Updated 8/12/17; Originally published 8/19/15
- Realtors have many professional restrictions on what they can and cannot do
- The client’s will is (almost) always supreme
- Sometimes agents can get in trouble by not being sneaky, but trying to be too helpful
Not all real estate agents are Realtors. “Realtors” are real estate agents that belong to the National Association of Realtors (and their local chapters, like the Texas Association of Realtors and the Fort Hood Area Association of Realtors).
Real estate agents have rules they must follow. But Realtors have additional ethical obligations to their buyers and sellers imposed by the NAR Code of Ethics. These obligations that Realtors have to their clients and each other can be remembered with the mnemonic, OLD CAR.
Being ethical would seem to be a straightforward affair – just be a good person, right? But the reality is that there is actually a lot of gray area in real estate. No two deals are alike, and there are often tricky situations that can trap even the best-intentioned agents.
Your agent must obey your instructions, as long as they do not violate the agent’s other ethical and legal responsibilities.
Having an agent isn’t the same as handing over power of attorney and letting your agent do whatever they want. Not even close. An agent is just your adviser. They may recommend a fair market value for a home, but if you want to offer (or list, if you are the seller) at a different price or terms, then it is their duty to do so.
Sometimes, you might be asking your agent to do something legal and ethical, but still crazy. If a client is being unreasonable or difficult, instead of obedience, an agent can fire the client. For example, I’ve sent a listing termination on a few occasions when a seller asked me to do something I felt was unreasonable, or if a seller wasn’t treating home showings seriously.
An agent must be loyal to their client. In this case, that means looking out first for their clients’ best interests, even before their own interests.
When this might most come into play is ensuring an agent is not commission chasing – either showing you their own listings exclusively or steering you toward listings with buyers agent bonuses. It also means, when negotiating or presenting your case, agents must advocate for your interests. Even if we told you your home is way overpriced, we still have to put our best face forward and not let on to a buyer or their agent that we actually think it’s overpriced.
Don’t Pay Too Much!
- Don’t share the seller’s agent
- Beware agents who show you their own listings
- Ask to be referred to a colleague if you like your agent’s listing
This responsibility can extend even to people with whom the agent has no official relationship. For example, if I am the listing agent and know about a defect concerning the property, I must disclose it to buyers, even if the seller doesn’t disclose it. Any material facts I am aware of, it is presumed that my client is aware of as well, because it is my responsibility to share that information.
That also means when a buyer shares the inspection with the seller, even if the buyer walks away, the seller is now obligated to share that inspection report with all future buyers.
An agent must keep their clients information confidential. Not just until the home closes, but forever.
Anything I learn about the client – their personal finances, what they are willing to offer or accept on a home – is confidential. This responsibility can create difficult situations for agents. For example, agents may have two clients offering on the same house – competing clients! The agent may know both clients’ offers, but cannot reveal it to the other buyer. Or perhaps an agent happens to show one of their own listings. Even though they might refer out the buyer in either of these events, a slip of the tongue is all it takes to get sued.
I’ve seen where an agent did a listing presentation for my seller, but I got the listing. Later, that agent coincidentally represented the buyer. Obviously, there is nothing wrong with that, but it is a tricky situation if the seller had previously revealed their mortgage payoff, repair concerns, moving timelines, etc. The other agent would have not been allowed to reveal that information to their buyer.
As your agent, I am responsible for keeping proper documentation and records and take care of any money like earnest money or option fees that are in my possession. I am not allowed to commingle those monies with my own in any way.
Commingling money sounds bad (and it is), but it is an easy one to trap an agent trying to be nice. Option and earnest money checks must be deposited within three days of the contract, and for out of town buyers, it can be a tremendous pain trying to get that money mailed, wired or Western Union-ed. Some agents might be tempted to pay the amount themselves and have the client reimburse them later. Nope! That is commingling.
Red Flags When Choosing a Realtor
- If it’s too good to be true… watch out
- Don’t take an agents’ word for it
- Look for seriousness over glamor
Reasonable care simply says that agents have a catchall responsibility to be competent. That means doing basic minimum tasks like preparing market analyses for buyers and sellers, knowing the market, understanding and correctly filling out paperwork, and accomplishing other basic tasks.
Note that an agent generally does not have any of the obligations until you are their client. That means having a signed Buyers Representation Agreement for buyers or Listing Agreement for sellers, so it is a good idea to get those signed as early in the process as you are comfortable.
Being a Realtor is like living in a minefield of potential legal and ethical issues. These are some of the reasons clients hire us, of course, to navigate the do’s and don’ts of real estate. It is also why training and continued education is so important for a professional Realtor.