ETHICS AND REAL ESTATE

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ETHICS AND REAL ESTATE

• Doris Barrell, CRB, CRS, GRI

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• Chapter 1 /
• An Introduction
• to Ethics

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What Are Ethics?
Behavior
Morals
Whats fair!
Laws
Standards of Conduct
Sanctions
Whats right!
Whats good!
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Are Legal and Ethical the Same?
A legal decision can be clear-cut.
Generally, an ethical decision indicates higher
standards of conduct than required by law.
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Chapter 1 Case Study

• Mark J., a listing agent, is faced with an
  ethical dilemma. What is his ethical
  responsibility to his client, to the purchaser,
  to the tenants, to the community?

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What Motivates Ethical Behavior?

• Family
• School
• Religion
• Law

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Ethical Behavior

• First social organization is the family.
• The family sets the pattern for our first sense
  of right and wrong.

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Ethical Behavior

• School provides opportunity for growing sense of
  integrity and honesty.
• School teaches values of sharing and teamwork.

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Ethical Behavior

• Religion often plays a strong role in developing
  social behavior.
• Religions often encourage love and compassion for
  all .

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Ethical Behavior and the Law
Legal guidelines that mandate ethical behavior in
real estate include

• Sherman Antitrust Act
• Real Estate Settlement Procedures Act
• Fair Housing Act

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Finding Help In Decision Making

• Personal contacts
• Peers and colleagues

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Finding Help In Decision Making

• State licensing law
• REALTOR
• Code of Ethics

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Finding Help In Decision Making

• Books, newspaper and magazine articles
• Internet web sites

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• Chapter 2 /
• National Association of REALTORS
• Code of Ethics

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Public Perceptions of Agents
Such a deal I have for you!
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State Licensing of Real Estate Agents

• Mandatory prelicensing class with specific number
  of hours

• Pass state licensing exam

• Mandatory continuing education hours

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Working for a Sharper Image

• NAR nationwide TV public awareness campaign shows
  the value of the services and activities the
  agent brings to the transaction.

Youve got a lifewe let you live it! Were
REALTORS. Real estate is our life.
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National Association of REALTORS

• Founded in 1908
• Its purpose was to establish high standards of
  business practice and professional conduct.

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National Association of REALTORS

• Three-tiered membership (local, state, national)
• Over 730,000 members today from all aspects of
  the real estate industry

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Beyond Our Shores
NAR International Division and the Eastern
European Real Property Foundation
Helping other countries develop a real estate
industry with high standards of professional
conduct and ethical business practices.
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NAR Code of Ethics
Organization of the Code

• Preamble
• 17 Articles
• 70 Standards of Practice

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NAR Code of Ethics

• Enforcement
• Grievance Committee
• Professional Standards hearing
• Arbitration hearing

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Articles of the Code of Ethics

• Articles 1 through 9
• Duties to Clients and Customers
• Articles 10 through 14
• Duties to the General Public
• Articles 15 through 17
• Duties to other REALTORS

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Most Often Cited Article 1

• Protect and promote the best interests of the
  client
• Treat all parties honestly

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Second Most Cited Article 2

• Avoid exaggeration, misrepresentation or
  concealment of pertinent facts
• Not responsible for latent or non-material
  defects

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Articles Most Violated

• Article 9all agreements must be in writing
• Article 12always present a true picture in
  advertising

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Article 16

• Respect the agency relationship of another agent
  with his or her client
• (Article 16 contains 20 Standards of Practice!)

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• Chapter 3 /
• A Blueprint for
• Decision Making

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Blueprint for Decision Making

• Actual Conflict
• of Interest
• Decision maker has a personal benefit to be
  gained from the decision

• Potential Conflict
• of Interest
• Perception that the decision maker will benefit
  from the decision

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Avoiding Conflict of Interest

• Questions to ask yourself
• Steps to take to avoid possible conflict of
  interest
• What makes the decision so difficult?
• What happens with a
• whistle-blower?

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Environment for Decision Making

• Top/down philosophy
• Appointing an ethics officer or creating an
  ethics committee
• Selecting an ombudsperson

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Dilemma Paradigms

• Truth versus loyalty
• Individual versus community
• Short term versus long term
• Justice versus mercy

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The Blueprint
The layout
Drafting solutions
Final drawing
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Laying It Out

• Determine if it is an ethical or business
  decision
• Define the issues at stake
• Determine who are the parties involved
• Weed out the pertinent facts to the case

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Layout Structure

• Check outside influences
• Specify who is involved
• Check for possible win/win solution
• Consider what each party seeks as outcome

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Drafting Possible Solutions

• Things to take into account

• Paradigms
• Best- and worst-case scenarios
• Personal, professional or religious values
• Laws or regulations

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Drafting Possible Solutions

• Guidelines to help the decision maker

• Determine consequences to each party
• Check on personal motivations
• Consider long-term effects of decision
• Research similar cases
• Review relevant laws or regulations

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The Final Drawing
The Decision

• Make it
• Write it down
• Be able to defend it

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• Chapter 4 /
• Ethics and the
• Real Estate Business

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Changes Affecting Business

• Mergers
• Buyouts
• Takeovers
• Is bigger better?

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Changes Affecting Business

• Women in the workplace
• The age of the workforceentrance of young lions

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Major Changes in Real Estate
Using the Internet

• To find a property
• To locate an agent
• To secure a mortgage loan
• To transact real estate business

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Major Changes in Real Estate
Buyer agency

• Agent represents the buyer, not the seller
• Agent has statutory duties to the buyer
• Agent paid through the transaction

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Styles of Business Ethics
By the Book Following rules from law, a
licensing authority, the Code of Ethics and/or
company policy Primary concern To follow the
letter of the law
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Styles of Business Ethics

• In the Long Run
• Primary concern The long-term benefits to the
  company

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Styles of Business Ethics

• Walk a Mile in Anothers Shoes
• Primary concern The effect on the individual
  rather than the company, relies on gut response

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Styles of Business Ethics

• My Way or the Highway
• Primary concern The boss is always right!

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Company Code of Ethics Benefits

• Sets focus
• Helps company make decisions
• Helps associates make decisions
• Establishes reasons to fire
• Biggest benefit is in the process of developing
  the code!

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• Chapter 5 /
• Ethical Dilemmas
• in Real Estate

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Ethical Dilemmas

• Case Study 1
• Is a Man as Good as His Word?

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Ethical Dilemmas

• Case Study 2
• Who Can Live in the Mother-in-Law Suite?

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Ethical Dilemmas

• Case Study 3
• When Are Three Clients Two Too Many?

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Ethical Dilemmas

• Case Study 4
• To FSBO or Not to FSBO!

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Ethical Dilemmas

• Case Study 5
• Is It Legal, Ethical and Moral?

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Ethical Dilemmas

• Case Study 6
• The Web and I!

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Ethical Dilemmas

• Case Study 7
• Am I My Brothers Keeper?

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Ethical Dilemmas

• Case Study 8
• Can an Ad Go Behind the Sign?