization was founded as a National Association of Real Estate Exchanges. At the founding of this association, there were only 120 members and a single state association, which goes to show how successful they’ve been in the 111 years since. The Code of Ethics that’s used by the association today was officially adopted in 1913 and was notable for using the golden rule as the main theme of the code. It wasn’t until three years later that the term of Realtor was identified for any real estate agent who became a member of the association and subscribed to the Code of Ethics.

While the association developed the Realtor name in 1916, they didn’t trademark “Realtors” and “Realtor” until 1949 and 1950 respectively. In the years following, they would strongly defend the trademarks in a variety of cases. In 1972, their name was officially changed to the NAR. Since that time, they have seen exponential growth from around 400,000 members to more than 1.1 million! They also belong to 54 state associations that include Puerto Rico, Guam, and the Virgin Islands, which means that members are available in every state. Their Code of Ethics has been a guiding principle for every professional who becomes a member, which has provided the association with a sterling reputation among prospective customers.

The Realtors Code of Ethics

The Code of Ethics refers to a lengthy document of principles that are currently laid out within 17 separate articles. Any real estate professional who wants to gain membership at this prestigious association must first subscribe to this code of ethics, which ensures that all customers are treated fairly and honestly. While the Code of Ethics has been updated many times throughout its lengthy history, the underlying structure of the document has remained the same.

Unlike state guidelines that govern standard real estate professionals, this document is very restrictive and is designed to make certain that every realtor who is a member of this association adheres to these extensive principles. The main goal of this document is to serve as something that will regulate the industry and make sure that buyers, sellers, and other customers are always treated honestly and fairly. The end result should be a smooth and successful transaction. The standard of conduct that each realtor must follow applies to the public, to the clients and customers that the realtor has, and to other realtors. The breaking of these principles by a realtor will invariably result in disciplinary action.

Escrow meeting

Our Duty to Clients & Customers

The first section of this document centers around the realtor’s duty to their customers and clients, which is of the utmost importance to the success of any realtor. There are nine articles in this section, the first of which denotes that the realtor should always protect the client’s best interests. When conducting business with a client or customer, the realtor must not exaggerate, misrepresent, or hide facts about a property. If the realtor has personal interest in this property for some reason, they are required to disclose this information to their customers. Article 3 of this section states that all realtors must cooperate with one another unless this cooperation doesn’t adhere with the client’s best interests.

When a realtor is showing a property or working with a homeowner to sell a property, they aren’t allowed to recommend services to the client that will result in them obtaining a kickback or collecting money. Any client funds that are put through escrow or a trust fund must be kept entirely separate from the realtor’s funds. Article 9 of the duties to clients and customers section states that any documents that pertain to the transaction of selling or buying a home must be presented to the client in terms that are understandable by them, which means that there can be no complicated legalese or small print in these documents subject to misinterpretation.

Who pays escrow?

Our Duty to the Public

While this code is primarily centered around a realtor’s dealings with their clients and customers, they also have a duty to the public, which is outlined through articles 10-14. First of all, a Realtor cannot deny their services on the basis of discrimination of any kind, which includes race, color, sex, religion, handicap, sexual orientation, familial status, national origin, or gender identity. Realtors are also only allowed to provide services that are within a Realtor’s professional scope, which means that they aren’t allowed to provide any service for which they are unqualified.

When advertising and marketing to the public for a home that’s being listed on the market, a Realtor must never create misleading or altogether false advertisements. When looking specifically at Article 13, Realtors cannot engage in certain activities that would be regarded as practicing law, which means that they must instead recommend to the seller or buyer that they obtain legal counsel if the transaction calls for it.

The final article of this section is less important to the public but is designed to make sure that a Realtor is honest at all times while performing their duties. If ever placed under investigation when charged with a violation of one of these principles, the Realtor in question must cooperate fully with the investigative proceedings, which can include presenting evidence when necessary. The realtor cannot obstruct or delay the investigation in any way. If they do, additional disciplinary actions could be taken.

Realtor sharing information

Our Duty to Realtors

The final section of this document involves the duty that realtors have to other realtors. Each member of the NAR is expected to treat their fellow members with honesty and respect, which is outlined in three separate articles. For instance, a Realtor cannot make a false or misleading statement against another Realtor, which extends to the filing of ethics complaints that are unfounded. If a customer has signed a listing agreement with a Realtor, other Realtors are not allowed to solicit the same client. There are many examples of Realtor interference that can upend a real estate transaction, which is why this type of interference is not allowed.

Finally, any contractual disputes must be arbitrated or mediated by the Realtor Board of the NAR. In general, this article means that a realtor must seek remedies to a dispute with another realtor through the association as opposed to seeking legal solutions within the judicial system. Keep in mind that these are merely summaries of the code. Many of the articles within the Code of Ethics document are comprised of several amendments to the article, which are referred to as Standard of Practice amendments.

Whether you’re getting ready to list your home or are considering purchasing a property, having a real estate firm understanding of the ethics and principles that are held by the NAR should give you the confidence needed to choose a realtor over a standard real estate agent — contact Grogan & Grogan today for any of your Tucson home buying or selling needs!