Real Estate Ethics in a Fast-Paced Market
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 smart phones. 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 neighborhood. Or if a customer asks about information your client wants 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 AgencyThere 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 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 DisclosuresWithholding 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 include 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 DutiesRemember: State real estate license law specifies the responsibilities of licensees when they represent buyers or sellers, called “fiduciary duties:”