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Ethics: Truth vs. Loyalty

Truth vs. Loyalty

Code of Ethics: People think that following a Code of Ethics is some "be-all-end-all" branding of integrity. It really depends on how you view the code, and for whom the code of ethics was written.

Truth vs. Loyalty is one of those Right vs Right issues. Many erroneously assume the ethics is about right and wrong. Right vs. Wrong is easy...it's baby stuff..it's kindergarten stuff. True ethical dilemmas that we face as professionals in the real estate industry are about "Right vs. Right" and not right and wrong at all. It is obviously right to tell the truth and it is obviously right to be loyal. Now are you loyal to other Realtors or to your clients. I hope the latter, and yet anyone who tells the truth will have to admit, that the Realtor Code of Ethics is more about how agents treat other agents, than it is about how agents treat their clients.

Very, very often, telling the truth will be of benefit to your client and put you at odds with your peers. This is an unfortunate situation. Very, very often, telling the truth will cost you a sale. Being loyal to your client above everything else is not easy. I find many face this issue by hiding from the truth. By not attending the inspection. By handing the inspection report to the buyer without reading it. By handing the the condo re-sale certificate without reading it. By covering their butt by not getting too involved in the detail.

To tell the truth means you have to scour every detail of this property and this transaction so that you KNOW the details. You have to be willing to risk losing the commission in order to be loyal to your client and true to their objective.

We need to write a new Code of Ethics where the agent's self interest is not present in any way, shape or form. Where how we treat one another in this business, Realtor to Realtor, is not mentioned AT ALL. We need a Code of Ethics that is "By the People and FOR the People" and "the People" ain't us.

Posted by ARDELL DellaLoggia on 01/02/2007 02:15 PM

Comments (41)

Seattle Real Estate in the ActiveRain Channel

client based ethics

41 Comments on Ethics: Truth vs. Loyalty

JAN

2007

Well, to borrow a line from a recent hit movie, "They're actually more what you might consider...guidelines!" Unfortunately, that would be the opinion held by many among our ranks.

Representing our client's best interests relentlessly, diligently, and foremost honestly, is the reason for our existence in this business.

Ardell, very interesting post. I do enjoy a post that makes me stop and think. Where would you start? What issues would you overhaul first? You should get plenty of feedback on this article.

Ardell i agree with most of your comments but we have to treat our peers with respect also and have to be ethical all at the same time , case in point a recent experience when i sent an offer and the Realtor did not present it to the client because he was waiting to double end it !

The example cited by Joe is all too common in this industry and that goes back to the lax licensing requirements. Any schmoe off the street can become a realtor. Of course, the ones that REMAIN realtors over an extended time period are likely following all ethical/truth standards.

Ardell - We owe a fidcuciary duty to our clients. That comes first. If I represent my client well, thats the main thing. Of course I always strive to retain a cordial relationship with any other relators in the transaction as well.

Dilemmas came up all the time for me when our seller's market was in full swing. 2006 was relatively peaceful if not as monetarily productive so I thank you number one for giving me a reason to look back and smile at 2006.

I'm a terrible liar thank god. There was a shouting match with a a potential lister who wanted to hide a few things. It was not fun. But god knows there is enough trouble to negotiate without adding fraud or lies to the equation.

Real Estate is about people. I will say that again. Real Estate is about people.

It is not about us. If everyone understood that no one would have to wrestle with the C.O.E.

TLW...ROAR!

Joe,

Here's a reality. An offer from someone without an agent is worth more to the seller than one with an agent. Your assumption that the agent is "double ending" is often erroneous. Most listing agents do not take the full commission when the buyer does not have a buyer's agent. So the net to the seller is higher.

You make my point. Should the listing agent feel sorry for you? Or should the listing agent work hard to increase the seller's net proceeds. This is clearly a real issue we all need to address, and we need to do it now. I don't know the answer, Joe. Traditionally the answer is you are right. But then how CAN you be right if the seller/client makes less money that way?

Hard issues to face in the industry these days. No clear answers either.

Ardell in some ways what I like about our business is the necessity for constant analysis and something tells me you do too. What IS the correct answer? Here, we have a fiduciary responsibility to inform our sellers of offers....that means that a seller could know about the offer but the BA does not KNOW the seller is aware of it. We are also not bound to disclose that there are multiple offers, that is up to the seller's descretion. I love it. It's almost like being a lawyer without having to be one :-) On the other hand, there are times I have documented when selling agents have never presented an offer. Monika McG. even wrote about a bank never being made aware of an offer. So I have a few agents I am automatically wary of because of my past history with them on when they have neglected to go into an office and pick up the paperwork and present it! I had one gal who said she hadn't had any time off in months and wasn't going in till the following week! What's up with that and have you ever heard of turning your business over to someone while you are off? This is the kind of stuff that makes me messhugah. Anyway I am done lol

Ardell,

Very interesting post. In NY State all the laws are to protect the consumer. The code of ethics and real estate board guidlines are to protect Realtors. The code of ethics means nothing in a court of law.

I have some issues with things not in the code of ethics. For example, most of us have several investor clients who want us to keep our eyes out for good deals. So, if we also want to invest in property ourselves, do we tell our clients about it, or buy it ourself?

I question whether we can ethically purchase a property without first telling our clients about it. Who are we working for anyway?

Ardell,

When ethics and law conflict the law wins...all the time!

One good thing about our Ethics is that they are ever changing…a document that changes just about every year. As it should! We need to be forward thinking and much more so than we currently are in my opinion.

While some of that change has been pretty hard to take or even understand for some…nothing compares to the experience of actually sitting at an NAR Board of directors meeting and listening to the positions of about 700 REALTORS from every state argue passionately either for or against the proposed changes. It borders on the comical and at times I felt like we would never ever get anywhere. Sometimes I’m not sure that we have.

It was hard to remember and be respectful of the fact that every state is different, has different laws and different acceptable business practices…how can NAR possibly please every state…every REALTOR?

What comes to mind is how for years we beat up the proposed Article 1 SOP 1-13 changes(which I blogged about)…and I do mean years. I would sit there thinking My god…this so good for the consumer how can some of these Directors/committee members possibly think it’s bad and vote it down…but they did, time and time again.

Article one is a consumer protection article and that change did make it hard for the agents. Yeah…in some cases very hard. Is it a conflict…sure the listing agent has no authority to disclose multiple offers and must follow the lawful direction of the client...agency/fiduciary. The buyer agent asks and is told a lie (even though our ethics dictate we be honest with each other) when indeed there are other offers in…and the buyer is told …that the agent doesn’t know if there are other offers in BUT at least they are made aware that IF there ARE than their offer can be shopped. How could that type of disclosure take years to be approved?? If you work in a state where there is no contract confidentiality…now at least you have to disclose it can happen. If you don’t than nothing to worry about!

So while NAR’s wheels turn slowly and our Code or Ethics may be lacking…it at least gives us something to start with…would'nt hurt to raise the bar higher but at least there is a bar and where ethics and law conflict the law always wins. Sorry to be sooo long winded!

Ardell, you said: "...But then how CAN you be right if the seller/client makes less money that way?" At least in our MLS listing agents are supposed to make a note: VR, DR for Variable Rate, Dual Rate." We are supposed to explain upon inquiry of a BA what difference it would make $$ wise so that the BA can tell his/her client and they can negotiate their offer accordingly. That's my understanding anyway. Damion???

Interesting post, Ardell - some great points that I agree with regarding our clients. I don't see how one can separate out the REALTOR-to-REALTOR piece or write a Code that does not include this, since you generally, but not always, have another REALTOR involved. While a Code "By the People, For the People" might cover the issues you raise, I think you still must address the relationships between REALTORS. And since not all REALTORS behave ethically there need to be some guidelines by which behavior can be measured. But clearly it does not guarantee ethical behavior either. And, as Monika pointed out, each state has different laws, and some may be at odds with the Code and will, of course prevail in a court of law. There is room to improve.

Broker Bryant,

If life were really all that simple, but it ain't.

Joe brings an offer for $300,000 with a 3% commission due him, net offer to seller is $291,000.

Buyer calls and says I have no agent, I am representing myself. Here's my offer of $295,000. No commission to a "Buyer's Agent".

Seller makes more on second offer.

Joe is pissed. COE does not permit me to give Joe an even playing field by reducing his commission, or by getting paid by his buyer. He already submitted a full price offer, so how can his offer be competitive?

Ardell this is TLW I am Broker Bryant's wife. Are you talking to me?

Broker Bryant is not on your post. So I assume you are addressing me.

Sounds like you don't like me saying Real Estate is about people.

Oh! Well. We all can't like everything we read. Why not pose that question to everyone on your post? :)

I would love to hear their answers. :)

TLW...ROAR! (Broker Bryant's Wife) Co-Owner and Founder of Tutas Towne Realty, Inc. :)

The question is which people, Mrs Broker Bryant. The agent people? The seller? The buyer? It just isn't as simple as saying that it is about "people" generally.

I offer a simple example to make my point. You on the other hand are getting into a "pissing match".

There are real issues for today's times that need better answers than the COE suggests, or that past precedence will answer for us.

Is the seller permitted to take the lower offer that gives the seller the highest net?

I am not suggesting that I do not "like" your comment, I am simply saying the response is too simplistic for today's times.

Excuse me, I venture to say that the seller still owns and is the "boss" of the listed property. If you know you are bringing the buyer in a dual rate or variable rate situation--you may have to offer higher than list to get the home.

Another class at the MAR convention comes to mind: winning and losing a trandsaction can reach beyond dollar signs. Buyers and sellers have several areas to negotiate. In the example he gave, he won with a lower $$ offer than other agents because the seller was wanting more earnest money and assurance that the buyer REALLY, REALLY liked the property and was committed to taking care of the property. This speaker's position was that rather than fax an offer, try to present it to the seller and agent, but before conferring submitting the offer to try and learn from the listing agent, what is most important to the seller.

*If there are very close offers sometimes things that seem unimportant to the agents may actually be the deciding point for the seller; we are the messengers, we serve--we don't decide. (She liked my wallpaper... He won't cut down the tree my grandfather planted)

Suzi,

You are SO right! We have a closing on Monday and the Buyer's Agent who came and presented his offer (to me, not the seller who is 100 years old!) really made a difference! I disagree that we are "merely" messengers. Many clients seek the advices of the agent, at least mine always have. How "the message" is presented is VERY important to the outcome.

Often the information presented verbally agent to agent can make a HUGE difference in the outcome as well. I can't believe agents who reveal negative things about the buyer when presenting the offer to me. As if I'm going to keep it a secret from the seller.

Marty,

You hit that nail right on the head! Wish I had an answer for you. When I first saw agents buying up and flipping property and offering the ones where the numbers didn't work to their clients, I was nauseous!! But I just have stayed out of investing personally, so I haven't had to deal with it. I felt it was a conflict of interest.

I see a lot of agents who buy and sell their own property, but don't represent other people, so they are OK.

I think you can't really mix the two. I totally agree with you! And those that buy from old people at a listing appointment for rock bottom price and then flip the property, should be drawn and quartered!

Carole,

LOVED the RANT! I could feel your anxiety releasing... I don't know how to write in Yiddish, but I thought it was Messuginah, like with an n in there somewhere :)

It would be nice if just change a code would make things perfect in the world, but that will never happen. People that are unethical under one code will be unethical under any other codes. Codes of Ethics or any other standard or guideline are for honest and ethical people to help keep them ethical and honest.

It is like a lock on a door, it isn't there for the crooks, they will find a way in no matter how many locks you have. The locks are to keep the honest people from temptation. But maybe if you bring enough attention to what is wrong Ardell, maybe, just maybe some positive change can happen.

JAN

2007

Rich! I'm watching the movie now! LOL Pirates of the Caribbean!

Monika,

Apologies I didn't have time to read some of the long ones earlier. Excellent comment. I very much appreciate your expounding in detail. I'll do go back and read it again and open the link, It's very late. Busy day this first business day after the holiday.

Glad you got that....

Let me begin by apologizing to those who might take offense to my comment. But the bottom line is it is your responsibility to your client and then yourself. Being ethical, moral and having intergrity frequently puts you at odds with another Realtor. But the only one YOU can control is yourself and if in controlling yourself you are true to a higher standard, ethics and intergrity and it offends a fellow Realtor so be it. We all to frequently worry that by doing the right, ethical, and just thing we may offend someone. So.... What! If they were just, upright and eithical they would not be offended and if you sway to their direction in order to avoid hurting feelings rather than representing who you are changed with representing then you are neither honest or ethical and lack basic intergrity..;....

Perhaps you are one of those agents who think that uncovering every potential, possible issue will make them a hero. I think the Code of Ethics is just fine the way it is.

A simple solution that always works for me is to put the client first. I always tell a client that I have an interest in purchasing a property IF they decide it is not for them. I give my client the first right to purchase. And yes, I have lost the opportunity to purchase some choice properties because my client dragged his feet in making a decision not to purchase and some other savvy agent came along and snatched it up! Oh, well. I don't know how else to do business than to put my client's interest first and foremost.

Remember all the quips your parents told and reminded you about.... a couple come to mind....Do unto others.... you got to look yourself in the mirror.... do the right thing.... how would you feel if that happened to you.....think before you act.... and on and on and on and on. They are there for a reason, even before the code of ethics. It all comes down to character, which I define as what you do when no one is watching

Dick Beals

Sharon,

I think you could do an offer as Sharon Vest, "and or assigns". Then your client would have time to consider it, you would get it if the client didin't and the client wouldn't feel pressured to decide in a split second. That way no one ends up a loser.

My $.02

Rich,

Isn't it amazing that I would watch that movie the same day you said it!?

Kathy,

Perhaps you are correct that I look for "trouble" and clearly I could turn an blind eye, and did for many years. But truth is, most of the rules protect agents from other agents or service the seller's needs. Which made sense for most of time as all agents represented sellers.

I don't think the Code was revamped enough at the point where buyer's achieved the status of being represented. Speaking as someone who started real estate during the sub-agency days when we all represented sellers and has operated in every possible type of agency that exists in this Country, I think it's fair to say that I am judging it from first hand experience.

Do you remember when they removed the word "fair" from the Code of Ethics? Do you know why that was?

Suzi,

Your response assumes that both parties have an agent. The example of seller making more money when buyer comes direct to listing agent is that the listing agent had no intention initially of changing the commission, and so it did not show as "variable". The buyer made the offer of "no buyer agent fee" as he had not agent.

COE would say that the buyer's agent cannot negotiate the buyer agent fee...but that would not apply if the buyer brought his own offer with an attorney. So buyer pays his attorney and attorney negotiates to buyer agent fee...which leaves Joe out in the cold. Or leaves Joe thinking erroneously that the seller's agent "double ended" the sale and received both the listing fee and the selling agent fee.