Mastering Your Moral Compass: Being an ethical real estate agent can be challenging at times, but CRSs say it’s worth the effort.
By David Tobenkin
How to handle pocket listings ethically, how to handle multi-offer situations in a hot market and how to avoid getting in hot water on social media are all among the front-burner ethics issues that have come to the fore in recent years. But real estate professionals and REALTOR® ethics experts say it’s possible to successfully navigate them—and it does set you apart from your competition.
Rules of the Road
There is, of course, a national ethics benchmark: the National Association of REALTORS’® 104-year-old Code of Ethics available at nar.realtor/code-of-ethics.
“To maintain ethical compliance, members first and foremost should read the code and complete their required ethics training,” says Kate Lawton, director of professional standards and financial administration at the National Association of REALTORS®. The Code of Ethics and Arbitration Manual lays out the procedures that local associations of REALTORS® follow to enforce the code.
REALTORS® are now required to complete no less than 2.5 hours of ethics training within two-year cycles, with the most recent cycle beginning Jan. 1, 2017. That rule doubles the requirement in effect prior to this year, which required 2.5 hours of training every four years.
Doing the Right Thing Really Is Worth It
There are a variety of ethical dilemmas that CRSs routinely encounter—here are five examples, along with tips for maneuvering through them and some lessons learned.
1. The Hidden Cost of Ethical Behavior
Being ethical cost Judie Seitz $20,000 in one transaction alone, says Seitz, CRS, a Cincinnati, Ohio-based agent at Comey & Shepherd REALTORS®. Seitz says her ethical compass was put to the test when she listed the former Cincinnati Bengals head coach’s house in the MLS more than 12 years ago. “Prior to the open house, I received a call from a doctor in the area,” Seitz says. “He said he had been working with an agent for a year and a half trying to find a home. He said he knew the house and wanted to buy it, and that if I would show it to him ahead of the open house, he would buy it through me and bypass his agent.”
“The added 3 percent commission for the sale would have been more than $20,000, which, given financial challenges I had at the time, would have helped me quite a bit,” Seitz says. “However, in my heart, I knew that I had vowed to myself to lead my life and business based on ethics, not just the rules. Many times the rules do not go deep enough. I told him that no one would see it before the Sunday open house. Well, he came to the open house with his agent right at the start time, and he purchased the house. While I missed out on the additional $20,000, I felt good that I had stuck to my ethical standards.”
Moral: It’s not all about the money. Your own moral and ethical standards are on the line, and learning how much they’re worth offers value in itself.
2. Electronic Transparency
Some say the ease with which documents pass back and forth electronically is leading to insufficient attention to ethical obligations. “My clients, a young Coast Guard family [first-time buyers], had electronically signed a buyer representation agreement buried beneath counter-offer documents,” says John Berger, CRS, a RE/MAX Allegiance agent in Chesapeake, Virginia. “The NAR Code of Ethics requires that when sending anyone documents to sign electronically, REALTORS® shall make reasonable efforts to explain the nature of the agreement and disclose the specific terms being agreed to by the contracting party. According to these buyers, this did not happen.”
Moral: Ensure that electronic documents, the material information they contain and their significance are clearly explained to buyers and sellers.
3. Social Standards
Lawton says a hot ethics issue is complying with Article 12 of the Code of Ethics’ requirement that REALTORS® present true pictures in their advertising, marketing and other representations, which she says is becoming more challenging in an age of proliferating social media. “Some members don’t understand that Article 12 applies to communications on social media,” Lawton says.
Moral: Carefully scrutinize social media discussions of properties and professional representations so even passing (often flowery) remarks on informal sites comply with Article 12, and consider confining all such discussions to a designated professional page so they can be policed for ethical compliance.
4. Code of Many Colors
Having a game plan for situations that could be ethically challenging, such as handling multiple offers when the listing agent also wishes to represent a potential buyer, can help maintain ethical standards, says Craig McKenzie, CRS, a managing broker at Keller Williams Whidbey Realty in Oak Harbor, Washington. “When I am the listing agent in that situation, I make every effort to allow all potential buyers to have a fair chance at the transaction,” he says. “To keep it above board, I bring my managing broker into the equation, and he represents the seller in evaluating all written offers, and I represent my buyer. Once the preferred offer is picked by the seller, I step back in to represent the seller.”
Best practices in such situations also involve appropriate communications with the sellers, notes Diane Disbrow, CRS, 2017 National Association of REALTORS® Law and Policy Liaison and broker-owner of Bay Shore Realty Inc. in Tuckerton, New Jersey. “My company has an addendum to our listing agreement [describing multiple offer situations], and we discuss various negotiating strategies, options and alternatives for them to consider,” Disbrow says.
Moral: Ensuring ethical conduct in multiple-offer situations, especially knowing you may represent seller and buyer, may take advanced planning.
5. A Pocketful of Problems
One of the hottest ethical conundrums facing real estate professionals, pocket or “coming soon” listings, may have no clear ethical answer—yet. A recent article in The Residential Specialist on the subject—Pocket Listings—noted that opinion of CRSs was split on the ethics of “coming soon” sales made before properties are posted on the MLS. “Is there really a need for the ‘coming soon’ strategy?” asks Kay Hunt, CRS, a managing broker at Imagine Homes Realty, LLC. “Are we acting in the best interest of our clients at all times? Article 1 of the REALTOR® Code of Ethics ‘to promote and protect the interests of the client’ and Article 3’s duty to ‘cooperate with other brokers except when cooperation is not in the client’s best interest’ make the ‘pocket listing’ strategy a slippery slope. Although not illegal or unethical by itself, we need to ensure we are not compromising the legal and ethical duties we owe our clients.”
Moral: Pocket sales are a defining ethical issue of the day, involving some clear ethical challenges that warrant developing a coherent ethics strategy.
Ethical conduct as a real estate professional is not incompatible with financial success, and it can yield a richer, more rewarding practice over the longer term, real estate professionals say. But it will take knowledge, patience, effort and resolve to not be the weak link in the ethics chain, and instead be the responsible actor who maintains or improves the standards of all parties involved in sales transactions and the profession as a whole. 
Transactional Mediation
One challenge to improving ethics in the industry is the reticence of many real estate agents and consumers to file complaints with their local or state REALTOR® associations regarding unethical conduct. In response, the National Association of REALTORS® required that ombudsman services be offered to their members and consumers, either directly or through an agreement with other associations of REALTORS®, as of Jan. 1, 2016, notes Diane Disbrow, CRS, 2017 National Association of REALTORS® Law and Policy Liaison and broker-owner of Bay Shore Realty Inc., in Tuckerton, New Jersey.
“The Ombudsman Program is informal telephone mediation,” Disbrow says. “The ombudsman can also solve consumer and inter-REALTOR® conflicts before they become serious problems. Some complaints do not allege violation of the NAR Code of Ethics, and many times they are transactional, technical and procedural questions that can be addressed by communication. Like a mediator, an ombudsman helps parties find solutions that everyone can be happy with.”
Doreen Roberts, CRS, a broker at Fremo, California- based MasterKey Real Estate and an ombudsman for the Bay East Association of REALTORS® and the California Association of REALTORS®, says that more than 600 ombudsman action requests are filed per year at the state level. Among the most common referrals are unethical behaviors by listing agents with interested buyers, Roberts says: “Many agents are hoping to write their own offer and often seek to thwart other offers by not responding. Then we get calls after the fact from agents or buyers saying, ‘Our offers were higher than what was published.’ We remind listing agents that under Article 1 of the [National Association of REALTORS® Code of Ethics], they have a fiduciary relationship to their clients to put their clients’ best interests first, including talking to any potential agents with buyers.”
Remember, you can also report agents illegally using the CRS Designation by going to CRS.com and filing an Illegal Usage Report.
