Week Three of the NYRS course for top residential brokers covers Professional Ethics, a critical issue and compelling area of study, especially in the light of increasing lapses in moral behavior by individuals in every arena, from corporations to politics to religion. As brokers, we make decisions and take actions daily that affect the interests of others. How we go about our business greatly impacts the results we achieve.
AS licensees of the state, we are required to comply with the law. However, compliance is not the same as ethics. Obeying the law is one thing, but doing what is right and morally responsible is more than doing what is legal.
When we are grounded in ethical values, we conduct ourselves with decency, fairness and respect for others. We shun and avoid those who are unscrupulous or corrupt, for we have little tolerance for dishonesty. In our business dealings, ethical questions arise in the grey areas between right and wrong when there is a conflict of interest or a dilemma between values.
Alan Goodman, Master Trainer from The Institute for Global Ethics, recognizes three specific dilemmas: conflicts between Truth versus Loyalty, Self versus Community, and Justice versus Mercy. Referring to an individual’s “ethical fitness,” he advocates “doing the right thing” and valuing good over personal gain or self-interest.
As brokers, we are hired to promote and protect the interests of our buyers and sellers. One of the examples used in class referred to the property owner who tragically jumped to his death from the apartment’s window. The law says that we must protect the seller’s confidentiality, and since this detail is not material to the apartment’s sale, then we should not volunteer this fact. However, are we obliged ethically to disclose this information to a buyer? No, is the answer. If asked directly, we can not lie, but we are not morally obligated to reveal this fact. In this instance then, which is the higher right? Truth? Or Loyalty?
Similarly, when we represent an estate, divorce or celebrity sale, we are not obliged to disclose personal information. Our fiduciary responsibility is to protect the privacy of our clients.
We know implicitly that it is wrong to misrepresent and make false or misleading statements. But what about full disclosure of a property’s past problems, if known, which can fall into the grey zone between right and wrong? Often the sin of omission becomes the sin of commission when a broker is silent with respect to a property’s past problems such as a history of mold or leaks now resolved and painted over, or vermin infestation now cured. Chances are this damaging information will turn up during an attorney’s due diligence and reading of board minutes. Withholding such information can derail a potential sale and cause harm to the client. When disclosed upfront, these obstacles become non-issues. Similarly, it’s important to obtain all the facts pertinent to a sale. What is known about an adjoining empty lot where a new development might obscure a view? Knowledge is power, and timely disclosure is essential for a smooth and successful transaction.
Doing The Right Thing
One of the checks and balances Goodman discusses in determining right vs. wrong behavior is to ask whether the action can pass the smell test. Issues that are obviously wrong stink. Goodman recommends that the individual ask: “How would I feel if this decision were published? What would my parents or children think?”
Ethical fitness requires consistency. When values are unshakeable, integrity builds. When you treat others as you would want to be treated, there is understanding and appreciation for the other side—even compassion. Good faith facilitates cooperation, and respect encourages flexibility. As negotiators, our job is to bridge distances, and when there is trust, we are most successful.
Increasingly, our co-brokers are becoming as important as our clients. When I first started in this business, well before the time that exclusives became the norm, I had a buyer on one side of the transaction and a seller on the other. Now, nearly always, I interact directly with one principal and a broker who represents the other principal. The way competing brokers communicate and deal with each other is incredibly significant. Honesty, cooperation and fair play are paramount.
REBNY’s Code of Ethics and Professional Practices defines standards of acceptable behavior within our industry with a comprehensive list of “shall” and “shall not’s.” A peer group enforces ethical conduct and hears complaints, grievances and disputes, seeking to protect the interests of the community ofbuyers and sellers as it provides for fair treatment to all transaction participants.
Despite the competitive nature of our industry, and perhaps even because of it, ethical behavior is both the means and the end to doing good business. When you care about honor, you can be relied upon to do the right thing—and as one happy client refers another, one successful deal leads to another.
There is a host of situations in our business where moral reasoning is required. Next month, I’ll take a look at specific ethical issues, and I welcome your thoughts.