Times change but ethical challenges don’t.
Technology is raising a host of ethics issues, such as what’s okay and what’s not to say on social media. But the biggest ethics issues continue to be those that recur year after year such as matters involving property disclosures and settlement procedures. Here are the biggest ethics issues today along with how to handle them.
1. ‘Coming Soon’ properties.
To put up a sign or advertise to let consumers know a property is coming on the market, you have to do it the right way. First, you have to have the owner’s authorization before you can provide notice of sale of a property or advertise the property, and “coming soon” would constitute both a notice of sale and an advertisement. Second, you need to check your state license laws, because they might require you to have a listing agreement in place before advertising a property, and saying a property is “coming soon” would constitute a form of advertising. Third, you can’t let other associates in your firm show the property if you say in the MLS that it’s not available for showing. If they do, that could be construed as a misrepresentation of its availability. Conversely, if it’s listed as available for showing, associates from any firm have to be able to show it. Fourth, if buyers are interested in the property, you have to direct them back to their exclusive representative, if they have one, and not provide them any substantive services.
2. Multiple offers.
With prices rising and interest rates low, multiple offers are becoming more frequent in many markets. Here’s the right way to handle them: First, present all offers as objectively and quickly as possible. Second, if you’re asked about them by a buyer or cooperating broker and if the seller has given you approval, disclose the existence of all offers, as well as their source. Third, If you have a signed agreement to act as the buyer representative, you have to let the buyer know that the seller or the seller’s representative might not treat the existence, terms, or conditions of their offer as confidential. Only if the seller or seller’s agent is required to by law, regulation, or an agreement do they have to treat the offer confidentially.
3. Unauthorized access.
It’s not always convenient to meet clients when they want to look at a house, but you need to be there or you risk violating the terms and conditions the seller has set for viewing the property. You also can’t give a prospect a key, a lockbox combination or use of a lockbox key. And allowing any unauthorized user, whether a member of the public or a broker without a lockbox key, the use of that lockbox key is a violation of common lockbox system rules through MLSs or associations. (Note from ECAR CEO, Susy Hurlbert: Using the Sentrilock Sysem helps monitor unauthorized use of a lockbox).
4. Social media.
Public? Personal? Professional? Anything you say on Facebook, Twitter, or any other social media platform about real estate, even if you’re just giving your informal opinion, must be accurate to the best of your knowledge. That’s because social media posts, for all practical purposes, are treated as marketing under the NAR Code of Ethics and Standards of Practice. That’s the case even though it’s typical in social media to blur the lines between what’s personal and professional. What’s more, anything you say must present a true picture of the market or a property. And your professional affiliation must always be clear. That means either including the name of your firm in your post or tweet or linking to it. On platforms such as Craigslist, where there is no link to another display, you have to include the firm name in the communication. Check your license law for any additional requirements.
5. Settlement procedures.
There are important differences between the Real Estate Settlement Procedures Act (RESPA) and the NAR Code of Ethics. The Section 8 anti-kickback part of RESPA prohibits the giving and receiving of a thing of value in exchange for a referral, with one exception: if the referral is to an affiliated business, like a mortgage originator or title company properly set up under RESPA, and that business arrangement is disclosed. The Code of Ethics and Standard of Practice 6-1 require disclosure of any financial benefit you receive for referring someone for something.
6. Property disclosure.
Each year property disclosure disputes are the top complaints filed by consumers and the past year has been no different. You are not obligated to discover latent defects with the property or provide advice on matters that are outside the scope of your license. For example, when asked about roofing problems, you should direct your client to a roofer. What you must disclose, though, are matters you observe within the scope of your license. Brown water stains on the ceiling, for instance. Even if the owner doesn’t include that on a seller disclosure form, you should disclose that as a sign of possible water intrusion. When in doubt, disclose.