ShareThe 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. View the Preface to Case Interpretations to learn more about their history/background.
Case #1-1: Fidelity to Client
(Originally Case #7-1. Revised May, 1988. Transferred to Article 1 November, 1994. Revised November, 2022.)
Client A complained to an Association of REALTORS® that two of its members, REALTORS® B and his sales associate, REALTOR® C, had failed to represent the client’s interests faithfully by proposing to various prospective buyers that a price less than the listed price of a house be offered. His complaint specified that REALTOR® B, in consultation with him, had agreed that $400,000 would be a fair price for the house, and it had been listed at that figure. The complaint also named three different prospective buyers who had told Client A that while looking at the property, REALTOR® C, representing REALTOR® B, when asked the price had said, “It’s listed at $400,000, but I’m pretty sure that an offer of $360,000 will be accepted.”
REALTOR® B and REALTOR® C were notified of the complaint and requested to be present at a hearing on the matter scheduled before a Hearing Panel of the Association’s Professional Standards Committee.
During the hearing, REALTOR® B confirmed that he had agreed with Client A that $400,000 was a fair price for the house, and that it was listed at that figure. He added that he had asked for a 90 day listing contract as some time might be required in securing the full market value. Client A had agreed to do this but had indicated that he was interested in selling within a month even if it meant making some concession on the price. The discussion concluded with an agreement on listing at $400,000 and with REALTOR® B agreeing to make every effort to get that price for Client A.
REALTOR® C said in the hearing that REALTOR® B had repeated these comments of Client A and he, REALTOR® C, had interpreted them as meaning that an early offer of about 10 percent less than the listed price would be acceptable to the seller, Client A. Questioning by the Hearing Panel established that neither REALTOR® B nor REALTOR® C had been authorized to quote a price other than $400,000.
It was the Hearing Panel’s conclusion that REALTOR® B was not in violation of Article 1 since he had no reason to know of REALTOR® C’s actions. The panel did find REALTOR® C in violation of Article 1 for divulging his knowledge that the client was desirous of a rapid sale even if it meant accepting less than the asking price. The panel noted that such a disclosure was not in the client’s best interest and should never be made without the client’s knowledge and consent.
Case #1-2: Honest Treatment of All Parties
(Originally Case #7-2. Revised May, 1988. Transferred to Article 1 November, 1994. Cross-reference Case #2-18. Revised May 2017 and November, 2022.)
As the exclusive agent of Client A, REALTOR® B offered Client A’s house for sale, advertising it as being located near a public transportation stop. Prospect C, who explained that his daily schedule made it necessary for him to have a house near the public transportation stop, was shown Client A’s property, liked it, and made a deposit. Two days later, REALTOR® B read a notice that the transportation running near Client A’s house was being discontinued. He informed Prospect C of this, and Prospect C responded that he was no longer interested in Client A’s house since the availability of public transportation was essential to him. REALTOR® B informed Client A and recommended that Prospect C’s deposit be returned.
Client A reluctantly complied with REALTOR® B’s recommendation, but then complained to the Association of REALTORS® that REALTOR® B had not faithfully protected and promoted his interests; that after Prospect C had expressed his willingness to buy, REALTOR® B should not have made a disclosure that killed the sale since the point actually was not of major importance. The new transportation route, he showed, would put a stop within six blocks of the property.
In a hearing before a Hearing Panel of the Association’s Professional Standards Committee, REALTOR® B explained that in advertising Client A’s property, the fact that a transportation stop was less than a block from the property had been prominently featured. He also made the point that Prospect C, in consulting with him, had emphasized that Prospect C’s physical disability necessitated a home near a transportation stop. Thus, in his judgment, the change in routing materially changed the characteristics of the property in the eyes of the prospective buyer, and he felt under his obligation to give honest treatment to all parties in the transaction, that he should inform Prospect C, and that in so doing he was not violating his obligation to his client.
The Hearing Panel concluded that REALTOR® B had not violated Article 1, but had acted properly under both the spirit and the letter of the Code of Ethics. The panel noted that the decision to refund Prospect C’s deposit was made by the seller, Client A, even though the listing broker, REALTOR® B, had suggested that it was only fair due to the change in circumstances.
Case #1-3: Net Listing
(Originally Case #7-3. Revised May, 1988. Transferred to Article 1 November, 1994. Revised November, 2022.)
Client A called REALTOR® B to list a small commercial property, explaining that he wanted to net at least $370,000 from its sale. He inquired about the brokerage commission and other selling costs. REALTOR® B’s response was: “You have indicated that $370,000 net to you from the sale will be satisfactory. Suppose we just leave it at that and take all of the selling costs from the proceeds of the sale above $370,000.” Client A agreed.
The property was sold to Buyer C for $420,000. After settlement, in which it was apparent that $50,000 would go to REALTOR® B as commission, Client A and Buyer C both complained to the Association of REALTORS® about REALTOR® B’s conduct in the matter, and a hearing was scheduled before the Association’s Professional Standards Committee.
REALTOR® B’s defense was that he had performed the service that Client A engaged him for precisely in conformance with their agreement. Buyer C had considered the property a good buy at $420,000 and was happy with the transaction until he learned the amount of the commission.
The Hearing Panel found REALTOR® B in violation of Article 1 of the Code. The panel concluded that REALTOR® B had departed completely from his obligation to render a professional service in fidelity to his client’s interest; that he had, in fact, been a speculator in his client’s property; and that he had not dealt honestly with either party to the transaction.
Case #1-4: Fidelity to Client
(Originally Case #7-5. Revised May, 1988. Transferred to Article 1 November, 1994. Cross-reference Case #4-5. Revised November, 2022.)
Client A contacted REALTOR® B to list a vacant lot. Client A said he had heard that similar lots in the vicinity had sold for about $150,000 and thought he should be able to get a similar price. REALTOR® B stressed some minor disadvantages in location and grade of the lot, and said that the market for vacant lots was sluggish. He suggested listing at a price of $97,500 and the client agreed.
In two weeks, REALTOR® B came to Client A with an offer at the listed price of $97,500. The client raised some questions about it, pointing out that the offer had come in just two weeks after the property had been placed on the market which could be an indication that the lot was worth closer to $150,000 than $97,500. REALTOR® B strongly urged him to accept the offer, stating that because of the sluggish market, another offer might not develop for months and that the offer in hand simply vindicated REALTOR® B’s own judgment as to pricing the lot. Client A finally agreed and the sale was made to Buyer C.
Two months later, Client A discovered the lot was no longer owned by Buyer C, but had been purchased by Buyer D at $165,000. He investigated and found that Buyer C was a brother-in-law of REALTOR® B, and that Buyer C had acted on behalf of REALTOR® B in buying the property for $97,500.
Client A outlined the facts in a complaint to the Association of REALTORS®, charging REALTOR® B with collusion in betrayal of a client’s confidence and interests, and with failing to disclose that he was buying the property on his own behalf.
At a hearing before a panel of the Association’s Professional Standards Committee, REALTOR® B’s defense was that in his observation of real estate transactions there can be two legitimate prices of property— the price that a seller is willing to take in order to liquidate his investment, and the price that a buyer is willing to pay to acquire a property in which he is particularly interested. His position was that he saw no harm in bringing about a transaction to his own advantage in which the seller received a price that he was willing to take and the buyer paid a price that he was willing to pay.
The Hearing Panel concluded that REALTOR® B had deceitfully used the guise of rendering professional service to a client in acting as a speculator; that he had been unfaithful to the most basic principles of agency and allegiance to his client’s interest; and that he had violated Articles 1 and 4 of the Code of Ethics.
Case #1-5: Promotion of Client’s Interests
(Originally Case #7-6. Revised May, 1988. Transferred to Article 1 November, 1994. Revised November, 2022.)
Client A gave an exclusive listing on a house to REALTOR® B, stating that he thought $399,000 would be a fair price for the property. REALTOR® B agreed and the house was listed at that price in a 90-day listing contract. REALTOR® B advertised the house without response, showing it to a few prospective buyers who lost interest when they learned the price. In a sales meeting in his office, REALTOR® B discussed the property, advised his associates that Client A had insisted on the list price and it was now clear that it was overpriced since there had been few showings and no offers.
After six weeks had gone by without a word from REALTOR® B, Client A called REALTOR® B’s office without identifying himself, described the property, and asked if the firm was still offering it for sale. The response he received from one of REALTOR® B’s nonmember associates was: “Yes it's still on the market.” After some additional conversation, the associate told Client A that she had heard at a sales meeting that the price was too high so it wasn't getting much activity. The associate then asked if Client A would be interested in some other similar properties which were listed at lower prices.
Client A wrote to the Association of REALTORS® complaining of REALTOR® B’s action, charging failure to promote and protect the client’s interest by REALTOR® B’s failure to advise the client of his judgment that the price agreed upon in the listing contract was excessive, and by REALTOR® B’s failure to actively seek a buyer.
In a hearing on the complaint before a Hearing Panel of the Association’s Professional Standards Committee, REALTOR® B’s response was that Client A had emphatically insisted that he wanted $399,000 for the property; that by advertising and showing the property he had made a diligent effort to attract a buyer at that price; that in receiving almost no response to this effort he was obliged to conclude that the house would not sell at the listed price; that in view of the client’s attitude at the time of listing, he felt it would be useless to attempt to get Client A’s agreement to lower the listed price.
The Hearing Panel concluded that REALTOR® B was in violation of Article 1; that he had been unfaithful in his obligations in not advising his client of his conclusion that the property was overpriced, based on the response to his initial sales efforts; and in withholding his best efforts to bring about a sale of the property in the interests of his client.
Case #1-6: Fidelity to Client’s Interests
(Originally Case #7-7. Reaffirmed May, 1988. Transferred to Article 1 November, 1994. Revised November, 2001.)
REALTOR® A managed an apartment building owned by Client B. In his capacity as property manager, REALTOR® A received a written offer to purchase the building from Buyer C. REALTOR® A responded that the building was not for sale. A few days later Buyer C met Client B and told him that he thought he had made an attractive offer through his agent, and indicated that he would be interested in knowing what price would interest Client B. Client B answered that he had received no offer through REALTOR® A and asked for the details.
Client B then filed a complaint against REALTOR® A with the local Association of REALTORS® charging failure to represent and promote his interests. His complaint specified that while REALTOR® A had been engaged as a property manager, he had at no time told him not to submit any offers to buy, and that in the absence of any discussion whatever on this point, he felt that REALTOR® A should have recognized a professional obligation to acquaint him with Buyer C’s offer which, he stated in the complaint, was definitely attractive to him.
REALTOR® A was notified of the complaint and directed to appear before a panel of the Association’s Professional Standards Committee. In his defense, REALTOR® A stated that his only relationship with Client B was a property manager under the terms of a management contract; that he had not been engaged as a broker; that at no time had the client ever indicated an interest in selling the building; that in advising Buyer C that the property was not on the market, he felt that he was protecting his client against an attempt to take his time in discussing a transaction which he felt sure would not interest him.
It was the conclusion of the Hearing Panel that REALTOR® A was in violation of Article 1; that in the absence of any instructions not to submit offers, he should have recognized that fidelity to his client’s interest, as required under Article 1 of the Code of Ethics, obligated him to acquaint his client with a definite offer to buy the property; and that any real estate investor would obviously wish to know of such an offer.
Case #1-7: Obligation to Protect Client’s Interests
(Originally Case #7-8. Reaffirmed May, 1988. Transferred to Article 1 November, 1994. Revised November, 2001 and November, 2022.)
Client A, a military officer, was transferred to a new duty assignment and listed his home for sale with REALTOR® B as the exclusive agent. He moved to his new assignment with the understanding that REALTOR® B, as the listing broker, would obtain a buyer as soon as possible. After six weeks, during which no word had come from REALTOR® B, the client made a weekend visit back to his former community to inspect his property. He learned that REALTOR® B had advertised the house: “Vacant — Owner transferred,” and found an “open” sign on the house but no representative present. Upon inquiry, Client A found that REALTOR® B never had a representative at the property but continually kept an “open” sign in the yard. Client A discovered that the key was kept in a combination lockbox, and when REALTOR® B received calls from potential purchasers about the property, he simply gave callers the address, advised that the key was in the lockbox, gave them the combination, and told them to look through the house by themselves and to call him back if they needed other information or wanted to make an offer.
Client A filed a complaint with the Association of REALTORS® detailing these facts, and charging REALTOR® B with failure to protect and promote a client’s interests by leaving Client A’s property open to vandalism, and by not making appropriate efforts to obtain a buyer.
REALTOR® B’s defense during the hearing was that his advertising of the property was evidence of his effort to sell it. He stated, without being specific, that leaving keys to vacant listed property in lockboxes and advising callers to inspect property on their own was a “common local practice.”
The Hearing Panel concluded that REALTOR® B was in violation of Article 1 of the Code of Ethics because he had failed to act in a professional manner consistent with his obligations to protect and promote the interests of his client. REALTOR® B permitted and enabled buyers to access the property on terms other than authorized by the seller, as required by Standard of Practice 1-16.
Case #1-8: Knowledge of Essential Facts
(Originally Case #7-10. Reaffirmed May, 1988. Transferred to Article 1 November, 1994. Revised November, 2022.)
Client A listed a small house with REALTOR® B who obtained an offer to buy it and a deposit in the form of a check for $2,000. Client A agreed to accept the offer, then heard nothing from REALTOR® B, the listing broker, for three weeks. At that time REALTOR® B called him to say that the sale had fallen through and that the buyer’s check had been returned by the bank marked “Non Sufficient Funds.”
Client A complained to the local Association of REALTORS® against REALTOR® B charging him with dilatory and unprofessional conduct and apparent unfamiliarity with essential facts under laws governing procedures in real estate transactions.
At the hearing, it was established that two days after making the offer the buyer had refused to sign escrow instructions, and that REALTOR® B had not deposited the buyer’s check until ten days after receiving it.
REALTOR® B’s defense was that since the return of the check he had received numerous promises from the buyer that it would be made good, and that the buyer’s reason for refusing to sign escrow instructions was to give the buyer’s attorney time to read them. Questioning during the hearing established that the check had not been made good, the escrow instructions had not been signed, and that the delay had caused great inconvenience and possible loss to Client A.
The Hearing Panel concluded that REALTOR® B should have deposited the check immediately, in which event it would either have been accepted, or its NSF status could have been known and reported to the client at once; that REALTOR® B should have advised his client immediately of the buyer’s refusal to sign escrow instructions; that in this negligence REALTOR® B reflected a lack of adequate knowledge of essential facts under laws governing real estate transactions, and was in violation of Article 1 of the Code of Ethics, having failed to protect the client’s interests.
Case #1-9: Exclusive Listing During Term of Open Listing
(Originally Case #7-11. Revised May, 1988. Transferred to Article 1 November, 1994. Revised November, 2001.)
During a Board of REALTORS® luncheon, REALTOR® A described to those at the table an old house in a commercial area which was open listed with him and invited the others to cooperate with him in selling the property. REALTORS® X and Y said they also had the property open listed but had found very little interest in it. REALTOR® B made no comment, but feeling he could find a buyer for it, went to the owner and discussed the advantages of an exclusive listing. The owner was persuaded and signed an exclusive listing agreement with REALTOR® B, telling him at the time that he had listed the property on an “open” basis for 30 more days with REALTORS® A, X, and Y. REALTOR® B’s comment was, “Just don’t renew those open listings when they expire.”
A few days later, REALTOR® A brought the owner a signed offer to purchase the property at the asking price. The owner told REALTOR® A that he now had the property exclusively listed with REALTOR® B, and asked him to submit the offer through REALTOR®
B. Before REALTOR® A could contact REALTOR® B, REALTOR® B had taken another offer to purchase the property at the asking price to the owner. Confronted with two identical offers, the owner found both REALTOR® A and REALTOR® B expected full commissions for performance under their respective existing listing agreements. The owner filed an ethics complaint with the Board of REALTORS® alleging violations of Article 1 of the Code of Ethics because of the difficult position he had been placed in by REALTOR® A and REALTOR® B. The owner alleged neither of them had warned him that he might be liable for payment of more than one commission.
A hearing before a panel of the Board’s Professional Standards Committee established the facts to be as outlined above. In reviewing the actions of REALTOR® A, the Hearing Panel found that he was not at fault; that he had performed as requested under his listing agreement. On the other hand, it was the conclusion of the Hearing Panel that REALTOR® B had violated Article 1 by failing to advise the owner of his potential commission obligation to the other listing brokers when the client told him other listing agreements were in force.
The Hearing Panel pointed out that because of REALTOR® B’s omission his client, through no fault of his own, may have incurred legal liability to pay two commissions; that REALTOR® B should have advised the owner of his potential liability for multiple commissions; and that by not doing so REALTOR® B had failed to protect his client’s interests as required by Article 1.
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.
Case #1-11: Responsibilities of Cooperating Broker
(Originally Case #7-13. Revised May, 1988. Transferred to Article 1 November, 1994. Cross-reference Case #16-4. Deleted November, 2001.)
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.
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.
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 prelist- ing 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.
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 underpriced.
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.
Case #1-16: Obligation to Advise Client of Market Value
(Originally Case #2-2. Revised and transferred to Article 7 as Case #7-20 May, 1988. Transferred to Article 1 November, 1994.)
REALTOR® A listed Client B’s house at $136,000. The house was sold to Buyer C, who met Client B at a cocktail party a month later and told him that he had just been offered $148,000 for the house but declined the offer feeling that if he decided to sell, he could do considerably better.
On the basis of this information, Client B charged REALTOR® A with unethical conduct in not having advised him as to fair market value and pointing out that the offering price was considerably below market value. The Board’s Grievance Committee referred the complaint to the Professional Standards Committee for hearing.
The Hearing Panel reviewed the facts. At the time the listing contract was signed, REALTOR® A advised his client that he had not recently been active in the part of the city where the house was located and that before fixing the price definitely it might be well to have an appraisal made, but the client declined saying that he felt $136,000 was a fair price.
REALTOR® A’s defense was that he had indicated the desirability of an appraisal to determine a fair asking price; that he had indicated he was not active in the neighborhood where the home was located; and that while he had a feeling that the client might be placing a low price on his property, he felt his professional obligation to the client was discharged when he suggested having an appraisal made.
It was the finding of the Hearing Panel that REALTOR® A’s defense was valid and that he was not in violation of Article 1.
Case #1-17: Listing Property at Excessive Price
(Originally Case #2-3. Revised and transferred to Article 7 as Case #7-21 May, 1988. Transferred to Article 1 November, 1994.)
Mr. A was about to retire and move to a warmer climate, and had discussed the sale of his house with a number of brokers. He dropped in on REALTOR® B to discuss the matter and said that various brokers had told him he should expect to sell the property at from $150,000 to $158,000. “Oh, that sounds low to me,” said REALTOR® B, “property moves well in that neighborhood and I recall that your house is in good shape and well landscaped. Give us an exclusive on it at $168,000 and we’ll make a strong effort to get you what your property is really worth.” REALTOR® B got the listing.
He advertised the property, held it open on weekends, had many inquiries about it, and showed numerous prospective buyers through it for a few weeks, but received no offers. When activity slowed, and the client became concerned, REALTOR® B was reassuring. “We’ll just keep plugging till the right buyer comes along,” he said. When the 90-day exclusive expired, REALTOR® B asked for a renewal. He told the client that new houses coming on the market were adversely affecting the market on resales of existing houses, and recommended lowering the price to
$158,900. Client A ruefully agreed, but the lowered price did not materially increase buyer interest in the property. As the term of the 90-day extension of the listing neared, REALTOR® B brought Client A an offer of $150,000 and strongly recommended that it be accepted. But the client objected. “You told me it was worth about $168,000 and sooner or later the right buyer would pay that price. Meanwhile similar houses in the neighborhood have been selling within 30 to 60 days at around $156,000.”
“I know,” REALTOR® B said, “but six months ago we had a stronger market and were at the most favorable time of the year and $168,000 was not an out-of-line price at that time. But now we’re in the slow time of the year and the market is off. All things considered, I think the $150,000 offer in hand is a good one. I doubt that a better one will come along.”
Client A accepted the offer and complained against REALTOR® B to the local Board of REALTORS®, charging REALTOR® B with misinforming him as to fair market value apparently as a means of obtaining the listing of his property.
At the hearing, the facts as set out above were not disputed. Questioning developed the additional fact that at the time of the original listing REALTOR® B had not gone through the house to make a systematic appraisal of opinion of value, and that his recommended offering price was not based on a systematic review of sales in the neighborhood. Members of the Hearing Panel pointed out that the neighborhood in question was a development of houses, basically the same in size and quality, that had been put on the market about 10 years earlier at prices varying from $145,000 to $150,000; that good location and land development practices had maintained a good market for resales, but there was no indication that any property in the immediate neighborhood had been resold for as high as $160,000. When told that circumstances tended to bear out the complainant’s charge that REALTOR® B’s recommended price was a stratagem to obtain the listing, REALTOR® B’s defense was that he felt he had a right to take an optimistic view of the market.
It was concluded that REALTOR® B was in violation of Article 1 of the Code of Ethics.
Case #1-18: REALTOR® Not Responsible for Legal Advice
(Originally Case #2-4. Revised and transferred to Article 7 as Case #7-22 May, 1988. Transferred to Article 1 November, 1994.)
Client A listed a commercial property with REALTOR® B who sold it. Following the sale, Client A learned that his total tax position would have been more favorable if he had disposed of the property in a trade. He complained to the Association of REALTORS® against REALTOR® B stating that in connection with his listing of the property he had discussed his total tax position with REALTOR® B, and that REALTOR® B, in spite of his obligation under Article 1 of the Code of Ethics to “be informed regarding laws” had failed to advise him that a trade would be more to his advantage than a sale.
At the hearing, REALTOR® B defended his actions by stating that it was true that Client A had briefly outlined his total tax situation at the time he listed the property for sale. REALTOR® B advised that he had told Client A that sale of the listed property might result in unfavorable tax consequences and suggested that Client A consult an attorney. The client had not taken this advice.
After several weeks of advertising and showing the property, in the absence of a change of instructions from the client, the property was sold in accordance with the terms of the listing contract.
The Hearing Panel concluded that advising the client to consult an attorney had demonstrated REALTOR® B’s attempt to protect the best interest of his client; that in giving this advice REALTOR® B had fully discharged his obligation under Article 1; that a REALTOR® is not responsible for rendering legal advice beyond the advice that legal advice be sought when the client’s interest requires it; and that REALTOR® B was not in violation of Article 1.
Case #1-19: Knowledge of Proposed Legislation
(Originally Case #2-5. Revised and transferred to Article 7 as Case #7-23 May, 1988. Transferred to Article 1 November, 1994.)
REALTOR® A received a letter from the ABC College in another city stating that one of its old graduates in REALTOR® A’s city had willed a vacant property in that community to the college. The letter explained that the college had no use for the property, and wanted REALTOR® A to sell it at its fair market value. The proceeds would go to the endowment fund of the college. REALTOR® A suggested a price for the property, an exclusive listing contract was executed, and in less than a month the lot was sold and settlement made with the college. Two weeks later, a trustee of the college, who handled its investments, filed a complaint against REALTOR® A charging negligence in knowledge of proposed local legislation which had resulted in sale of the property at approximately one-eighth of its fair market value. The Grievance Committee referred it for hearing before a panel of the Professional Standards Committee.
The Professional Standards Committee scheduled a hearing and notified REALTOR A and the college trustee to be present. The hearing developed these facts:
(1) The client’s property was in an area which had been approved for rezoning from residential to commercial use in a general revision of the local zoning map and ordinance that was in preparation. (2) Although specific sections of the revisions, including the section involving the lot in question, had been tentatively approved, final approval had not been given to the complete revision at the time of the sale, but this action had been taken a few days following the sale. For several months prior to the sale there had been a public notice of the proposal to rezone affixed to a sign near one corner of the property.
(3) In his one inspection of the property, REALTOR® A had not noticed the sign. (4) Other sales in the rezoned area substantiated the client’s belief that the shift to commercial zoning supported a value at approximately eight times the price received for the lot.
REALTOR® A’s defense was that the ordinance putting the rezoning into effect had not been enacted at the date of his sale of the client’s property, and that he had no knowledge at the time of the rezoning proposal.
The Hearing Panel’s conclusion was that REALTOR® A had violated Article 1 and was definitely deficient in his professional obligations in this instance; that before suggesting a price to his client he should have checked the property carefully enough to have seen the notice concerning a proposal for rezoning; and that as a REALTOR® Active in the area he should have been aware of the extensive changes that were being proposed in his city’s zoning ordinance. Such knowledge was within his obligation under Article 1 to protect the best interests of his client.
Case #1-20: REALTORS® Buying and Selling to One Another are Still Considered REALTORS®
(Originally Case #7-24. Revised May, 1988. Transferred to Article 1 November, 1994. Cross-reference Case #2-13. Revised May, 2017 and November, 2022.)
REALTOR® A owned a home which he listed through his own brokerage firm. The property listing was filed with the Multiple Listing Service of the Board. REALTOR® B called REALTOR® A and told him of his interest in purchasing the home for himself. REALTOR® A suggested a meeting to discuss the matter. The two agreed upon terms and conditions and the property was sold by REALTOR® A to REALTOR® B.
A few months later, during hard rains, leakage of the roof occurred with resultant water damage to the interior ceilings and side walls. REALTOR® B had a roofing contractor inspect the roof. The roofing contractor advised REALTOR® B that the roof was defective and advised that only a new roof would prevent future water damage.
REALTOR® B then contacted REALTOR® A and requested that he pay for the new roof. REALTOR® A refused, stating that REALTOR® B had had a full opportunity to look at it and inspect it. REALTOR® B had then charged REALTOR® A with violation of Articles 1 and 2 of the Code of Ethics by not having disclosed that the roof had defects known to REALTOR® A prior to the time the purchase agreement was executed.
At the subsequent hearing, REALTOR® B outlined his complaint and told the Hearing Panel that at no time during the inspection of the property, or during the negotiations which followed, did REALTOR® A disclose any defect in the roof. REALTOR® B acknowledged that he had walked around the property and had looked at the roof. He had commented to REALTOR® A that the roof looked reasonably good, and REALTOR® A had made no comment. The roofing contractor REALTOR® B had employed after the leak occurred told him that there was a basic defect in the way the shingles were laid in the cap of the roof and in the way the metal flashing on the roof had been installed. It was the roofing contractor’s opinion that the home’s former occupant could not have been unaware of the defective roof or the leakage that would occur during hard rains.
REALTOR® A told the panel that he was participating only to prove that he was not subject to the Code of Ethics while acting as a principal as compared with his acts as an agent on behalf of others. He pointed out that he owned the property and was a principal, and that REALTOR® B had purchased the property for himself as a principal. The panel concluded that the facts showed clearly that REALTOR® A, the seller, did have knowledge that the roof was defective, and had not disclosed it to REALTOR® B, the buyer. Even though a REALTOR® is the owner of a property, when he undertakes to sell that property, he accepts the same obligation to properly represent its condition to members of the public, including REALTORS® who are purchasers in their own name, as he would have if he were acting as the agent of a seller.
The panel concluded that REALTOR® A was in violation of Articles 1 and 2 of the Code.
Case #1-21: REALTOR®’s Purchase of Property Listed with the Firm
(Adopted May, 1989 as Case #7-25. Transferred to Article 1 November, 1994. Revised November, 2001 and November, 2022.)
Mr. and Mrs. A visited REALTOR® B’s office and explained they had owned a four-bedroom ranch house nearby for thirty years but since their children were grown and Mr. A was retiring, they wanted to sell their home and tour the country in their motor home.
REALTOR® B and Mr. and Mrs. A entered into an exclusive listing agreement. REALTOR® B conducted an open house, advertised in the local paper, and took other steps to actively promote the sale.
Four weeks after the property went on the market, REALTOR® B received a call from REALTOR® Z, a broker affiliated with the same firm who worked out of the firm’s principal office downtown. REALTOR® Z explained that she had seen information regarding Mr. and Mrs. A’s home in the MLS and was interested in the property as an investment. She indicated she was sending an offer to purchase via electronic mail to REALTOR® B.
When REALTOR® B met with Mr. and Mrs. A to present REALTOR® Z’s offer, he carefully explained and presented a written disclosure that REALTOR® Z was a member of the same firm although he was not personally acquainted with her. Mr. and Mrs. A, being satisfied with the terms and conditions of the purchase offer, signed it and several weeks later the sale closed and a commission was paid to REALTOR® B.
Several weeks later, REALTOR® B received a letter from Attorney T, representing Mr. and Mrs. A. Attorney T’s letter indicated that since a member of REALTOR® B’s firm had purchased the property, in Attorney T’s opinion, REALTOR® B was not entitled to a commission. The letter went on to demand that REALTOR® B refund the commission that had been paid by Mr. and Mrs. A.
REALTOR® B politely, but firmly, refused to refund the commission.
Mr. and Mrs. A filed a complaint with the Association of REALTORS® alleging that REALTOR® B’s refusal to refund the commission constituted a violation of Article 1 of the Code of Ethics.
REALTOR® B, in his response, agreed with the facts as stated in Mr. and Mrs. A’s complaint but indicated that he had faithfully represented the best interests of Mr. and Mrs. A and had no obligation to refund the commission.
The Grievance Committee concluded that the matter should be referred to a Hearing Panel of the Association’s Professional Standards Committee.
At the hearing, Mr. and Mrs. A repeated the facts as set forth in their written complaint and, in response to REALTOR® B’s cross-examination, acknowledged that REALTOR® Z had not influenced their decision to list the property with REALTOR® B or their decision as to the asking price. They also agreed that REALTOR® B had carefully disclosed that REALTOR® Z was a member of the same firm; and that REALTOR® B had represented their best interests throughout the transaction. Their only disagreement with REALTOR® B, they stated, was that since their home had been purchased by a member of REALTOR® B’s firm, they should not have been obligated to pay a commission and REALTOR® B’s refusal to refund the commission violated Article 1.
The Hearing Panel concluded that REALTOR® B had promoted Mr. and Mrs. A’s interests; and had carefully disclosed that REALTOR® Z was a member of the same firm; and that REALTOR® B’s refusal to refund commission did not constitute a violation of Article 1.
Case #1-22: REALTOR®’s Offer to Buy Property He has Listed
(Adopted May, 1989 as Case #7-26. Transferred to Article 1 November, 1994. Revised November, 2001 and November, 2022.)
Doctor A, a surgeon in a major city, inherited a summer house and several wooded acres on the shores of a lake over a thousand miles from Doctor A’s home. Being an extremely busy individual, Doctor A paid little attention to his inheritance for almost two years. Then, planning a vacation trip, Doctor A and his wife decided to visit their property since it was located in a part of the country that they had never seen. Doctor A and his wife spent a week in the house during which they concluded that it was too far from their home town to use on any regular basis. Consequently, Doctor A decided to sell the property and made an appointment with REALTOR® B whose office was located in a town nearby.
Doctor A explained that he had inherited the summer house two years earlier and wanted to sell it since it was impractical to keep for his personal use. Doctor A mentioned that he had no idea what the property was worth since it had not previously changed hands in forty years and that he was not familiar with local property values.
REALTOR® B explained that sales of vacation homes had been slow for a number of months and recommended a listing price of $175,000. When Doctor A commented that the price seemed low given that the house was located on a lake and included several wooded acres, REALTOR® B responded by asking Doctor A what he thought the property was worth. Doctor A repeated that he really had no idea what it was worth since he was completely unfamiliar with the area and concluded that he would have to rely on REALTOR® B’s judgment. Doctor A and REALTOR® B executed an exclusive listing on the property and two days later Doctor A and his wife returned home.
Three weeks later, Doctor A received a purchase contract for $175,000 from REALTOR® B less the amount of the listing commission signed by REALTOR® B as the purchaser. REALTOR® B’s letter indicated his belief that Doctor A should not expect any other offers on the property due to the slow market and that REALTOR® B’s “full price” offer was made to “take the property off Doctor A’s hands.”
Doctor A immediately called REALTOR® B and advised him that while he might agree to sell the vacation house to REALTOR® B, he would not do so until he could have the property appraised by an independent appraiser. Under no circumstances, continued Doctor A, would he recognize REALTOR® B as his agent and pay a commission if REALTOR® B purchased the house.
REALTOR® B responded that there was no reason to obtain an independent appraisal since Doctor A had little choice in the matter. In REALTOR® B’s opinion Doctor A could either sell the property to REALTOR® B for $175,000 less the amount of the commission or, should Doctor A refuse REALTOR® B’s offer, REALTOR® B would be entitled to a commission pursuant to the listing agreement.
Believing that he had no choice, Doctor A signed the purchase agreement and returned it to REALTOR® B. Shortly thereafter, the transaction closed.
Several weeks later, Doctor A learned that Associations of REALTORS® had Professional Standards Committees that considered charges of unethical conduct by REALTORS®. He filed a complaint to REALTOR® B’s Association spelling out all of the details of the sale of his summer house. In his complaint, Doctor A indicated that he had no problem with REALTOR® B offering to purchase the property but rather his unhappiness resulted from REALTOR® B’s insistence on being compensated as Doctor A’s agent even though he had become a principal in the transaction. Doctor A quoted Article 1 questioning how REALTOR® B’s duty to promote Doctor A’s interests could have been served when REALTOR® B had taken an essentially adversarial role in the transaction. Finally, Doctor A commented, REALTOR® B’s “take it or leave it” attitude had certainly seemed less than honest.
The Association's Professional Standards Administrator referred Doctor A’s complaint to the Grievance Committee which concluded that a hearing should be held. At the hearing before a panel of the Association’s Professional Standards Committee, both Doctor A and REALTOR® B told their sides of the story. After all of the evidence and testimony was heard, the Hearing Panel went into executive session and concluded that while the Code of Ethics did not prohibit REALTOR® B’s offering to purchase property listed by him, REALTOR® B had stepped out of his role as agent and had become a principal in the transaction. Article 1 of the Code of Ethics requires the REALTOR® to “protect and promote the interests of the client.” Once REALTOR® B expressed his interest in purchasing the property, he could no longer act as Doctor A’s agent except with Doctor A’s knowledgeable consent. This consent had not been granted by Doctor A. Further, REALTOR® B’s advice that Doctor A had no choice but to view REALTOR® B as his agent and to compensate him accordingly had been incorrect and had been a decisive factor in Doctor A’s decision to sell to REALTOR® B. The Hearing Panel also found that REALTOR® B had significantly influenced Doctor A’s decision as to the listing price, perhaps with knowledge that he (REALTOR® B) would like to purchase the property for himself. Consequently, the Hearing Panel found REALTOR® B in violation of Article 1.
Case #1-23: Claims of Guaranteed Savings
(Adopted November, 1993 as Case #7-27. Revised April, 1994. Transferred to Article 1 November, 1994. Revised November, 2022.)
In response to REALTOR® A’s advertisement, “Guaranteed Savings! Don’t purchase without representation,” Mr. and Mrs. B signed an exclusive buyer representation contract with REALTOR® A. After viewing several homes accompanied by REALTOR® A, Mr. and Mrs. B decided to make an offer on 1234 Hickory. The seller did not accept the offer. The listing broker explained to REALTOR® A that the sellers were well-situated, spent much of their time at their vacation home, and had determined not to accept anything other than the listed price. REALTOR® A, in turn, explained that to Mr. and Mrs. B. In response to their questions, he indicated that there appeared to be little point in making anything other than a full price offer but that he would be happy to continue to show them other properties. Mr. and Mrs. B responded that they were not interested in other properties and had decided to make a full price offer on the Hickory Street residence. They did and their offer was accepted.
Following closing, and after discussing their transaction with friends, they wrote a letter to the Association of REALTORS® indicating that while they were pleased with the service provided by REALTOR® A, they thought that his claim of “guaranteed savings” was an exaggeration. After obtaining and reviewing a copy of the Code of Ethics, they filed a formal complaint alleging that Article 1, as interpreted by Standard of Practice 1-4, had been violated.
At the hearing, REALTOR® A argued he was able to aggressively negotiate purchase agreements on behalf of his clients whereas the listing broker or subagents, with their loyalty to the seller, could not. He also indicated that, in many instances, his buyer clients paid less, often substantially less, than buyers dealing through listing brokers, subagents, or even through other buyer agents. However, in response to questioning by Mr. B’s attorney, REALTOR® A acknowledged that, while savings were not uncommon, they were not ensured in every instance, particularly in cases where the seller was determined to receive full price. “But I offered to show them other properties and, if we looked long enough, I am sure I could have found them a bargain,” offered REALTOR® A in his defense.
The Hearing Panel disagreed with REALTOR® A’s reasoning, concluding that while savings might be possible, REALTOR® A had been unable to demonstrate them in every instance and that this guarantee of savings was misleading. Consequently, his advertisement was in violation of Article 1.
Case #1-24: Advantage Gained Through Deception of Client
(Originally Case #4-3. Revised and transferred to Article 6 as Case #6-5 May, 1988. Revised November, 1993. Transferred to Article 1 November, 1994. Revised November, 1997.)
Client X listed his unique parcel of land on a lake exclusively with REALTOR® A, who worked diligently for months to sell Client X’s property. Finally, REALTOR® A came up with the idea of selling the property to the county for a park, and made arrangements for its presentation at a special meeting.
Client X went before the County Commissioners with his attorney. REALTOR® A, the listing broker, was in the audience. REALTOR® A commented about the property and told the County Commissioners that if the County purchased the property he, REALTOR® A, would receive a real estate commission. The County Commissioners agreed to take the matter under advisement.
REALTOR® B, a member of the County Commission, approached Client X and suggested that if the property were listed with REALTOR® B exclusively, and REALTOR® B then cooperated with REALTOR® A so that the real estate commission would be split between them, the County would probably purchase the property from Client X. Otherwise, REALTOR® B indicated, the County would not purchase it. Unknown to Client X, the County Commissioners had already voted to buy the land. Worried that he might not sell the land, Client X immediately signed a second written exclusive listing with REALTOR® B. Thereafter, a sales contract was executed which provided that the real estate commission was to be divided equally between REALTOR® A and REALTOR® B. Unknown to REALTOR® B, Client X had told REALTOR® A the entire story about REALTOR® B’s approach to and conversation with Client X.
REALTOR® A filed a complaint against REALTOR® B alleging violations of Article 1 and Article 16. The Grievance Committee found enough evidence of REALTOR® B’s alleged violations of the Code to warrant a hearing before a Hearing Panel of the Association’s Professional Standards Committee.
At the hearing, REALTOR® B defended himself, indicating that he had been instrumental in influencing the County Commission to vote to buy Client X’s land, and had voted for it himself. Accordingly, REALTOR® B felt it was appropriate for him to receive a commission.
It was the Hearing Panel’s conclusion that REALTOR® B had used his official position as County Commissioner to deceive Client X with respect to the prospects of the County purchasing his property, and had coerced Client X into executing an exclusive listing while the property was already listed exclusively with REALTOR® A. The Hearing Panel found REALTOR® B in violation of Article 1 for having advised Client X dishonestly and Article 16 for having acted inconsistently with the exclusive relationship that existed between Client X and REALTOR® A.
Case #1-25: Disclosure of Latent Defects
(Adopted November, 2000. Revised November, 2022.)
REALTOR® A had listed Seller S’s vintage home. Buyer B made a purchase offer that was contingent on a home inspection. The home inspection disclosed that the gas furnace needed replacement because unacceptable levels of carbon monoxide were being emitted.
Based on the home inspector’s report, Buyer B chose not to proceed with the purchase.
REALTOR® A told Seller S that the condition of the furnace and the risk that it posed to the home’s inhabitants would need to be disclosed to other potential purchasers. Seller S disagreed and instructed REALTOR® A not to say anything about the furnace to other potential purchasers. REALTOR® A replied that was an instruction he could not follow so REALTOR® A and Seller S terminated the listing agreement.
Three months later, REALTOR® A noticed that Seller S’s home was back on the market, this time listed with REALTOR® Z. His curiosity piqued, REALTOR® A phoned REALTOR® Z and asked whether there was a new furnace in the home. “Why no,” said REALTOR® Z. “Why do you ask?” REALTOR® A told REALTOR® Z about the home inspector’s earlier findings and suggested that REALTOR® Z check with the seller to see if repairs had been made.
When REALTOR® Z raised the question with Seller S, Seller S was irate. “That’s none of his business,” said Seller S who became even angrier when REALTOR® Z advised him that potential purchasers would have to be told about the condition of the furnace since it posed a serious potential health risk.
Seller S filed an ethics complaint against REALTOR® A alleging that the physical condition of his property was confidential; that REALTOR® A had an ongoing duty to respect confidential information gained in the course of their relationship; and that REALTOR® A had breached Seller S’s confidence by sharing information about the furnace with REALTOR® Z.
The Hearing Panel disagreed with Seller S’s contentions. It noted that while REALTORS® do, in fact, have an obligation to preserve confidential information gained in the course of any relationship with the client, Standard of Practice 1-9 specifically provides that latent material defects are not considered “confidential information” under the Code of Ethics. Consequently, REALTOR® A’s disclosure did not violate Article 1 of the Code of Ethics.
Case #1-26: Subordination of Client’s Interests to REALTOR®’s Personal Gain
(Adopted May, 2001.)
REALTOR® B was a sales associate with XYZ, REALTORS®. To promote XYZ’s in-house listings, the firm’s principals offered $1,000 bonuses to the company’s sales associates at time of closing on each of XYZ’s listings they sold.
Dr. Z, a recent transferee to the town, entered into a buyer representation agreement with XYZ through REALTOR® B.
Dr. Z explained he had specific needs, foremost of which was any home he purchased be convenient for and readily accessible by Dr. Z’s spouse who was physically challenged. “Part of my wife’s physical conditioning program is swimming,” said Dr. Z, “so in addition to everything else, I am looking for a home with a pool or room to build a pool.”
REALTOR® B knew there were a number of homes for sale meeting most of Dr. Z’s general specifications, several of which were listed with XYZ.
Over the next few days, REALTOR® B showed Dr. Z several properties in the Blackacre subdivision, all of which were listed with XYZ, including one with an outdoor swimming pool. Not included among the properties shown to Dr. Z were several similar properties in Blackacre listed with other firms, including one with an indoor pool.
After considering the properties shown to him by REALTOR® B, Dr. Z made an offer on the home with the outdoor pool. His offer was accepted and the transaction closed shortly thereafter.
Several months later, REALTOR® B received notice of an ethics complaint filed against him by Dr. Z. Dr. Z had learned about the home with the indoor pool from a colleague at the hospital who lived on the same block. The complaint alleged that REALTOR® B had put his interests, and those of his firm, ahead of Dr. Z’s by promoting XYZ’s listings exclusively and by not telling Dr. Z about a similarly-priced property with an indoor pool, which suited his family’s needs better than the property he had purchased. The complaint went on to indicate that REALTOR® B had received a bonus for selling one of XYZ’s listings and that Dr. Z suspected that REALTOR® B’s failure to tell him about the home with the indoor pool was motivated by the opportunity to receive a bonus.
At the hearing, REALTOR® B defended his actions stating that properties rarely meet all of potential purchasers desires; that he had made Dr. Z aware of several properties that met most of his requirements, including one with an outdoor pool; and that Dr. Z must have been satisfied with REALTOR® B’s service since he had purchased a home.
Upon questioning by Dr. Z’s attorney, REALTOR® B acknowledged that he knew about but had not shown the house with the indoor pool to Dr. Z. He conceded that a pool that could be used year round was better suited to the family’s needs than one that could be used only four months each year. He also admitted his failure to tell Dr. Z about the house with the indoor pool had at least in part been motivated by the bonus offered by his firm. “But,” he argued, “aside from the indoor pool, that house was no different than the one Dr. Z bought.”
The Hearing Panel concluded that REALTOR® B had been fully aware that one of Dr. Z’s prime concerns was his wife’s ongoing physical conditioning needs and REALTOR® B’s decision to show Dr. Z only properties listed with XYZ and to not tell him about the home with the indoor pool had been motivated by the possibility of earning an in-house bonus. The Hearing Panel determined that REALTOR® B had placed his interests ahead of those of his client and had violated Article 1.
Case #1-27: Appraisal Fee as Percentage of Valuation
(Originally Case #11-7. Revised November, 2001. Transferred to Article 1 November, 2001. Revised November, 2022.)
REALTOR® A, a licensed or certified appraiser, was approached by Client B who engaged him to make an appraisal of an apartment building located in a proposed public redevelopment area. Client B explained that he had recently inherited the property and recognized that it was in a neglected condition. Client B also explained that he wanted the appraisal performed in order to have a definite idea of the property’s value before discussing its possible sale with negotiators for the redevelopment project. REALTOR® A and Client B entered into a contractual relationship whereby REALTOR® A promised to perform the appraisal of Client B’s property. Client B, at REALTOR® A’s suggestion, agreed to compensate REALTOR® A for his appraisal services based on a percentage of the amount of the appraised value to be determined.
Several months later, Client B complained to the Association of REALTORS® against REALTOR® A, specifying that he had been overcharged for the appraisal. Client B explained that the appraisal fee he had agreed upon with REALTOR® A was based on a percentage of the valuation shown in the appraisal report. Client B’s letter to the Board stated that his attempt to negotiate with the redevelopment agency on the basis of REALTOR® A’s appraisal had broken down and that the redevelopment agency had gone into court, under eminent domain proceedings, and that the award made by the court was approximately one-fourth of the amount of REALTOR® A’s appraisal. Client B contended that by making his valuation so unrealistically high, REALTOR® A had grossly overcharged him. He added that the experience had been embarrassing to him, since in his attempts to negotiate with the redevelopment agency it had not been his intention to seek an unreasonably high price. By relying on REALTOR® A’s appraisal, he had been placed in a position of seeming to have sought an excessive price for his apartment building. Client B said that it was his opinion that REALTOR® A had overvalued the property to obtain a higher fee.
Client B’s complaint was considered by the Association’s Grievance Committee which, upon review, referred it to the Association’s Professional Standards Administrator to be scheduled for a hearing before a Hearing Panel of the Association’s Professional Standards Committee. The appropriate notices were sent out and a hearing was scheduled.
At the hearing, REALTOR® A defended his actions stating that he was unaware of any prohibition in the Code of Ethics prohibiting a REALTOR® from charging a percentage of the valuation of a property as an appraisal fee. REALTOR® A stated that the client had freely agreed to the arrangement; that he felt that his appraisal was a fair one; and that he was not shaken in this view by the award made by the court since he felt that the court’s award was unreasonably low.
After considering all of the evidence submitted by both parties, the Hearing Panel did not accept REALTOR® A’s argument that he was unaware of the Code’s prohibition of charging an appraisal fee contingent upon the value as determined by the appraisal. The panel concluded that REALTOR® A, by basing his fee on the amount of valuation, had violated Article 1 of the Code of Ethics as interpreted by Standard of Practice 1-14.
Case #1-28: Disclosure of Existence of Offers to Prospective Purchasers
(Adopted November, 2002. Revised November, 2022.)
Seller S listed her home for sale with REALTOR® B. The property was priced reasonably and REALTOR® B was confident it would sell quickly. The listing agreement included the seller’s authorization for publication in the MLS and authority to disclose the existence of offers to prospective purchasers.
Within days, REALTOR® B had shown the property to several prospective purchasers and one of them, Buyer Z, wrote a purchase offer at close to the asking price.
REALTOR® B called Seller S to make an appointment to present the offer. After hanging up with Seller S, REALTOR® B received another call, this time from REALTOR® A. REALTOR® A explained that he represented a buyer who was interested in making an offer on Seller S’s property. REALTOR® A explained that while his buyer-client was quite interested in the property, price was also a concern. He asked REALTOR® B if there were other offers on the property, indicating that his buyer-client would likely make a higher offer if there were competing offers on the table. REALTOR® B responded telling REALTOR® A, “That’s confidential information. Please tell your client to make his best offer.”
Taken aback by REALTOR® B’s comments, REALTOR® A shared them with his buyer-client, who chose not to make an offer and instead pursued other properties.
Buyer Z’s offer was accepted by Seller S later that evening and, sometime later, the transaction closed.
Several months afterward, Seller S and REALTOR® A met at a social event. REALTOR® A related his conversation with REALTOR® B. Seller S asked REALTOR® A if he thought that REALTOR® A’s buyer-client would have made an offer on Seller S’s home absent REALTOR® B’s refusal to disclose whether there were other offers pending. REALTOR® A responded that it was impossible to tell for certain, but his buyer-client had certainly not been favorably impressed by REALTOR® B’s response to a seemingly routine question.
Seller S subsequently filed an ethics complaint against REALTOR® B alleging violation of Article 1 as interpreted by Standard of Practice 1-15. He noted that he had clearly authorized REALTOR® B to disclose to buyers and cooperating brokers the existence of pending offers and that REALTOR® B’s arbitrary refusal to share information he was authorized to share could have been the reason, or part of the reason, why REALTOR® A’s client had chosen not to make an offer on Seller S’s home.
REALTOR® B defended his actions indicating that while he agreed that he had an obligation to promote Seller S’s interests, his obligation to REALTOR® A and to REALTOR® A’s buyer-client was simply to be honest. He had not, in any fashion, misrepresented the availability of Seller S’s property. Rather, he had simply told REALTOR® A to encourage his client to make her best offer. “I’m not required to turn every sale into an auction, am I?” he asked rhetorically. “I feel that I treated all parties honestly,” he concluded.
The Hearing Panel did not agree with REALTOR® B’s reasoning, indicating that he had violated Article 1 as interpreted by Standard of Practice 1-15. They noted that Standard of Practice 1-15 requires REALTORS®, if they have the seller’s approval, to divulge the existence of offers to purchase on listed property in response to inquiries from either potential buyers or from cooperating brokers. REALTOR® B had not met that obligation and, consequently, the Hearing Panel concluded that REALTOR® B had violated Article 1.
Case #1-29: Multiple Offers to be Presented Objectively
(Adopted November, 2002.)
REALTOR® A listed Seller S’s house. He filed the listing with the MLS and conducted advertising intended to interest prospective purchasers. Seller S’s house was priced reasonably and attracted the attention of several potential purchasers.
Buyer B learned about Seller S’s property from REALTOR® A’s website, called REALTOR® A for information, and was shown the property by REALTOR® A several times.
Buyer X, looking for property in the area, engaged the services of REALTOR® R as a buyer representative. Seller S’s property was one of several REALTOR® R introduced to Buyer X.
After the third showing, Buyer B was ready to make an offer and requested REALTOR® A’s assistance in writing a purchase offer. REALTOR® A helped Buyer B prepare an offer and then called Seller S to make an appointment to present the offer that evening.
Later that same afternoon, REALTOR® R called REALTOR® A and told him that he was bringing a purchase offer to REALTOR® A’s office for REALTOR® A to present to Seller S. REALTOR® A responded that he would present Buyer X’s offer that evening.
That evening, REALTOR® A presented both offers to Seller S for his consideration. Seller S noted that both offers were for the full price and there seemed to be little difference between them. REALTOR® A responded, “I’m not telling you what to do, but you might consider that I have carefully pre-qualified Buyer B. There’s no question but that she’ll get the mortgage she’ll need to buy your house. Frankly, I don’t know what, if anything, REALTOR® R has done to pre-qualify his client. I hope he’ll be able to get a mortgage, but you never can tell.” REALTOR® A added, “Things can get complicated when a buyer representative gets involved. They make all sorts of demands for their clients and closings can be delayed. You don’t want that, do you? Things are almost always simpler when I sell my own listings,” he concluded.
Seller S, agreeing with REALTOR® A’s reasoning, accepted Buyer B’s offer and the transaction closed shortly thereafter.
Upset that his purchase offer hadn’t been accepted, Buyer X called Seller S directly and asked, “Just to satisfy my curiosity, why didn’t you accept my full price offer to buy your house?” Seller S explained that he had accepted another full price offer, had been concerned about Buyer X being able to obtain the necessary financing, and had been concerned about delays in closing if a buyer representative were involved in the transaction.
Buyer X shared Seller S’s comments with REALTOR® R the next day. REALTOR® R, in turn, filed an ethics complaint alleging that REALTOR® A’s comments had intentionally cast Buyer X’s offer in an unflattering light, that his comments about buyer representatives hindering the closing process had been inaccurate and unfounded, and that REALTOR® A’s presentation of the offer had been subjective and biased and in violation of Article 1 as interpreted by Standard of Practice 1-6.
At the hearing, REALTOR® A tried to justify his comments, noting that although he had no personal knowledge of Buyer X’s financial wherewithal and while he hadn’t had a bad experience dealing with represented buyers, it was conceivable that an overzealous buyer representative could raise obstacles that might delay a closing. In response to REALTOR® R’s questions, REALTOR® A acknowledged that his comments to Seller S about Buyer X’s ability to obtain financing and the delays that might ensue if a buyer representative were involved were essentially speculation and not based on fact.
The Hearing Panel concluded that REALTOR® A’s comments and overall presentation had not been objective as required by Standard of Practice 1-6 and found REALTOR® A in violation of Article 1.
Case #1-30: Multiple Offers Where Listing Broker Agrees to Reduce Listing Broker’s Commission
(Adopted November, 2002, Revised May 2019)
REALTOR® A listed Seller S’s house. He filed the listing with the MLS and advertised to interest prospective purchasers. Seller S’s house was priced reasonably and attracted the attention of several potential purchasers.
Buyer B learned about Seller S’s property from REALTOR® A’s website, called REALTOR® A for information, and was shown the property by REALTOR® A several times.
Buyer X, looking for property in the area, engaged the services of REALTOR® R as a buyer representative. Seller S’s property was one of several REALTOR® R introduced to Buyer X.
After the third showing, Buyer B was ready to make an offer and requested REALTOR® A’s assistance in writing a purchase offer. REALTOR® A helped Buyer B prepare an offer and then called Seller S to make an appointment to present the offer that evening.
Later that same afternoon, REALTOR® R called REALTOR® A and told him that he was bringing a purchase offer to REALTOR® A’s office for REALTOR® A to present to Seller S. REALTOR® A responded that he would present Buyer X’s offer that evening.
That evening, REALTOR® A presented both offers to Seller S for his consideration. Seller S noted that both offers were for the full price and there seemed to be little difference between them. REALTOR® A responded, “They’re both good offers and they’ll both net you the same amount.” Seller S asked about the feasibility of countering one or both of the offers. REALTOR® A agreed that was a possibility, but noted that countering a full price offer could result in the buyer walking away from the table. Besides, he reminded Seller S, production of a full price offer triggered REALTOR® A’s entitlement to a commission under the terms of their listing agreement. Seller S acknowledged that obligation but expressed regret that, faced with two full price offers, there was no way to increase the proceeds he would realize from the sale of his property. “I’ll tell you what,” said Seller S, “if you’ll reduce your commission, I’ll accept the offer you procured. While you’ll get a little less than we’d agreed in the listing contract, you’ll still have more than if you had to pay the other buyer’s broker.”
Seeing the logic of Seller S’s proposal, and realizing that he and the seller were free to renegotiate the terms of their agreement, REALTOR® A agreed to reduce his commission by one percent. Seller S, in turn, accepted Buyer B’s offer and the transaction closed shortly thereafter.
Upset that his purchase offer hadn’t been accepted, Buyer X called Seller S directly and asked, “Just to satisfy my curiosity, why didn’t you accept my full price offer to buy your house?” Seller S explained that he had accepted a full price offer produced by REALTOR® A because of REALTOR® A’s willingness to reduce his commission by one percent.
Buyer X shared Seller S’s comments with REALTOR® R the next day. REALTOR® R, in turn, filed an ethics complaint alleging that REALTOR® A’s commission reduction had induced Seller S to accept the offer REALTOR® A had produced, that REALTOR® A’s commission reduction made his presentation of the competing offer less than objective and violated Article 1, as interpreted by Standard of Practice 1-6, and that REALTOR® A’s failure to inform him of the change in his (REALTOR® A’s) commission arrangement violated Article 3, as interpreted by Standard of Practice 3-4.
At the hearing, REALTOR® A defended his actions stating that he had said nothing inaccurate, untruthful, or misleading about either of the offers and that he understood that his fiduciary duties were owed to his client, Seller S, and that he and Seller S were free to renegotiate the terms of their listing agreement at any time. REALTOR® A acknowledged that by reducing his commission with respect to an offer he produced, he might arguably have created a dual or variable rate commission arrangement of the type addressed in Standard of Practice 3-4. He pointed out that if that commission arrangement had been a term of their agreement when the listing agreement was entered into, or at some point other than Seller S’s deciding which offer he would accept, then he would have taken appropriate steps to disclose the existence of the modified arrangement. He noted that Standard of Practice 3-4 requires disclosure of variable rate commission arrangements “as soon as practical” and stated that he saw nothing in the Standard that required him and his client to call “time-out” while the existence of their renegotiated agreement was disclosed to other brokers whose buyers had offers on the table—or to all other participants in the MLS. He acknowledged that if the accepted offer had subsequently fallen through and Seller S’s property had gone back on the market with a variable rate commission arrangement in effect (where one hadn’t existed before), then the existence of the variable rate commission arrangement would have had to have been disclosed. But, he concluded, the accepted offer hadn’t fallen through so disclosure was not feasible or required under the circumstances.
The Hearing Panel agreed with REALTOR® A’s reasoning and concluded that he had not violated either Article 1 or Article 3, regardless of whether he or the seller had suggested the reduction of REALTOR® A's commission.
Case #1-31: Protecting Client’s Interest in Auction Advertised as “Absolute”
(Adopted May, 2005. Cross-referenced with Case #12-18. Revised November, 2022.)
Seller T, a widowed elementary school teacher in the Midwest, inherited a choice parcel of waterfront property on one of the Hawaiian islands from a distant relative. Having limited financial resources, and her children’s’ college educations to pay for, she concluded that she would likely never have the means to build on or otherwise enjoy the property. Consequently, she decided to sell it and use the proceeds to pay tuition and fund her retirement.
Seller T corresponded via the Internet with several real estate brokers, including REALTOR® Q whose website prominently featured his real estate auction services. An exchange of email followed. REALTOR® Q proposed an absolute auction as the best way of attracting qualified buyers and ensuring the highest possible price for Seller T. Seller T found the concept had certain appeal but she also had reservations. “How do I know the property will sell for a good price?” she e-mailed REALTOR® Q. REALTOR® Q responded “You have a choice piece of beachfront. They aren’t making any more of that, you know. It will easily bring at least a million five hundred thousand dollars.” Seller T acquiesced and REALTOR® Q sent her the necessary contracts which Seller T executed and returned.
Several days prior to the scheduled auction, Seller T decided to take her children to Hawaii on vacation. The trip would also afford her the chance to view the auction and see, firsthand, her future financial security being realized.
On the morning of the auction only a handful of people were present. Seller T chatted with them and, in casual conversation, learned that the only two potential bidders felt the property would likely sell for far less than the $1,500,000 REALTOR® Q had assured her it would bring. One potential buyer disclosed he planned to bid no more than $250,000. The other buyer wouldn’t disclose an exact limit but said he was expecting a “fire sale.”
Seller T panicked. She rushed to REALTOR® Q seeking reassurance that her property would sell for $1,500,000. REALTOR® Q responded, “This is an auction. The high bidder gets the property.” Faced with this dire prospect, Seller T insisted that the auction be cancelled. REALTOR® Q reluctantly agreed and advised the sparse audience that the seller had cancelled the auction.
Within days, two ethics complaints were filed against REALTOR® Q. Seller T’s complaint alleged that REALTOR® Q had misled her by repeatedly assuring her—essentially guaranteeing her—that her property would sell for at least $1,500,000. By convincing her she would realize that price— and by not clearly explaining that if the auction had proceeded the high bidder—at whatever price—would take the property, Seller T claimed her interests had not been adequately protected, and she had been lied to. This, Seller T concluded, violated Article 1.
The second complaint, from Buyer B, related to REALTOR® Q’s pre-auction advertising. REALTOR® Q’s ad specifically stated “Absolute Auction on July 1.” Nowhere in the ad did it mention that the auction could be cancelled or the property sold beforehand. “I came to bid at an auction,” wrote Buyer B, “and there was no auction nor any mention that it could be cancelled.” This advertising, Buyer B’s complaint concluded, violated Article 12’s “true picture” requirement.
Both complaints were forwarded by the Grievance Committee for hearing. At the hearing, REALTOR® Q defended his actions by noting that comparable sales supported his conclusion that Seller T’s property was worth $1,500,000. “That price was reasonable and realistic when we entered the auction contract, and it’s still reasonable today. I never used the word ‘guarantee;’ rather I told her the chances of getting a bid of $1,500,000 or more were very good.” “But everyone knows,” he added, “that anything can happen at an auction.” If Seller T was concerned about realizing a minimum net return from the sale, she could have asked that a reserve price be established.
Turning to Buyer B’s claim of deceptive advertising, REALTOR® Q argued that his ad had been clear and accurate. There was, he stated, an auction scheduled for July 1 and it was intended to be an absolute auction. “The fact that it was advertised as ‘absolute’ doesn’t mean the property can’t be sold beforehand—or that the seller can choose not to sell and cancel the auction. Ads can’t discuss every possibility. It might have rained that day. Should my ad have cautioned bidders to bring umbrellas?” he asked rhetorically.
The Hearing Panel concluded that while REALTOR® Q had not expressly guaranteed Seller T her property would sell for $1,500,000, his statements had led her to that conclusion and after realizing Seller T was under that impression, REALTOR® Q had done nothing to disabuse her of that misperception. Moreover, REALTOR® Q had taken no steps to explain the risks of an absolute auction to Seller T, including making her aware that at an absolute auction the high bidder—regardless of the bid— would take the property. REALTOR® Q’s actions and statements had clearly not protected his client’s interests and, in the opinion of the Hearing Panel, violated Article 1.
Turning to the ad, the Hearing Panel agreed with REALTOR® Q’s position. There had been an absolute auction scheduled—as REALTOR® Q had advertised—and there was no question but that REALTOR® Q had no choice but to cancel the auction when he had been instructed to do so by his client. Consequently, the panel concluded REALTOR® Q had not violated Article 12.
Case #1-32: Manipulation of Comparables for REALTOR®’s Personal Gain
(Adopted May, 2023)
The Respondent, REALTOR® A, was the listing agent for a property owned by the Complainant, Client A, located at 123 King Street (the “property”). Client A and REALTOR® A met for an initial consultation and during that meeting, REALTOR® A provided Client A with real estate comparables in the $500,000 to $525,000 range. REALTOR® A suggested listing the property at $500,000. Client A entered into an exclusive listing agreement with REALTOR® A’s brokerage and agreed to list the property at $510,000.
Prior to the listing going live in the MLS, REALTOR® A contacted Client A and offered $525,000 to purchase the property. After speaking with REALTOR® A, Client A found that two similar properties located in his neighborhood had sold earlier that month for $583,000 and $575,000, respectively. Neither of these properties were included in the real estate comparables that REALTOR® A had provided to Client A in their initial consultation. Client A terminated the listing agreement with REALTOR® A’s brokerage and met with an alternate REALTOR® who suggested an initial listing price of $570,000. The property sold for $578,000 one week after it was listed.
At the hearing, REALTOR® A stated that he had reviewed the higherpriced comparables prior to his initial consultation with Client A, but because he believed the comparables he originally shared with Client A provided a more realistic expectation of a possible sales price for the property, he decided not to include them in his report.
The Hearing Panel found that the list price encouraged by REALTOR® A was well below market value, as evidenced by the final sales prices of both the property and the comparable properties discovered by Client A. The Hearing Panel found that REALTOR® A’s actions showed a conflict of interest which prevented him from protecting and promoting the best interests of Client A, as demonstrated by REALTOR® A’s own offer to purchase the property at a price which was also significantly below the market value combined with his decision to not show Client A the higher-priced comparables.
REALTOR® A was found in violation of Article 1.