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Ethics

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Agents Talk Business

Water cooler talk around a real estate office is much like any other business office, I’m sure. Many agents are friends away from the office, so you hear family stories, what happened over the weekend, vacation tales, lunch plans, and business.

When agents talk business, it’s usually lender or title related, a new office policy or the real estate market. Some of us talk about blogging, websites and internet prospects. We may promote a new listing or talk about the one we have a new contract on. The home that didn’t close and is now back on the market.

You said what?

Occasionally, though, I hear someone say something and wonder, “What were they thinking?” Such as:

  • My seller paid X amount of dollars toward the buyer’s closing cost to make the transaction work; now the buyer is walking.
  • My buyers have 20% down payment, they just can’t find the right house.
  • I sold this home two years ago and now the sellers are getting divorced.
  • My clients are being transferred and really need a quick sale.
  • At least the husband’s company is paying all their closing costs.
  • The home’s overpriced; we just hope someone will make an offer.
  • My seller has some room in their price for negotiation.

It’s Top Secret

With each of these simple statements, that agent has potentially violated their agency and fiduciary duties to their client. You never know when the agent you are talking to will represent the buyer for your seller’s home. Conversely, you may be representing the buyer for the other agents listing. Or….you don’t know who else may be listening.

Even if the home is already under contract, we know they don’t all close. Sharing the least bit of information, to our client’s detriment, can have negative consequences for our clients. It’s why we lock our pending files.

We need to be aware of what we say when speaking about our listings and our clients. Our clients’ information, both private and transactional, should be kept “secret”.

Have you ever heard anything you knew you could use in negotiations, if given the opportunity?

Paula is team leader for The "Home to Indy" Team in Indianapolis . She is passionate about education and client care and believes an empowered client is better prepared to make good decisions for themselves. You'll find her online at Agent Genius,Twitter and sharing her insights about her local real estate market at Home To Indy.

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21 Comments

21 Comments

  1. Mariana Wagner

    June 14, 2008 at 9:05 pm

    I am often amazed at the lack of fiduciary duty that agents have with their clients. My favorite is when a Buyer Agent calls and says, “My buyers need to get into something QUICK.” … Hmmmm … thanks for THAT, because your “need it quick” now comes with a nice price tag.

  2. Brad Coy

    June 14, 2008 at 9:54 pm

    Hey Paula! Welcome to AG

    This happens all the time. Not so much in my office as out in the field. Last time it happened an agent told me 10 seconds after we met that his seller was too ambitious in his pricing and would take 20K less. The term “motivated” gets thrown around all the time, but this guy told me flat out how many tens of thousands less his client would take…. and he did not know me from Adam. (not that this should matter)

    Some agents might just want to lay off the caffeine as well as other stimulants 😉

  3. Susan Hilton - Texas Aggie Realtor

    June 14, 2008 at 10:05 pm

    I often wonder why people don’t realize that so much of what they say is and should be treated as confidential! I sure don’t want my attorney or doctor talking about me like that.

  4. Carson

    June 14, 2008 at 10:29 pm

    This reminds me of the ‘secret agent code’ used in home descriptions described in the book Freakonomics.

    Terms hinting at fixed, higher sales price:
    Granite, State of the Art, Corian, Maple, Gourmet

    Words hinting at lower sales price (encouraging lower bids):
    Fantastic, Spacious, Charming, Great Neighborhood, !!!, Well Maintained

  5. Cyndee Haydon

    June 14, 2008 at 10:54 pm

    Paula – great reminder – in this market when it can take 3 agents before a home sells (you know they saying you want to be the first love, second wife and third realtor 🙂 – you NEVER do know how that info can get used.

  6. Benjamin Bach

    June 15, 2008 at 3:51 am

    The first house I ever sold was an open house my clients walked into.

    The listing agent told them, apparently unprovoked, that they could get this $240K house for $220K no problem, and then the cleaning lady at the house told my clients they can probably get it for less.

    This was the first open house, in a pretty good seller’s market.

    We bought the house, easily, at $210K.

    The seller was the only surprised person when the first offer came in 40K under asking price, first week on market.

  7. Wade Munday

    June 15, 2008 at 4:53 am

    I’m a real estate investor and buy/list/sell my own houses. I will typically title the properties in a trust or corportate entity, so that my name doesn’t appear on the title. I feel that helps me in negotiations when I’m not the seller.

    In an attempt to learn the motivations of the sellers, selling agents often ask me:
    How long has the house been on the market?
    How much does the seller have invested in the house?
    Why are they selling?
    Do you know what the seller will accept?

    I understand that they are trying to get at the seller’s motivations to negotiate the best price for their client, but what amazes me is when I reply with, “I’m not at liberty to discuss that with you”, the selling agent takes offense. I guess I should revise my reply to remind them about my fiduciary responsibility to my client, maybe they would accept that.

    On the flip side, when I’m interested in buying a property, I will ask the probing questions and I’m always surprised with how much of the seller’s information they readily reveal. The good one’s will reply with I’m not able to discuss that with you, and I always reply, “it never hurts to ask”

    In my pre agent/investor days, I purchased/sold several personal houses using the services of an agent, and I always had the feeling that both the listing/selling agents would have an “inner” negotiation going on trying to figure out what they could get the seller and buyer to accept. I felt they were more concerned with getting their commission than representing their client. So I quickly learned to “keep my cards close to my chest” and only share information with my agent that I didn’t mind they shared with the other agent, because my instincts told me they were representing themselves as well as me in the transaction.

    Sadly, I’ve seen this over and over again in my buying/selling of investment properties.

  8. Jennifer in Louisville

    June 15, 2008 at 6:44 am

    Seems to happen a great deal of the time in our market. I think most persons are oblivious that they may potentially be weakening their clients negotiating position. You don’t even have to go digging that hard to get them to cough up some good info – a lot of times they just volunteer it.

  9. Dan Connolly

    June 15, 2008 at 12:07 pm

    It never ceases to amaze me. I called an agent on a listing that was a pre-foreclosure. My clients had found it online and I was trying to set up an appointment. The agent told me that the house was not in the best condition and that she had a perfectly darling house just a couple of blocks away for just about the same price. I could not believe it. Imagine the poor family trying to sell and save their credit from a foreclosure and the agent is trying to take people away from that listing.

    Here’s a question: NAR says it’s unethical for us to talk badly about our competition and we can’t talk to the “clients” of a fellow Realtor’s listing. In this case wouldn’t the most ethical thing be to call the Sellers and tell them their agent was steering potential buyers away from the listing? (p.s. I didn’t do it)

  10. Jim Duncan

    June 15, 2008 at 1:09 pm

    Dan –

    Standard of Practice 15 states:

    REALTORS®shall not knowingly or recklessly make false or misleading statements about competitors, their businesses, or their business practices. (Amended 1/92)
    • Standard of Practice 15-1
    REALTORS®shall not knowingly or recklessly ?le false or unfounded ethics complaints. (Adopted 1/00)
    • Standard of Practice 15-2
    The obligation to refrain from making false or misleading statements about competitors’ businesses and competitors’ business practices includes the duty to not knowingly or recklessly repeat, retransmit, or republish false or misleading statements made by others. This duty applies whether false or misleading statements are repeated in person, in writing, by technological means (e.g., the Internet), or by any other means.

    If it’s true, it’s not necessarily a violation IMHO; call the broker. File a complaint. I’d love to, if I were in your position, be able to go “behind the sign” and tell the sellers, but I’d stick with telling their broker – assuming they care.

  11. Jonathan Dalton

    June 16, 2008 at 3:42 pm

    Since I have no friends, this isn’t really much of an issue for me.

    Here’s the catch to the whole thing … as Arizona law reads, those other agents also have a fiduciary responsibility to your client in as much as the client’s represented by the broker, not the individual agent. So if one of these agents takes this information and uses it for the benefit of their buyer at the expense of the seller, they also have violated the broker’s fiduciary responsibility.

    These conversations can be rather dangerous on several levels.

  12. Paula Henry

    June 16, 2008 at 5:14 pm

    Mariana – Any time you need something quick – it costs more. Sometimes agents just don’t think!

    Brad – Thanks for the welcome! It does happen more often in the field here, still, much of it should never be said, unless your seller specifically says, tell them I’ll take any offer.

    Susan – Exactly!

    Carson – Truth is, it’s not secret code! Well, I don’t know of one anyway:) It does sound like it though!

    Cyndee – By the time it gets to the third listing agent, the home is priced right and sold for less than if an agent did have some inside info.

  13. Paula Henry

    June 16, 2008 at 5:57 pm

    Benjamin – To think, we tell sellers not to be present at showings. In this case they should have held their own open house. I bet the seller was surprised and the agent probably didn’t try to negotiate harder on their behalf.

    Wade – Your’s is an excellent response and one which should be practiced by every agent. It’s really unfortunate, in your experience, you felt the two agents had their own deal going. I have had agents try to settle some inspection issues “on the side” and I refused. My client is getting what they deserve, in writing and at closing.

    Jennifer – Yep, I’ve seen it time and again.

    Dan – She could have easily suggested you see both, without potraying her clients home in a negative light. I probably wouldn’t call the broker or go to the clients, but, Oh how I would want to tell those clients.

    Jim – Thanks for your input.

    Jonathan – You have no friends 🙁 It really doesn’t have to be a friend. Just the fact someone else may hear the conversation is enough to make an agent be quiet.

    You make an excellent point – the broker is ultimately responsible.

  14. Tina Merritt

    June 16, 2008 at 8:30 pm

    What about offers/counter offers/client communication being FAXED into an office fax machine???? I can’t tell you how many times I have been working late at night and seen a competitor’s offer or counter-offer come in over the fax machine for anyone and everyone to see!!!! As a listing agent, I am surprised and disappointed at how many agents are still not willing to learn how to email a contract. As a buyer’s agent, I’m amazed at the number of agents who still do not use email!!!!

  15. Paula Henry

    June 16, 2008 at 9:44 pm

    Tina – Excellent point! Like you, I prefer email – it is safer and retains the integrity of the print. When agents don’t know how or don’t have the means to email – I have MyFax – it goes straight to my computer.

  16. Vicki Moore

    June 17, 2008 at 9:08 pm

    This is one of my favorite topics. I have been told – as I’m sure everyone has – the most amazing things about someone else’s clients. I totally agree that it doesn’t hurt to ask; and I do. I have to laugh when the agent says the sellers have already bought another house or that the husband has left to the new city for the new job and left his wife and kids at the old house. What are they thinking? The first thing I do is call my clients. I’ve had agents tell me: My client is crying; she wants the house so badly. Hey stoop! What are you thinking?

  17. Matthew Rathbun

    June 17, 2008 at 9:22 pm

    I am going to throw in there that office meetings where agents are asked to “tell us about your listings” the same thing happens. I’ve been in many offices as agent and guest speaker and heard the same thing: “My clients really need to sell, their divorce is getting ugly” etc…

    To Dan’s point, we need to remember that “ethics” are not the same as morality. “Ethics” are more a “Standard of Practice.” I agree that you should consider an Ethics complaint at your Association, but there are ways around the agent not being able to contact the opposing clients…. Maybe your clients may have a concern that might just sorta compel them to call the poorly represented sellers…. just saying…

  18. Youngstown Ohio

    June 17, 2008 at 10:08 pm

    youngstown ohio real estate

    Dan –

    Standard of Practice 15 states:

    REALTORS®shall not knowingly or recklessly make false or misleading statements about competitors, their businesses, or their business practices. (Amended 1/92)
    • Standard of Practice 15-1
    REALTORS®shall not knowingly or recklessly ?le false or unfounded ethics complaints. (Adopted 1/00)
    • Standard of Practice 15-2
    The obligation to refrain from making false or misleading statements about competitors’ businesses and competitors’ business practices includes the duty to not knowingly or recklessly repeat, retransmit, or republish false or misleading statements made by others. This duty applies whether false or misleading statements are repeated in person, in writing, by technological means (e.g., the Internet), or by any other means.

    If it’s true, it’s not necessarily a violation IMHO; call the broker. File a complaint. I’d love to, if I were in your position, be able to go “behind the sign” and tell the sellers, but I’d stick with telling their broker – assuming they care.

    Good Point!!

  19. Patricia Green

    June 18, 2008 at 8:44 pm

    Paula,
    Loved your comments about “water cooler talk”, and how true it is. Most agents mean well when they are speaking to other agent “friends” but do forget that they have a responsibility at ALL TIMES to their client. Depending on the situation, I just listen and don’t speak. As an agent, it can help if I have a client looking for a good deal and their are agents (not just in my office only) that tend to have loose lips. It is a different situation thought if that client allows the agent to disclose to other agents their situation, and I have personally had that happen to me. Then it is okay to tell of their situation, no matter how desperate the client.
    Just thought I’d throw that in………….Thanks!

  20. Paula Henry

    June 19, 2008 at 10:17 am

    Vicki – I have to say – I have never been in a situation where I actually used information learned from my office, but I have received some great info from the other agent in negotiations on a home. In all situations, they should negotiate from a position of strength, not desperation.

    Matthew – I remember those office meetings well, that’s where some of these statements came from. It never ceases to amaze me what some agents will give up about their client.

    Patricia – I agree – agents do not mean harm – my guess is they just don’t think. Chances are slim, the person they are talking to is going to bring the buyer or list the right home, however, it could happen. It’s unfortunate many can relate to this. Most of the comments I hear come during negotiations or inquiries about a home.

    I would be cautious to reveal anything about my clients, other than ” my client’s said to make an offer”, unless I had their agreement in writing.

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Ethics

The problem with a self-policing industry: you have to be a narc

Ethics violations in the real estate industry can make or break a Realtor’s career, depending on the severity, so it would stand to reason that all would be mindful of the rules, but there are always individuals in the field that act as if the Code of Ethics is irrelevant.

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An animated discussion on ethics training

“Does anyone else find it ironic that NAR – the trade association for Realtors – has to mandate that members take an ethics class every four years?” An agent who attended one of my company’s broker opens yesterday posed that question to the wine and cheese grazing attendees. Of course, that opened up an animated discussion on the value of etchics training and the lack of enforcement when the rules are violated.

One agent volunteered that the guy sitting next to her in her last ethics class played games on his cell phone and then cheated during the test at the end of the class. Seriously, dude? You cannot even pay attention long enough to pass what should be the easiest test you’ll ever have to take in your career? Perhaps he was just seeing how far he could push it by cheating during an ethics test, to see if anyone else around him caught the extreme irony there. None of the other agents around him – including the agent he cheated off – turned him in and the instructor didn’t notice.

This same agent later called one of my sellers and tried to convince him to break a listing contract with me, because he had a “guaranteed buyer” in the wings. The seller was an attorney, and this bozo tried to get me cut out of the deal, offering the seller a reduced fee to dump me. The seller held firm and directed the agent to call me, then the seller called to let me know about the conversation.

“But you know if you file something the other agent will know.”

It gets better. After the deal closed, I requested paperwork from our local Board of Realtors to file an ethics complaint. The person in charge said, “But you know if you file something the other agent will know.” Gee. Really? I asked her to send the paperwork over anyway.

I called the seller/attorney and asked him to repeat the conversation to me, because I was documenting it to file a complaint. He turned wishy washy on me at that point and his story changed from “The other agent tried to get me to dump you as the listing agent to cut you out” to “Well he really only asked a few questions and I told him to call you. He probably didn’t mean any harm by it.” So there goes my star witness, who doesn’t want to rock the boat.

I didn’t file the complaint. I resorted to the “turn the blind eye but never trust the sleazeball again” path. And that is what happens to almost all ethics issues I hear about / see in person.

That’s what happens when you have a self-policing group of “professionals” who would rather not “narc” on a fellow agent. After all you’re probably going to end up on the other side of a deal from this guy some day, right? The guy in my example has sold two of my houses since that run-in. Why tick him off by filing a complaint and going through all that hassle? If he stops bringing buyers to my properties then my sellers ultimately lose, right?

Boiling down the CoE

The NAR Code of Ethics takes up pages and pages of tiny print, and it runs each year in their trade magazine (I think it’s the January issue). Does anybody read that? Probably not many. I’d argue none of us ever should have to read it again. Simply follow this advice instead. The thousands of words in the Code boil down to one thing: Do unto other agents, and consumers, and clients, what you would have them do unto you. It’s the Golden Rule. Simple. Well, obviously not, for many agents and brokers.

The sad part is the agent in my example had no clue how close I was to filing that compaint, and if he did know he’d probably scratch his head and wonder why his actions were “wrong.” Making us take a one-day class every few years won’t “make” the unethical agents suddenly operate ethically. Most of them just don’t get it.

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Ethics

Ethics hearings in private a disservice to consumers?

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Fight Club and real estate

For those of you that saw the movie ‘Fight Club’ you’ll remember that Rule #1 is “You do not talk about fight club,” followed closely by Rule #2, “You DO NOT talk about fight club.” Which, believe it or not, brings me to today’s topic: The Real Estate Code of Ethics and Arbitration. Article 17 obligates Realtors to resolve fights disputes with another Realtor through arbitration (not litigation). Arbitration is conducted at the local board level, and I am not aware of a local board that doesn’t require arbitration to be confidential.

I respect that public internecine warfare amongst Realtors isn’t in the interest of our industry, and doesn’t belong in the public spotlight. I’m not here to advocate the collective airing of our dirty laundry. That said, I wonder if our collective agreement to keep our concerns confidential can inadvertently harm the consumer and ultimately makes all of us look a little shoddier?

To find the first arbitration guidelines created by NAR and distributed as a set of suggested rules for boards to follow, we have to travel all the way back in time to 1929. NAR’s first Code of Ethics & Arbitration Manual wasn’t created until 1973, and it credited a 1965 California Association of Realtors version as its model.

Appalling conduct

I can think of two instances in the past year where I was so appalled by the conduct of a fellow Realtor that I went to the trouble to inquire about how to lodge a Code of Ethics complaint with my local board. After weighing the time required to make a competent complaint and comparing it with the best case outcome (a closed-to-the-public hearing in which they were found to have violated the code of ethics), I decided not to pursue a complaint in both cases. My association’s bylaws (and probably yours) give it the power to discipline any member based on the results of a Code of Ethics hearing, “provided that the discipline imposed is consistent with the discipline authorized by the Professional Standards Committee of the National Association of REALTORS® as set forth in the Code of Ethics and Arbitration Manual of the National Association.”

“Sanctioning Guidelines” – (Appendix VII of Part 4 of the 2011 manual for the very curious), guides member boards to impose disciplinary consequences that are progressive and fair, taking all considerations into account. Sample first-time disciplinary actions include suggestions of a letter of warning, a fine (amounts range from $200 to $5,000 depending on the severity of the violation), and attendance at relevant education sessions. Not to sound defeatist, but a confidential letter of warning and a fine of around $200 doesn’t seem like an outcome worth investing much of my time in.

Practicing in the internet era

Given that we live and work in the internet era, and review sites like Yelp abound, it seems a bit odd to me that a local board might know of an agent with problem behavior that is documented yet choose to make that information unavailable to consumers. My understanding is that the results of a code of ethics hearing are confidential with disclosure authorized in a few situations, none of which deal with informing the public.

Many of my fellow colleagues feel that the best response to a bad agent is to be patient and give them enough time to work themselves out of business. I can respect and understand their hands-off approach. But what about the damage that individual does to our industry as a whole? While we whisper, warn in confidence and know amongst ourselves how awful they are, the public doesn’t get the benefit of our perspective. Deprived of it, they turn to consumer review sites like Yelp.

How do you think we, as an industry, can help consumers in their quest to find a trustworthy agent?

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Ethics

Realtors, we really need to get over ourselves already

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A letter from the child of a Realtor.

Real estate now vs. 1987

In Real Estate, some things are always changing, like financing, education, laws, rules and technology. The two that will always remain constant, as long as they are within the law, are following our clients’ directions, and working with their best interests in mind.  I’m not sure we always follow through with this, though.

Some of us knowingly take over priced listings.  Some of us take listings that are out of our area of expertise.  Some of us won’t show short sales or REOs.  Some of us won’t show homes with low co-op splits.  Some of us don’t have Supra/e-Keys, and miss out on those listings entirely.

Putting our interests first

When these things occur we are putting our own interests first, not our clients’.  We may think that by having as many listings as possible is a good thing, that’s what we’re taught after all, isn’t it?  It may not matter that some are overpriced, eventually, whether one month or four months down the line, the price will be reduced.  It’s just a matter of time and money, for our clients, after all.  The same can be said when we take listings outside our area of expertise, just to add on to our inventory.  If we don’t know what we’re doing, on a short sale listing, for example, it will only cost our clients a lot of time and money.  A lot.

By eliminating certain houses our clients see, that may already fit their criteria, we’re taking away their choices.  Distressed sales account for close to 40% of the market.  This is probably higher in some local markets.  There is no legitimate way to ignore roughly 1/3 of the homes being sold.  Co-op fees are often a touchy subject, especially when they are, not “enough.”  If everyone utilized a Buyer Broker Agreement that stipulated what their fee was, the issue would take care of itself.  Not being able to access listings with the use of Supra/e-Keys is a choice.   Choosing not purchase one will mean agents will not be able to access Fannie Mae (and eventually, probably additional Gov REO homes) along with the listings that are already using them.

Our priorities versus theirs

We totally need to get over ourselves already.  We are not bigger than our clients.  Our priorities are not more important than theirs when it comes to the actual listing and selling of homes.

Recently, my awesome parents dug through a few boxes and rounded up one of my first art projects. About 25 years ago I did the poster featured above about my Mom, and her Real Estate career.  It was for an Open House (no pun, honest!!!) for the elementary school where I attended first grade.  It was just, what she did according to me way back then.  Things are way more complicated now, than when I was six.  There’s a heck of a lot more paperwork for one.  But the same basic principle still applies.

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