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Wary of Code Compliance Complaints? It’s Likely One of These

“But that wasn’t a Code of Ethics violation,” often follows the filing of a Code of Ethics complaint. It’s a difficult process even if the Realtor did nothing wrong, but here are some steps to lessen the risk it will happen to you.

CHICAGO – Barbara Betts still vividly remembers defending herself from a complaint filed by a fellow Realtor in front of a board of her peers. Though Betts says she was ultimately exonerated, she vowed from that point on to learn everything she could about the National Association of Realtors®’ Code of Ethics (COE) and risk management in order to prevent a similar situation from happening again.

In the virtual 2020 Realtors Conference & Expo session “How to Stay out of Trouble: Risk Management and Code of Ethics,” presented by Betts, she offered tips and best practices real estate professionals can incorporate into their business practices. Betts covered managing the risk of potential litigation, reducing liability, and minimizing exposure to possible ethics complaints.

When they joined NAR, Realtors knew that they also agreed to operate within the association’s Code of Ethics, which asks members to hold themselves to a higher standard. However, Betts, the broker-owner of The Betts Group in Long Beach, Calif., said newer members often don’t fully understand what complying with the code requires. She offered a high-level overview of some of the most common Code of Ethics violations that can trip up even well-intentioned Realtors.

Article 1: Realtors owe a fiduciary duty to their clients and honesty to all parties
Common problem areas:

  • Overpricing a listing – this can be considered misleading the lister.
  • Not presenting all offers up until the closing.
  • Disclosing confidential information about the seller, such as a bankruptcy filing or other financial troubles.

Article 3: Cooperation with other brokers
Common problem areas:

  • Misrepresenting access to show a home. For example, listing the date a property is available but showing it yourself before that date.
  • Providing access to a home on terms other than those established by the listing broker, such as giving clients access codes to use without you present.
  • Refusing to cooperate with another broker on the basis of the broker’s race, color, religion, sex, handicap, familial status, national origin, sexual orientation or gender identity.

Article 12: Honesty in real estate communications
Common problem areas:

  • Not making it clear in advertising material who your broker is, especially if it’s not you.
  • Not keeping website information accurate and up to date.
  • Using copyrighted images without permission in your communications, including social media posts.

Fair housing
Fair housing is covered by Article 10 of the Code of Ethics, and Betts highlighted two important topics related to this issue: steering and “love letters.” Betts warned that engaging in either one of these practices can lead to a lawsuit – even if there was no intent to violate fair housing laws.

Steering, she said, can be as simple as offering different opinions to two different clients. For example, if you tell one client a neighborhood is safe and another client not to buy there because of the crime rate – and you do so because of race – it would be considered steering.

“You have to give the same advice to everyone,” Betts said.

Risk management
Betts also included her top seven tips for risk management – practices real estate professionals can put into place to help make sure they’re covered if a complaint or lawsuit is filed against them. These practices, she said, help ensure that you have the information you need on hand and that nothing pertinent, such as text messages, goes missing:

  • Document everything – Betts uses Slack.
  • Following conversations, summarize important information in email and send it to the buyer or seller to make sure that there is a record of what you communicated.
  • Give clients choices when it comes to home warranty add-ons and inspector choices – don’t make the decision for them.
  • Email transaction milestones and reminders to clients.
  • Save all text messages and communications with clients and other agents.
  • Ask clients questions constantly, such as, “Do you understand?” or, “Do you have any questions?”

Betts said she loves clients who ask a lot of questions and advised real estate agents to work on getting silent clients to open up and reveal what they don’t understand about the process.

“Typically,” she said, “they won’t sue if they understand.”

Source: National Association of Realtors® (NAR)

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