Professional Standards Case Study – Article 1

Article 1 of the Code of Ethics and Standards of Practice of the National Association of REALTORS® covers the basic obligation to treat all parties honestly.

Specifically, here’s what Article 1 says:

When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly. (Amended 1/01)

In the following case study, would you have found the REALTOR® to be in violation?  Read on…

Case #1-6: Fidelity to Client’s Interests

Realtor® A managed an apartment building owned by Client B. In his capacity as property manager, Realtor® A received a written offer to purchase the building from Buyer C. Realtor® A responded that the building was not for sale. A few days later Buyer C met Client B and told him that he thought he had made an attractive offer through his agent, and indicated that he would be interested in knowing what price would interest Client B. Client B answered that he had received no offer through Realtor® A and asked for the details.

Client B then filed a complaint against Realtor® A with the local Board of Realtor® charging failure to represent and promote his interests. His complaint specified that while Realtor® A had been engaged as a property manager, he had at no time told him not to submit any offers to buy, and that in the absence of any discussion whatever on this point, he felt that Realtor® A should have recognized a professional obligation to acquaint him with Buyer C’s offer which, he stated in the complaint, was definitely attractive to him.

Realtor® A was notified of the complaint and directed to appear before a panel of the Board’s Professional Standards Committee. In his defense, Realtor® A stated that his only relationship with Client B was a property manager under the terms of a management contract; that he had not been engaged as a broker; that at no time had the client ever indicated an interest in selling the building; that in advising Buyer C that the property was not on the market, he felt that he was protecting his client against an attempt to take his time in discussing a transaction which he felt sure would not interest him.

It was the conclusion of the Hearing Panel that Realtor® A was in violation of Article 1; that in the absence of any instructions not to submit offers, he should have recognized that fidelity to his client’s interest, as required under Article 1 of the Code of Ethics, obligated him to acquaint his client with a definite offer to buy the property; and that any real estate investor would obviously wish to know of such an offer.