The preamble to NAR’s Code of Ethics sets a high standard for brokers and agents: “The term REALTOR® has come to connote competency, fairness, and high integrity resulting from adherence to a lofty ideal of moral conduct in business relations. No inducement of profit and no instruction from clients ever can justify departure from this ideal.”
The industry manifests these principles in the articles of the Code of Ethics and Standards of Practice and the promotion of educational standards–each evolving with changes in the marketplace. More importantly, it also encompasses the personal responsibility accepted by individual REALTORS® to adhere to these ideals.
“I learned the Code of Ethics guidelines early in my practice,”says Paula K. Savard, CEO of Paula K. Aberman Associates, based in Lancaster. If there are difficulties with a transaction, “it is usually because one of the practitioners doesn’t have enough experience and doesn’t understand what they are supposed to be doing,” according to Savard.
The Code Updates
On the national level, NAR continues to update its Code of Ethics, which will soon be celebrating its 100-year anniversary.
There are three changes to the Code for 2011. First, at the urging of several state associations, sexual orientation has been added as a protected category to Article 10. In addition to race, color, religion, sex, handicap, familial status, and national origin, discrimination based on sexual orientation will not be permitted.
According to Diane M. Mosley, manager of policy resources at NAR, whether the term “sexual orientation” includes or excludes gender identity is being researched and debated. Some state legislation has considered “sexual orientation” an umbrella term, while others have kept a narrow definition. This may be revisited for clarification by NAR in the future.
Second, a change to Standard of Practice 12-5 addresses the use of the Internet and mobile technology. The meager space available on mobile devices and on postings like Twitter can preclude the current standard of disclosing firm identity. The amendment acknowledges this predicament and allows an exception if there is a link to the required information.
Third, the obligation to cooperate and share information with other brokers described in Article 3 has been added to and amended. A new standard expands the duty to cooperate to include a duty to share information of a listed property and to make a property available for showing. Standard of Practice 3-7 was altered, replacing “relationship with the client” with “representational status,” which incorporates a REALTOR® executing an appraisal without the formal buyer/seller representation.
According to Joseph R. McClary, director of education, technology, and
special projects at the Association of Real Estate License Law Officials based in Littleton, Colo., there are several national trends in real estate education.
First, several states are moving toward more mandatory topics in their curriculum. States like Alabama and Louisiana require topics, such as risk management, in their real estate education programs. Others are considering short sales and default services, but many states do not have the funding to develop courses, nor do they have the authors available to compose the course material. Smaller states are having a much more difficult time funding these types of changes, states McClary.
Second, the national downturn in real estate, which pushed 300,000 to 400,000 real estate agents/brokers out of the industry, has put a severe strain on real estate schools. Many have gone out of business, or have been forced to diversify their curriculum. Another burden on the real estate schools has been the prevalence of online distance learning. The ease and convenience of Internet based classes has made it harder to fill seats in their classrooms.
Third, although the general trend is to increase the hours required for continuing education across the country, McClary does not report it happening across the country during the current economic turmoil. McClary states, “No, I don’t see a trend by regulatory agencies” to increase hours. The difficulty for real estate agents to make a living in many parts of the country has made the cost of any extra courses something they cannot shoulder, according to McClary.
Massachusetts is bucking the national trend. On June 1, the original licensing requirements changed for agents and brokers in Massachusetts. A sales agent now needs to fulfill 40 hours of instruction, up from 24 hours. A broker’s license mandates three years of agent experience, which has been assigned to a broker. The previous requirement was only one year. The intent of the change was to provide more substantial hands-on experience before becoming a broker and opening a shop. The three-year period does not require any minimum performance standard, which is a failure in the system, according to Savard.
Massachusetts has been at the bottom of the national range for pre-licensing classroom hours. At the previous 24 hours, many states were reluctant to grant reciprocal licenses, notes McClary. The national pre-licensing average is 60 to 90 hours. Some states such as Texas require as many as 150 hours. Many states also require post-licensing study, which may be a significant addition. Alabama, for example, requires 30 extra hours within the first year of licensing.
A continuing education bill to renew licensure in Massachusetts is currently working its way through Beacon Hill. The bill would increase the biannual requirement from 12 to 20 hours, and with good reason, as the current requirements are less than half those of the other states in the nation. It would require completing four additional two-hour classes. If passed, it would apply to brokers’ and agents’ license renewals. MAR has been a strong advocate for this legislation for several years.
“I want my agents to be as informed as possible,” says Richard Tisei, brokerowner of Northrup Associates REALTORS® in Lynnfi eld. He believes that real estate as an industry is behind other professional industries, which have higher continuing education requirements. The mere numbers alone are not the only issue, however. The complexity and changing financial environment—with market elements like short sales and foreclosures becoming more prevalent—demand more education, according to Tisei. In the past few years the real estate industry has undergone a tremendous shift and there “is a demand for a whole different skill set,” he adds. By having a bettereducated workforce, Tisei also believes it adds legal protection to the brokerage. “Every transaction is fraught with so much liability,” he states.
The changes in length of study and content of the material will hopefully remedy what many experienced REALTORS® view as a recurring problem in the industry. They continue to deal with fellow professionals who either don’t fully understand the rules and regulations in Massachusetts, or don’t follow some of the ethical guidelines established by NAR.
Jeff Chute, affiliated with Chute & Payzant Real Estate, Inc. based in Plymouth, has experienced several recurring ethical lapses in the industry. And as a certified real estate instructor, Chute sees REALTORS® in the classroom confused by many of these issues. He believes the disclosure of agency is a material, ethical issue in the industry. Chute regularly surveys his students, and continues to find “agents who are thoroughly confused or just don’t know” the facts about disclosing their type of agency. He continues to see REALTORS® fail to present disclosure forms at the first face-to-face meeting, as is mandated.
Chute also repeatedly sees REALTORS® release the details of multiple bids on a property without the seller-client’s permission, which is a violation of the Code of Ethics. “They do it all the time,” says Chute. In fact, he sees breaches of confidentiality by agents happening on a regular basis in the industry. Information should only be relayed with the client’s consent, which is the ethical standard Chute applies in his real estate practice.
Debbie Dwyer, broker-owner of the Dwyer Agency in Pittsfield and a member of NAR’s Professional Standards Committee, believes many of the ethical problems REALTORS® encounter are caused simply by poor communication and misinterpretation. She has experienced broker-owners who are not sufficiently aware of or take responsibility for everything that is happening in their office. Dwyer cited an example of an agent switching brokerage firms, who took a listing to the new firm without canceling the listing with the original office. This led to tremendous confusion at the closing. The entire episode, which easily could have been avoided with more attention to professional courtesy and communication, ended in front of a hearing.
Since its establishment in 1913, the Code of Ethics has sought to create an assurance of consistent protection for consumers across the country, and to foster the utmost professional conduct by REALTOR® members. The Code of Ethics is a living document, and it is forever under scrutiny to keep pace with the demands of the real estate industry. Its current form, comprising 17 articles and dozens of standards, is testament to the effort of REALTORS® to make sure the document stays relevant. And it is the personal responsibility of each REALTOR® to abide by and respect these founding principles of the real estate industry.