Professional Ethics in Real Estate, part of a master class series in the NYRS® Credential program, takes place in the wood paneled boardroom at REBNY. It’s an intimate setting where top agents participate in thoughtful discourse about moral dilemmas and ethical decision making. It’s less about sharing real estate war stories and more about successful professionals discussing the shades of difference between legal and ethical behavior and best strategies for resolving ethical conflicts.
While the law is exacting and black and white, ethical dilemmas operate in the grey areas between right and wrong when there is a conflict of interest or a dilemma between values. As licensees of the state, we operate within the law; however, compliance is not the same as behaving ethically or doing the right thing. In fact there are numerous instances when the law is silent or permits what some might consider questionable.
Agency Law dictates that we act in good faith to protect the interests of our principles, providing them with undivided loyalty, obedience, confidentiality, full disclosure, and reasonable care. As fiduciaries of those who employ us, we may not share privileged information, and we are obliged to act in their best interests to the exclusion of other interests, including our own self interest. Nonetheless, NY State law allows dual agency; however serving two masters—both buyer and seller in the same transaction—compromises the duties of fidelity and confidentiality. Personally I’d much prefer to have an equally experienced agent on the other side of a transaction than to represent both principals, because more often than not, trust gets diluted, karma turns from good to bad, and the deal is likely to derail. With the proliferation of online advertising sites like Streeteasy, increasingly buyers believe they will be getting a better deal going directly to the seller’s exclusive agent. The expected savings however are never really passed on, and buyers would be far better served by hiring a professional to represent them.
The law says we must disclose material facts that affect the desirability of a property, and at the same time we must protect the seller’s confidentiality. We know implicitly that misrepresenting and making false or misleading statements is wrong. But what about full disclosure of a property’s past problems, if known, which can fall into the grey zone between right and wrong? Similarly, an internal battle with conscience arises when an agent knows a fact that may affect value. The law says we may not disclose that a property was the site of a murder, suicide or felony; if asked directly, we cannot deny the fact. We are not obliged to reveal that noise can be heard through paper thin walls or from a subway or bus stop. We are obligated however to make known issues regarding mold, bedbugs and leaks. If an agent serves on a co-op/condo board and knows something that might impact the value of a building but the board is not ready to go public with this information, to whom is allegiance owed?
Guidelines for Ethical Fitness
Moral reasoning is required in a host of situations too numerous to detail but run the gamut from overpricing properties to win listings, to handling multiple bids, to not disclosing multiple contracts, to ‘whisper’ listings, to representing two different buyers on the same property, to simultaneously making offers on multiple properties, to biased sellers who discriminate subtlely. How brokers handle issues and how we balance our obligation to our clients with our obligation to our co-brokers speaks volumes about individual character and moral fitness.
REBNY’s Code of Ethics and Professional Practices defines standards of acceptable behavior within our industry with a comprehensive list of “shall’s” and “shall not’s.” For Residential Brokerage Division members, a supplemental recently updated 26 page RLS Universal Co-brokerage Agreement Rules and Regulations clarifies licensees' responsibilities to their colleagues and the public, outlining business practices, procedures and prohibitions for nearly every phase of the business including listings, open houses, multiple bids, violations and disputes.
In addition to these written guidelines, an unwritten framework of community core values influences our choices and our behavior. When we apply the Golden Rule of reciprocity that says “do unto others as you would have them do unto you,” we demonstrate understanding and appreciation for others.
It’s always gratifying to do business with other professionals in the NYRS® network who seek to raise the bar in the industry. Grounded in core values of honesty and fairness, we conduct our business with integrity and respect for others. Acting in good faith, our primary role is to serve and protect the interests of buyers and sellers. Each day we make decisions and take actions that affect others. How we go about our business matters and impacts the results we achieve. Despite the competitive nature of the business, and perhaps even because of it, ethical behavior is both the means and the end. When you care about honor, honesty and fairness, you can be relied upon to do the right thing—and as one happy client refers another, one successful deal leads to another.