Code Talk: Avoid These Common Code of Ethics Violations

Posted on September 1, 2013 by Jan Steward

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Editor’s Note: The Code of Ethics turns 100 in 2013. AAR will be celebrating the code with monthly articles published under the caption, Code Talk, in the Arizona REALTOR® Magazine, discussing the various ways the code governs professional conduct and interaction with the consumer in every day transactions.

To date, AAR has received 42 ethics violation complaints this year. That’s a slight decrease from the 46 we had last year at this time, but we can do better. This month, AAR would like to share with you some common violations we’re seeing this year, along with ways to avoid them.

1.  Verbal Counter Offers. “We’re seeing a rise in offers being verbally countered,” said Jan Steward, manger, risk management, Arizona Association of REALTORS®. “Not putting contract terms in writing is a risky practice.” And, it could end up becoming a Code of Ethics violation. Article 9 of the Code of Ethics, Standard of Practice 9-1 states: “For the protection of all parties, REALTORS® shall use reasonable care to ensure that documents pertaining to the purchase, sale, or lease of real estate are kept current through the use of written extensions or amendments.”

Trudy Moore, designated broker with HomeSmart said, “The problem with verbal counteroffers is that they usually occur when there are multiple offers.” The seller’s agent may tell Agent A that their client will accept one price and then Agent B submits another offer at a higher price.

Marge Lindsay, director of training and associate broker with West USA Realty, Inc., adds that verbal counteroffers can catch clients off-guard especially when they think that because the offer has been accepted verbally it’s official. “Clients are emotionally involved in the transaction and truly believe when a verbal counter offer is accepted, it’s a done deal.”  When that turns out not to be the case, the client may seek to blame their agent for inadequately protecting their interests. Lindsay therefore counsels her students to inform clients that “noting can be enforced until it’s in writing.”

2.  Pre-Possession without Written Consent. “We’re seeing a rise in buyers’ agents giving their buyers the keys prior to close of escrow and without a written contract,” said Steward. This is not only a liability issue, since the seller is responsible for the home and all who occupy it prior to close of escrow, but also an ethics violation. Article 3, Standard of Practice 3-9 states: “REALTORS® shall not provide access to listed property on terms other than those established by the owner of the listing broker.” 

Marge Lindsay adds, “We added provisions for this into the contract because of the many legal issues that come up as a result. The comment I make to my students is: Don’t let this recommendation [to get keys early] come out of your mouth.” REALTORS® need to understand the liability they are exposing themselves to. “Ask you broker to share a few horror stories about this. You’ll see how bad things can get.”

3.  Agents Not Presenting All Offers. Trudy Moore said, “Agents must present all offers. Recently, I’ve seen listing agents get 15 offers and only present the one that they think is the best deal for their client.” And while agents might have their client’s best interests in mind, not presenting all offers is grounds for violation.  Furthermore, it is up to the seller, not their agent, to decide which offer is best. Article 1, Standard of Practice 1-6 states: “REALTORS® shall submit offers and counter-offers objectively and as quickly as possible.”  Equally important is Article 1, Standard of Practice 1-7, which requires REALTORS® to “submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation writing.”  You must therefore be certain to present all purchase offers up until close of escrow unless you have written instructions from your principal waiving this requirement.

AAR is here to help you resolve disputes

If you’re experiencing any of these issues, talk to your broker and get his advice.

AAR offers its members many benefits, one of which is assistance with dispute resolution. When dealing with money, things can get heated. Depending on the allegation or offense, AAR offers various processes to resolve disputes for members statewide, with the exception of the Southeast Valley Regional Association of REALTORS® (SEVRAR). If your dispute is with a SEVRAR member, contact their association at 480-833-7510 for assistance.

Read previous Code Talk articles:

The C.O.E Bells Ring During the First Phone Call

The Ethics of Property Management

Disclose Early and Often

Listing Agreements

The Case for Buyer-Broker Agreements

Five Tips for Adhering to Article 12

Fair Housing

 

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