Chattanooga Real Estate Blog

Now we will take a look at a few of the Standards of Practice of Article 1, Duties to Clients and Customers.

Standard of Practice 1-1
REALTORS^®, when acting as principals in a real estate transaction, remain obligated by the duties imposed by the Code of Ethics. (Amended 1/93)

This one is obvious.  A REALTOR^®  must adhear to the Code of Ethics.  Not much to say on this one.

Standard of Practice 1-2
REALTORS^® are acting as agents or in legally recognized non-agency capacities except that any duty imposed exclusively on agents by law or regulation shall not be imposed by this Code of Ethics on REALTORS^® acting in non-agency capacities.

As used in this Code of Ethics, “client” means the person(s) or entity(ies) with whom a REALTOR^® or a REALTOR^®’s firm has an agency or legally recognized non-agency relationship; “customer” means a party to a real estate transaction who receives information, services, or benefits but has no contractual relationship with the REALTOR^® or the REALTOR^®’s firm; “prospect” means a purchaser, seller, tenant, or landlord who is not subject to a representation relationship with the REALTOR^® or REALTOR^®’s firm; “agent” means a real estate licensee (including brokers and sales associates) acting in an agency relationship as defined by state law or regulation; and “broker” means a real estate licensee (including brokers and sales associates) acting as an agent or in a legally recognized non-agency capacity. (Adopted 1/95, Amended 1/04)

The terminology can be very confusing. 

Basically, the public can be refered to by one of 3 words.  If you are my "client" then I have a contract with you to represent you in either the purchase or sell of real estate.  If you are my "customer", I have no contract with you but have provided some information that is not "client level service".  If you don’t fall into one of the catagories above then you are a "prospect". 

I have certain responsibilities and obligations to each of them with the most and highest level of service being owed to my clients.  I will go into agency in the next day or two.

We, REALTORS^®, are either "agents" or "brokers".  If I have a contract with you, I am an "agent".  If I don’t have a contract, I am a "broker".

I know this is a little dry but you have to know the terminology in order to understand the parts each person plays and what the duties are to them based on their part in the transaction.  Kind of like math.  You have to have good knowledge of the basics or you are doomed to failure in trig.

That’s all I have time for right now.  I have some clients on the way in so next time we’ll continue on with the Standards of Practice for Article 1.

Lets take a look at the Code of Ethics with a Pledge of Performance and Service that every REALTOR® agrees too.  A full and complete version can be found here. 

The Code of Ethics is broken down into 3 sections:  Duties to Clients and Customers, Duties to the Public and Duties to REALTORS®.  Each of these sections is further broken down into articles which are then broken down into sections know as Standards of Practice. 

Since I believe the public nor the FTC have any idea what we mean when we say "Code of Ethics" I’m going to posting my thoughts on each Article and SOP over the next few weeks.

Article 1

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.

What does this mean?  It means the primary concern of a REALTOR® is to promote the interests of our clients as long as it is legal.  Pretty simple.  I want my clients to receive the best possible service and for them to succeed in reaching their goal, whether it’s buying a home or selling a home.  My interests don’t play into the scenerio.  If I put my interests above my clients then I am violating the number one item in the Code of Ethics that I have agreed to abide by.  We actually work for our clients not for ourselves.

This Article always makes me think of the Andy Griffith episode where Barney decides he wants to sell real estate.  He puts together a deal where several families are selling their houses and buying others.  Opie tells the people who want to by their house about some problems.  They decide not to buy and Andy decides not to buy the one he was going to that has a lake in basement when it rains.  Barney gets mad because everyone backs out and no one buys or sells.  He has a fit because of all the commission money he just lost. 

That’s not the way it is anymore.  Unfortunately, that is still the perception that a lot of people and apparently the goverment has of the industry.  I’m not even sure it was that bad in the early 60′s when this episode was filmed.  We now have agency and disclosure in addition to the code.  Real Estate has come a long way since the days of Barney when it was every man for himself. 

Next up we’ll discuss the individual Standards of Practice points in Article 1.

The FTC has aggressively criticized the real estate industry and MLS systems for the past couple of years. MLS systems, in particular, have felt the sting of FTC press releases, threatened investigations, and lawsuits. It was therefore interesting to see what the FTC would say in a new consumer brochure that they released last week:

"Selling Your Home? Tips for Selecting a Real Estate Professional"

Naturally, neither this brochure nor the FTC’s online glossary of terms (mentioned in the brochure) address either AGENCY or ETHICS — two issues that the Feds simply refuse to acknowledge or understand. They apparently don’t see either as very important! Every REALTOR, on the other hand, should be prepared to discuss – knowledgeably – the value of BOTH an agency relationship AND the REALTOR Code of Ethics to every prospective buyer or seller.  Every potential customer and client should know exactly what they are and how they are affected by them. I am going to be posting on both of these topics over the next few weeks.