Real Estate Ethics in a Fast-Paced Market

Posted On: January 25, 2017

The average home spent only 56 days on the market last year, and NAR and Redfin predict a fast market in 2017. The Internet is speeding up the process. Before even speaking to a real estate agent, sellers can easily get their own comparative market analyses online, and buyers have already gotten pre-approved and viewed listings on their smartphones.

But when things are moving fast, corners are often cut and important issues overlooked. Some may think that acting ethically simply involves being honest all the time. But there are some situations in which being honest may get real estate agents in trouble.

For example, if a client asks about the race or religion of a buyer, a seller, or a neighborhood. Or if a customer asks about the information your client wants to be kept confidential. Do you know what to do? Don’t let a rush to close get you into legal trouble. Avoid these five ethical pitfalls in a fast-paced market:

1.   Agency Disclosures and Dual Agency

There are too many opportunities for misunderstanding when it comes to who is representing whom. When you’re being helpful, some buyers may get the wrong idea and assume you’re representing their interests when you are in fact the seller’s agent. When duties and loyalties are not clear cut, that’s when trouble can arise. You must obtain informed, written consent from the buyer and the seller to act as a dual agent. That means telling them they’ll be getting limited fiduciary duties from you.

There may also be a situation where two agents from the same brokerage firm represent the parties in the same transaction. This is a dual agency and still requires informed consent and limited services. Accidental or misunderstood dual agency can lead to angry clients, professional sanctions, and lawsuits. Review state law and the company’s policy, disclose the dual agency and educate the parties about the limitations. Disclose early and often. Also, remember to ask buyers if they are already represented.  You don’t want to interfere with another licensee’s exclusive relationship.

2.   Property Disclosures

Withholding or misrepresenting information that affects the desirability or value of a property is a violation of the NAR Code of Ethics and state license law, and it could land you in court. Agents must inform buyers of any known material facts, which are significant to the transaction and could reasonably influence a prudent individual’s decisions.

This includes important latent, or hidden, defects in the property. When in doubt, disclose. You want to disclose relevant, verified facts, but don’t promise things you can’t deliver or offer opinions on tax or legal implications. You are a real estate expert, not a tax expert, lawyer, or home inspector. License law and codes of ethics require licensees to stick to their traditional realm of expertise. It’s OK to say “I don’t know.” When in doubt, advise consulting a qualified expert.

3.   Fiduciary Duties

Remember: State real estate license law specifies the responsibilities of licensees when they represent buyers or sellers, called “fiduciary duties:”

  • Loyalty
  • Care
  • Obedience
  • Accounting
  • Disclosure
  • Confidentiality

If you’re a seller’s agent chatting with prospective buyers at an open house, you cannot tell them why the seller is selling or the lowest price the seller would accept. This would violate your duties of loyalty and confidentiality.

4.   Advertising

Focus on the specific benefits of your services and listings and avoid vague exaggerations like “Number #1 Agent” or “Best Deal in Town.” Puffing can cross the line into misrepresentation or fraud when it stretches the truth beyond reality. Also, make sure you have reliable sources for the information in listing and marketing materials like square footage and school districts.

Advertising that only uses models of certain races, appears to target prospects based on protected classes, or uses preferential terms can lead to fair housing violations.  A good rule is to describe the features of the property rather than the type of buyer who might buy it. Don’t include directions with references to well-known racial, ethnic or religious landmarks.

5.   Fair Housing

A buyer asks to be shown only properties in predominately Hispanic neighborhoods. A seller asks that you only present offers from non-Muslim buyers. An apartment owner asks you to only rent to Christian families. While real estate agents always want to do whatever they can to help clients and customers, complying with any of the above requests would be a violation of fair housing laws and could get you in hot water.

Agents must treat every prospect fairly and equally and provide consistent services to ALL prospects regardless of race, color, religion, national origin, gender, familial status, disability, and now sexual orientation under the REALTOR® Code of Ethics.

Remember to focus on the property, not the people when you’re making representations, handling offers, and showing properties. A crucial way to avoid ethical mistakes in your real estate career is to keep up to date on ethical and legal issues. So check out the convenient online courses at to fulfill your real estate continuing education requirements quickly and easily.   

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