Real Estate Code of Ethics

Everything You Need to Know About the Real Estate Code of Ethics

by The CE Shop Team

The History of the REALTOR® Code of Ethics

The National Association REALTORS® Code of Ethics has existed in some form for over a century. First adopted in 1913 as a lean set of guiding principles, the Code of Ethics has continually evolved as the standard against which all real estate agents are held. 

While it's been revised to reflect new developments in the real estate sector, the REALTOR® Code of Ethics still reflects the original principles of integrity, competency, accountability, and solving commission disputes in a reasonable and non-costly manner.

The latest amendment to the Code of Ethics was added in 2020, but it was not until January 1, 2021, that it came into effect. The Code comprises 17 articles, each covering distinct areas of conduct and which feature a set of what are referred to as "Standards of Practice." Think of these real estate Code of Ethics as laid-out "ground rules" that prompt agents to act in their client's best interests while maintaining a sense of professionalism and decorum. 

This guide will provide an overview of the real estate Code of Ethics and outline key takeaways for agents. 

Are All Real Estate Agents Bound to the REALTOR® Code of Ethics?

While the Code of Ethics is helpful to all real estate agents, it's something that only licensed NAR members subscribe to, meaning that if you're not a NAR member, you're not bound by the Code of Ethics as you're yet to become a REALTOR®. For further clarity on the difference between a REALTOR® and a real estate agent, this blog can help.

That said, even if you're not a NAR member, using the REALTOR® Code of Ethics as a guiding light for how you run your business can be helpful in the long run, especially if you'll be working with other real estate professionals who will use the official Code of Ethics to dictate their business practices.

So, in general, the real estate agent Code of Ethics is helpful to all agents — NAR members or not.

Pro Tip:

Becoming a NAR member isn't as hard it seems. All you need to do is find and join a local real estate association. Check an online directory like YP.com or Dex or browse NAR's list of local and state associations for any credible leads. Alternatively, send NAR an email with your name, address, phone/fax numbers, and company name, and they'll respond with some REALTOR® associations in your locality. 

What Is Included in the Real Estate Code of Ethics?

The Code of Ethics for real estate agents details how a real estate agent should deal with different parties, including: 

1. Your Clients and Customers

It's your solemn duty to protect your customers' best interests while treating all parties involved in any given transaction in a fair, transparent, and honest manner.

Also, the REALTOR® Code of Conduct prompts real estate agents to avoid concealment, exaggeration, or misinterpretation of facts relating to the transaction or the property. However, you’re not obligated to disclose confidential facts, advise on matters outside the scope of your license, or discover latent defects in the property.

2. The General Public

You shall strive to offer equal professional services to every person regardless of their color, race, religion, gender identity, sex handicap, nation origin, or family status. 

At the same, the services you provide to customers and clients shall conform to the highest standards of practice and competence expected in the specific real estate discipline in which you ply your trade.

Code of Ethics real estate dictations also require real estate agents to be truthful and honest in their communications with the public and present a true picture in their marketing, advertising, and other presentations. 

Lastly, the real estate agent Code of Ethics urges REALTORS® not to engage in any unlawful practices. If caught and charged with unethical public conduct, real estate agents will have to present all requisite facts before the appropriate NAR tribunals or affiliated council, society, or institute in which membership is held. 

3. Fellow Real Estate Agents

Whether mistakenly or knowingly, you must refrain from making any misleading or false statements about other real estate agents, their practices, or their businesses.

This section of the real estate agent Code of Ethics also cautions against taking any action or engaging in any practice that is inconsistent with the exclusive relationships or agreements that other real estate agents have with their clients. 

If there's a contractual or non-contractual dispute between real estate agents from different firms, the Code of Ethics advises the two parties to mediate the dispute. If mediation hits a snag, the agents shall forward the dispute to their local board for arbitration instead of pursuing litigation.

Within each relationship is a host of responsibilities that you're required to uphold to the other party in order to conform to the real estate Code of Ethics. If you're ever skeptical about associating with another agent, facilitating a specific transaction, or taking on a particular client, revisit the Code of Ethics for clarity. It's also important to familiarize yourself with the code at the onset and throughout your real estate career, as this is the only way to avoid an ethical breach.

Principles of the Real Estate Code of Ethics

At its core, the Code of Ethics for real estate agents incorporates some overarching themes that embody the profession of real estate as a whole. These tenets prompt you to:

  • Practice honesty and do not mislead clients
  • Adhere to qualities of fairness
  • Operate with the highest level of integrity, which entails acting honestly and ethically when dealing with all parties to reduce controversy and avoid going to court
  • Demonstrate utmost competency in all matters relating to real estate
  • Strive for lofty ideals
  • Remain ardent to improve personal and professional standards
  • Have a patriotic obligation
  • Build an occupational and professional reputation based on nothing else but merit
  • Continually address and suggest solutions to problematic ethical issues that might arise in the course of your career
  • Avoid acting in a way that amounts to or may be perceived as amounting to conflict of interest
  • Treat every real estate business or practice as a part of the community, and strive to add value to that community
  • Always seek "the least harm" when confronted with ethical stalemates

Unlike other professions, real estate depends on creating a public trust to thrive. For this reason alone, real agents collectively agreed to stick to these ethical principles. Breaching or not adhering to the core tenets destroys the hard-earned public trust for the real estate profession, making your job harder than it's supposed to be. Complying with the same Code of Ethics helps provide a consistent image to the general public, and by extension prospective clients, on what they can expect when they work with you. 

Code of Ethics Violations & Complaints

An official Code of Ethics violation generally involves an offense against the board or association and its members. In short, you commit an ethical violation when you fail to live up to the provisions of the REALTOR® Code of Ethics.

Examples of an ethics violation in real estate include:

  • Exaggerating a property’s features to make it seem more appealing 
  • Refusing to be cooperative with all your buyers and sellers
  • Revealing confidential information
  • Taking an extra commission from your clients
  • Using misleading advertisements
  • A failure to provide competent agent services
  • Discrimination 
  • Misinterpreting or omitting important information that affects the value or desirability of a property 

If you're found guilty of an ethics violation, you'll have to undergo official board or association proceedings. Typically, it is a client who submits an official ethics complaint to the board. Other times, it might be a fellow real estate agent or the board/association itself.

Oftentimes, ethical violations occur unintentionally or through ignorance, and so the official board hearing turns out to be an educational experience. However, depending on the severity of the violation, you might also:

  • Lose your board or association membership
  • Be suspended from the board or association for a specific length of time
  • Incur fines of up to $15,000
  • Be ordered to refrain from or cease specific conduct
  • Face mandatory attendance to seminars or courses
  • Receive letters of reprimand and warning

To create more public trust and avoid the push and shove that comes with being summoned by the board, it's important to familiarize yourself with the "Standards of Practice" in the Code of Ethics for real estate agents.