Case #1-15: Obligation to Advise Client on Market Value

258_29[1]_gifNAR

The Code of Ethics of the National Associate of Realtors® (NAR) establishes a public and professional consensus against which the practice and conduct of Realtors and Realtor-Associates may be judged.

Each month we will provide Case Interpretations directly from NAR®. The case interpretations offer examples of the practical application of the Code in professional standards enforcement and help Realtors understand the ethical obligations created by the Code of Ethics.

Case #1-15: Obligation to Advise Client on Market Value

(Originally Case #2-1. Revised and transferred to Article 7 as Case #7-19 May, 1988. Transferred to Article 1 November, 1994.)

Client A went from his hotel to REALTOR® B’s office and advised that he formerly lived in the community, and had kept his home as an income property after he moved away. The house had been vacant for several months and he had decided to sell it. He asked if REALTOR® B could drive him to look at it. As they inspected it, Client A stated that he would be happy to get $80,000 for it. REALTOR® B listed it at that price and after a few days it was sold to Buyer C.

Six months later, Client A was in town again. Hoping to recover a box of old photographs he had left in the attic, he called on Buyer C, whom he had met at settlement. When he arrived he found that Buyer D then lived in the house. He expressed some surprise that Buyer C had sold it so soon, and learned that Buyer D paid $140,000 for it. Astonished, Client A then made some inquiries as to market values and learned that he had grossly under priced his house when listing it with REALTOR® B. He went to the Board of REALTORS® office and filed a complaint against REALTOR® B charging him with unethical conduct in not having advised him as to the property’s fair market value.

At the hearing, REALTOR® B’s defense was that he had not been asked to put a price on the house, but had accepted agency on the basis of a price set by the client; that the client had stated he “would be happy” to get $80,000 for it; that he was glad to get a listing that would move quickly in the market; that he had done nothing unethical since he had not bought it himself; and that while he had honestly pointed out to the buyer that the house was a bargain, he had made no effort to induce relatives or business associates to buy it.

On questioning, he conceded that after looking at the house with Client A, he realized the property was being listed at about half its fair market value, but insisted that was his client’s business; that different owners have different reasons for selling and pricing their property, but acknowledged that Client A had not indicated that he needed a quick sale or that he would make any price concession.

The Hearing Panel pointed out that brokers have no hesitation in advising clients that properties are overpriced when this is the case, and they are obligated to be equally candid in providing their best judgment to clients when properties being offered for sale are obviously under-priced.

The panel concluded that in view of the wide discrepancy between the owner’s asking price and the property’s market value, which REALTOR® B conceded was apparent to him, it was REALTOR® B’s obligation as an agent to advise his client that the house was worth considerably more, especially since it was apparent that Client A had been away from the community for years and was out of touch with local values. The Hearing Panel found REALTOR® B in violation of Article 1.

smalllogo

Case #1-14: Conditioning Submission of Purchase Offer on Execution of a Prelisting Agreement

258_29[1]_gifNAR

The Code of Ethics of the National Associate of Realtors® (NAR) establishes a public and professional consensus against which the practice and conduct of Realtors and Realtor-Associates may be judged.

Each month we will provide Case Interpretations directly from NAR®. The case interpretations offer examples of the practical application of the Code in professional standards enforcement and help Realtors understand the ethical obligations created by the Code of Ethics.

Case #1-14: Conditioning Submission of Purchase Offer on Execution of a Prelisting Agreement

(Adopted May, 1988 as Case #7-18. Transferred to Article 1 November, 1994. Revised November, 2001.)

Owner A listed his home with REALTOR® B on an exclusive listing which was disseminated through the Multiple Listing Service.

Mr. C, a recent transferee to the city, was represented by REALTOR® D, who showed Mr. and Mrs. C a number of properties. Of the properties they had seen, Mr. and Mrs. C decided that Owner A’s home was the only one that suited their needs. They told REALTOR® D they were prepared to make a full price offer to maximize their chances of purchasing the home.

REALTOR® D agreed to write the offer, but first produced a prelisting agreement which, if signed, would obligate Mr. and Mrs. C to give REALTOR® D or his assigns the exclusive right to sell the property for 90 days should they ever decide to list the property for sale.

Mr. and Mrs. C objected to committing to a future listing, but REALTOR® D insisted he would not prepare or submit their offer to REALTOR® B and Owner A unless the C’s signed the prelisting agreement. Mr. and Mrs. C left without making an offer or signing the prelisting agreement. The next morning they called REALTOR® D stating that if the property was still available they would enter into the prelisting agreement since they still wanted to purchase the house. The prelisting agreement and the purchase offer were signed, their offer was accepted by Owner A, and the sale subsequently closed. After the closing, Mr. and Mrs. C filed an ethics complaint with the local Board of REALTORS®, alleging a violation of Article 1 on the part of REALTOR® D.

At the hearing, REALTOR® D defended his actions arguing that his conduct in no way had injured the buyers or sellers. He noted that Owner A’s home had sold at the full price, and Mr. and Mrs. C purchased the home they wanted at a price they were willing to pay. In addition, REALTOR® D was prepared to put forth his best efforts to sell Mr. and Mrs. C’s home if they ever decided to sell.

After hearing the evidence and testimony, the Hearing Panel concluded that REALTOR® D had violated Article 1. By entering into a principal/client relationship, REALTOR® D was obligated to protect and promote his clients’ interests. The Hearing Panel concluded that by conditioning submission of his clients’ offer on their signing a prelisting agreement, REALTOR® D had placed his financial gain ahead of his clients’ interests, which is prohibited under Article 1.

smalllogo

Code of Ethics Reminder

3071_61

Don’t Forget!

REALTORS® are required to complete at least 2.5 hrs of ethics training every 4 years.  The training must meet specific learning objectives and criteria established by the National Association of REALTORS®. Don’t Forget the current 4 year cycle ends December 31, 2016.

RealEstateCE.com’s offering of the 3 hrs Doing The Right Thing-The Code is designed to meet the NAR criteria.  Sign up today!

smalllogo

Case #1-13: Obligation to Present Subsequent Offers After an Offer to Purchase Has Been Accepted by the Seller

258_29[1]_gifNAR

The Code of Ethics of the National Associate of Realtors® (NAR) establishes a public and professional consensus against which the practice and conduct of Realtors and Realtor-Associates may be judged.

Each month we will provide Case Interpretations directly from NAR®. The case interpretations offer examples of the practical application of the Code in professional standards enforcement and help Realtors understand the ethical obligations created by the Code of Ethics.

Case #1-13: Obligation to Present Subsequent Offers After an Offer to Purchase Has Been Accepted by the Seller

(Adopted November, 1987 as Case #7-17. Transferred to Article 1 November, 1994.)

REALTOR® A had a 90-day exclusive listing on Seller X’s property. Seller X instructed REALTOR® A to list the property at $150,000 based upon the sales price of a neighbor’s house, which had sold a month earlier.

REALTOR® A aggressively marketed the property, filing the listing with the Board’s MLS, running a series of advertisements in the local newspaper, holding several “Open Houses,” and distributing flyers on the property at local supermarkets. REALTOR® A, whose listing contract was nearing expiration, held another “Open House” on the property, which resulted in an offer to purchase from Buyer Y at $15,000 less than the listed price. REALTOR® A, convinced that this was the best offer Seller X was likely to obtain, persuaded Seller X to accept the offer. Seller X expressed dissatisfaction with REALTOR® A’s failure to obtain a full price offer, but signed the purchase agreement nonetheless.

The next day, REALTOR® B, a cooperating broker, delivered to REALTOR® A a full price offer on Seller X’s property from Buyer Z. Buyer Z had attended an earlier “Open House” and was very enthusiastic about the home’s location, stating that it would be perfect for his mother.

REALTOR® A advised REALTOR® B and Buyer Z that an offer had already been accepted by Seller X and that he, REALTOR® A, would not present Buyer Z’s offer. REALTOR® B and Buyer Z then promptly filed a complaint with the Board charging REALTOR® A with a violation of Article 1, as interpreted by Standard of Practice 1-7.

At the hearing, REALTOR® A stated that he felt he was under no obligation to present Buyer Z’s offer, since the listing agreement did not specifically provide that subsequent offers would be presented to the seller. Further, REALTOR® A felt that such a practice could only lead to controversy between buyers and sellers, as well as result in breached contracts. “Why get everyone in an uproar,” said REALTOR® A, “by presenting offers after one has been accepted? And what would I do if Seller X wanted to back out of the first purchase contract and accept Buyer Z’s offer?”

The Hearing Panel found REALTOR® A in violation of Article 1. In their “Findings of Fact and Conclusions,” the Hearing Panel cited REALTOR® A’s lack of understanding of the requirements of Article 1, as interpreted by Standard of Practice 1-7. The panel noted that state law did not prohibit the presentation of offers after an offer had been accepted by the seller; that the fact that the listing contract was silent on whether subsequent offers would be presented did not relieve REALTOR® A from the obligation to present such offers; that as the agent of the seller, REALTOR® A must always act in the seller’s best interest and advise the seller of all offers submitted; and that should the seller wish to consider accepting a subsequent offer, REALTOR® A must advise the seller to seek the advice of legal counsel.

smalllogo

 

Case #1-12: Presentation of Subsequent Offers After an Offer to Purchase Had Been Accepted by the Seller

258_29[1]_gifNAR

The Code of Ethics of the National Associate of Realtors® (NAR) establishes a public and professional consensus against which the practice and conduct of Realtors and Realtor-Associates may be judged.

Each month we will provide Case Interpretations directly from NAR®. The case interpretations offer examples of the practical application of the Code in professional standards enforcement and help Realtors understand the ethical obligations created by the Code of Ethics.

Case #1-12: Presentation of Subsequent Offers After an Offer to Purchase Had Been Accepted by the Seller

(Adopted November, 1987 as Case #7-16. Transferred to Article 1 November, 1994.)

REALTOR® A, the listing broker, presented an offer to purchase to his client, Seller X, which was $20,000 less than the property’s listed price. The property had been on the market for several months and had not generated much interest. In his presentation, REALTOR® A told Seller X that, in his opinion, the offer was a good one and Seller X should consider accepting it. “With interest rates on their way up again,” said REALTOR® A, “properties are just not moving the way they did six months ago.” Seller X decided to accept the offer and the transaction closed. Several months after the sale, Seller X filed a complaint against REALTOR® A alleging a violation of Article 1, as interpreted by Standard of Practice 1-7. It had come to Seller X’s attention that a second offer had been made on the property after Seller X had accepted the first offer but prior to closing. This second offer, alleged Seller X, had not been submitted to him by REALTOR® A and was for $2,500 more than the first offer. Seller X’s complaint stated that by not presenting the second offer to him, REALTOR® A had not acted in his (the seller’s) best interest, as required by Article 1.

At the hearing, REALTOR® A produced a copy of the listing contract, which contained a provision reading: “Seller agrees that Broker’s responsibility to present offers to purchase to Seller for his consideration terminates with Seller’s acceptance of an offer.” REALTOR® A told the Hearing Panel that he had explained this provision to Seller X at the listing presentation and that Seller X had agreed to it, as indicated by Seller X’s signature on the listing contract.

Seller X admitted that he had understood and agreed to the provision at the time he listed the property, but he felt that REALTOR® A should have advised him of the second, higher offer nonetheless.

The Hearing Panel found REALTOR® A not in violation of Article 1. In their decision, the panel noted that REALTOR® A had explained the contract provision relieving him of the obligation to submit subsequent offers to Seller X; that Seller X had agreed to the provision and had signed the listing contract; and that, while it was unfortunate that Seller X had received less than full price for the property, REALTOR® A had fulfilled his obligations under the listing contract once the first offer to purchase had been accepted by Seller X.

smalllogo

The Power of Social Media Marketing

Coming soon iconNew Course Coming Soon! 

The Power of Social Media Marketing

The ultimate goal of utilizing social media for business is to create your brand. Do you know what your online brand looks like? Are you taking control of it or leaving it to chance? Before you launch a social media campaign, you need to know what your goal is. Without a firm plan in mind, you’re almost certainly setting yourself up for failure. It’s important to identify not only what you want to accomplish, but also the audience you’re targeting and how you want to connect with them. Our course “The Power of Social Media Marketing” can help you answer these questions and more.

The course is NOT about the technical details of how to use social media. The material is concentrated on WHY you should use the free platforms available to locate and expand your market. We investigate the technology available to be used to leverage your voice, connect, and create relationships. It’s all about the fundamental shift of how people are communicating – the way this affects how and what and when they buy. 

smalllogo

Case #1-10: Obligations Under Exclusive Listing

258_29[1]_gifNAR

The Code of Ethics of the National Associate of Realtors® (NAR) establishes a public and professional consensus against which the practice and conduct of Realtors and Realtor-Associates may be judged.

Each month we will provide Case Interpretations directly from NAR®. The case interpretations offer examples of the practical application of the Code in professional standards enforcement and help Realtors understand the ethical obligations created by the Code of Ethics.

Case #1-10: Obligations Under Exclusive Listing

(Originally Case #7-12. Reaffirmed May, 1988. Transferred to Article 1 November, 1994. Revised November, 2001.)

At the time Client A signed an exclusive listing agreement with REALTOR® B, they discussed market conditions and prevailing prices, and agreed on listing at $156,900. After six weeks with no apparent interest in the house, Client A called REALTOR® B to learn why his property was receiving scant attention from prospective buyers. REALTOR® B said, “It’s not hard to diagnose the trouble. Your property is overpriced. That was clear to me by the time we had it listed for ten days. In this market, it would take a really interested buyer to go as high as $149,000 for it. That’s why it hasn’t been possible for us to push it.” “When you reached that conclusion, why didn’t you tell me?” asked Client A. “Because,” said REALTOR® B, “it wouldn’t have done any good. I know from experience that sellers can’t be convinced that they are overpricing their property until they get tired of waiting for an offer that will never come. Now that the market has taught you something that you would not take as advice, let’s reduce the price to $148,900 and push it.”

Client A complained about REALTOR® B to the Board of REALTORS®, detailing these circumstances, strongly insisting that REALTOR® B had fully agreed with him on the price at which the property was originally listed.

Client A reiterated this point strongly at the hearing of his complaint which was held before a Hearing Panel of the Board’s Professional Standards Committee. REALTOR® B did not contest this, taking the position that at the time of the listing it was his judgment that a price of $156,900 was fair and obtainable in the market. He stated that a strong immediate sales effort had convinced him that the listed price was excessive, and he defended his action of reducing his sales effort as he had done in his discussion with the client. He said that many years of experience as a broker had convinced him that once a seller decides on a definite price for his property, no argument or analysis will shake his insistence on getting that price; that only inaction in the market is convincing to the sellers.

The Hearing Panel concluded that REALTOR® B’s conduct had violated Article 1 of the Code of Ethics, which requires REALTORS® to protect and promote their clients’ interests. The panel also found that since REALTOR® B honestly felt the original listing price of $156,900 was the fair market value at the time he listed it, REALTOR® B had not violated the Code of Ethics by suggesting that the price be lowered. However, since REALTOR® B later concluded the property was overpriced, he should have immediately notified Client A of his conclusion and not waited for Client A to call him six weeks later.

smalllogo