Ethical Selling Practices in Real Estate

Do you want to ensure your agent is held to high standards of integrity and ethics? Here are seven ethical selling practices in real estate. 

Following ethical practices is extremely important in all industries, and real estate is no exception. The National Association of Realtors has established its Code of Ethics and Standards of Practice. This details the ethical obligations that all realtors must submit to as mandated by law. 

As a realtor, you are responsible for managing marketing campaigns, finding new clients, carefully tracking all administrative paperwork, responding to incoming client requests, and coordinating all open houses, appointments, walkthroughs, and meetings. On top of everything, realtors must follow the code of ethics.

Ethical business decisions are important not only for business success but also for avoiding legal issues. Selling a home can be a challenging process, and the last thing that sellers and agents want to face are legal repercussions from mistakes. 

Whether you are an aspiring real estate agent, new homebuyer, or seller, it is vital to avoid legal and ethical problems. This guide details the most important ethical selling practices to ensure a smooth and legal sale. 

These are several ethical selling practices to follow in real estate.

1. Full Disclosure of Property Conditions

One of the most vital factors when showing a home is to disclose any known defects or problems with the property. If you are showing at an open house, you should highlight all the best parts of the property and be honest about any issues. Minor or significant issues could negatively impact the sale, meaning it's best to be open about it from the beginning. 

While going over the disclosure form, ensure to point out issues without giving an opinion. An opinion should not detail whether a problem can be remedied easily or not. A real estate disclosure form, or Form-17, is a document that sellers complete and provide for buyers before the purchase. 

This form pinpoints known issues or defects with the property, such as mold, history of flooding, plumbing problems, or water damage. For the sellers, this document fulfills their legal obligations and for buyers, it provides information to help them make a decision about purchasing. 

Brokers and agents can face liability concerns after the transaction has closed if a client experiences buyer's remorse. Full disclosure can help avoid this problem, as it explains the value and issues with a property. 

2. Accurate Property Descriptions

Accurate property descriptions are similar to full disclosure of property conditions. However, it comes into play when showing a home through video or pictures. Agents must provide truthful and detailed information about the property, including features, size, and amenities. 

While providing property descriptions, ensure that you avoid exaggeration or misleading claims. Be especially careful when posting a home on social media. Social media can lead to deceptive representations and comments that could violate fair housing principles. 

One of the main drawbacks of virtual tours is the lack of detail. Buyers don't have the opportunity to see the property issues themselves, so agents must balance pointing out the best features and property issues that come up during an inspection. 

Before anything, ensure to comply with government laws. Be sure to do your research because laws vary depending on where you live, and different levels of government may have different laws. 

3. Maintain Client Confidentiality

Real estate agents have access to a lot of customer information, which falls under a confidentiality agreement. Whether you are a buyer's or seller's agent, you must put safeguards in place to ensure the security of communication between you and the client. 

In the case of a data breach due to an agent's negligence, a client can sue for compensatory damages. An agent can even risk losing their real estate license. 

There are some exceptions to confidentiality in real estate, and it is important to recognize that the law and ethical consideration can override your dirty of confidentiality. 

Disclosure is necessary when any material facts or defects could impact the property value. Additionally, agents are legally obligated to disclose information when safety and security is a concern. If there is an incident resulting property damage or injury to a person, an agent could potentially face a lawsuit. 

4. Follow the Real Estate Code of Ethics

The real estate Code of Ethics is one of the most important documents to follow as an agent. The document details obligations that all realtors must know, understand, and follow. If a realtor does not follow the Code of Ethics, they could be subjected to varying penalties. 

Here is a closer look at some of the standards of practice declared in the document:

• Realtors pledge themselves to protect and promote the interests of their clients. Realtors must remain obligated to treat all parties honestly. 
• Realtors must not deliberately mislead the owner as to market value. 
• Realtors may represent the seller/landlord and buyer/tenant in the same transaction only after full disclosure to and with the informed consent of both parties. 
• Fees for preparing appraisals or other valuations shall not be contingent upon the amount of the appraisal or valuation
• Realtors shall not access, use, permit, or enable others to access or use listed or managed property on terms or conditions other than those authorized by the owner or seller.

5. Conflict of Interest Management

While realtors have to juggle many tasks, if they represent both parties in a transaction, they must maintain impartiality. Mitigating conflict of interests is a core ethical principle that prioritizes clients' best interests. 

If there are any potential conflicts, they are disclosed transparently. Similar to disclosing information on the property, an agent must do the same if they are representing both the buyer and seller. 

According to the St. Mary's Law Journal, in real estate, ethical conflicts of interest can arise when an attorney enters into an attorney-client relationship with more than one party in a single transition. While all parties have a common interest in closing the transaction, each party most likely has interests that must be protected. 

6. Client Advocacy

Acting on the client's best interests should always come first, even if it means missing out on personal gain. Above everything, the client should always come first. Whether the realtor is negotiating deals, resolving disputes, or providing information, the client's satisfaction and service. 

Client advocacy is essential not only to build a customer base but also to build long-lasting relationships and fulfill ethical commitments. Client advocacy is more than building trust and loyalty; it maximizes the benefits the clients could attain in the sale. 

Many potential buyers or sellers talk with relators to make informed decisions. As an agent, it is your duty to advocate actively to secure the best possible deal for your client. This includes negotiating favorable terms, identifying potential issues, and exploring all options. 

Real estate transactions can be complex, and advocating for a client can alleviate a great deal of stress for all parties. Client advocacy can include understanding and listening to the client, the current market, and the real estate process. 

The main objective in offer negotiations is prioritizing the client's needs. Skillful negotiation should lead the clients to find their forever home.

7. Keep Records

In the event a legal claim is made, detailed records are crucial in defending claims. In North Carolina, many legal claims have a three-year statute of limitations, however, some claims can be brought after that three-year period. 

NC Realtors recommends that records should be kept longer than the legally required period of three years. Keeping paper documents isn't enough, realtors should have an additional electronic copy of everything. Ideally, keep a third backup copy that is not connected to the same network or server. In the case of any potential viruses, the backup will be safe. 

Detailed records can become unorganized extremely fast, having a standardized naming system of all files will make everything easier. Federal and local laws may vary; the IRS can look for your tax documents after three years. However, local jurisdictions can come looking for them after seven years. 

Do your research on how long it takes to hold onto certain documents. For example, some legal and MLS documents should be kept permanently. Additionally, property records including deeds of title, property tax, appraisals, and blueprints/plans should be be kept permanently. 

The Association Record Retention by the National Association of Realtors document lists different types of real estate documents and the recommended time frames for how long the association should maintain the records. 

FAQs: Ethical Selling Practices in Real Estate

Here are some commonly asked questions about ethical selling practices in real estate. 

What is ethical practice in real estate?

Ethically practicing real estate entails acting fairly and honestly to all parties in the transaction. This includes no misleading or deceiving in negotiations or transactions with buyers or sellers. 

What is ethical conduct in selling?

Ethical sales practices apply to any industry where selling quality products or services at market rates that align with what your business has promoted in its offerings to customers is essential. Staying true to business practices and customers is essential in all industries, including real estate. 

What are the unethical practices of real estate agents?

Unethical practices of real estate agents include dual agency without disclosure, misrepresentation or concealment of property flaws, and manipulation of property photos or descriptions. 

What ethical behavior must a real estate agent follow when selling a house?

All real estate agents must maintain client confidentiality, fully disclose information to clients, and avoid any form of misrepresentation or fraud. If you are starting as a real estate agent, ensure you understand and follow the Code of Ethics and Standards of Practice from the National Association of Realtors. 

What is the REALTORS Code of Ethics?

The code of ethics details a list of ethical practices that all realtors must follow; the bottom line is to practice honesty and not mislead clients. As long as you operate with high integrity and honesty, you are on the right path to becoming a successful agent. 

Methodology

We used information and data from several different sources, as well as our own data, to determine everything you need to know about ethical selling practices in real estate. Most of the data was sourced from the following sources:

• The National Association of Realtors (NAR)
• St. Mary's University Law Journal 
• NC Realtors

Ethical Selling Practices - The Bottom Line

In order to maintain the highest ethical standards and succeed in the real estate business, realtors follow a code of ethics. As a buyer or seller, you can trust that the NAR has your back, as agents are not easily forgiven for intentionally misleading their clients. 

Buyers can rely on an agent for issues related to structural, functional, or aesthetic aspects of a home. Sellers might sell their homes more quickly with a reliable agent. 

If a real estate agent is found guilty of an ethics violation, the agent goes through an official board or association proceedings. The proceedings can result in losing association membership, suspension, fines, or warning letters depending on the severity of the violation. 

As you search for your next home, Raleigh, NC, is one of the fastest growing areas in the country, with many stunning neighborhoods to choose from. Feel free to contact one of our trustworthy real estate specialists, as they are eager to help you find the perfect home. Buying a home can be overwhelming, but a trusted agent can walk you through the entire process.