Professional Code and Ethics – Flashcards
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Professional Conduct Today's professional ethics are not only important for one's career; they are also legal imperatives.
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Professional conduct excludes disparagement of competitors. Real estate professionals also: Forgo pursuit of unfair advantage. Arbitrate rather than litigate disputes. Respect the agency relationships of others. Conform to accepted standards of co-brokerage practices.
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Fair Housing Laws Federal and state governments have enacted laws prohibiting discrimination in the national housing market. The aim of these fair housing laws, or equal opportunity housing laws, is to give all people in the country an equal opportunity to live wherever they wish, provided they can afford to do so, without impediments of discrimination in the purchase, sale, rental, or financing of property. Civil Rights Act of 1866. The original fair housing statute, the Civil Rights Act of 1866, prohibits discrimination in housing based on race. The prohibition relates to selling, renting, inheriting, and conveying real estate. Executive Order 11063. While the Civil Rights Act of 1866 prohibited discrimination, it was only marginally enforced. In 1962, the President issued Executive Order 11063 to prevent discrimination in residential properties financed by FHA and VA loans. The order facilitated enforcement of fair housing where federal funding was involved. Civil Rights Act of 1968 Title VIII (Fair Housing Act). Title VIII of the Civil Rights Act of 1968, known today as the Fair Housing Act, prohibits discrimination in housing based on race, color, religion, or national origin. The Office of Fair Housing and Equal Opportunity (OFHEO) administers and enforces Title VIII under the supervision of the Department of Housing and Urban Development (HUD). New Fair Housing Regulation: "Equal Access to Housing in HUD Programs - Regardless of Sexual Orientation or Gender Identity." In addition to the Fair Housing Acts and their Amendments, anti-discrimination regulations can be enacted by federal and state agencies. The latest example of the federal government taking this action is the regulation entitled "Equal Access to Housing in HUD Programs - Regardless of Sexual Orientation or Gender Identity." This regulation, effective March 5, 2012, applies to all HUD programs to ensure equal access to housing for all Americans regardless of sexual orientation or gender identity. The regulations add lesbian, gay, bisexual, and transgender (LGBT) individuals to the protected classes.
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The rule: Requires owners and operators of HUD-assisted housing, or housing whose financing is insured by HUD, to make housing available without regard to the sexual orientation or gender identity of an applicant for, or occupant of, the dwelling, whether renter- or owner-occupied. Prohibits lenders from using sexual orientation or gender identity as a basis to determine a borrower's eligibility for FHA-insured mortgage financing. Clarifies that all otherwise eligible families, regardless of marital status, sexual orientation, or gender identity, have the opportunity to participate in HUD programs. It clarifies that families, otherwise eligible for HUD programs, may not be excluded because one or more members of the family may be an LGBT individual, have an LGBT relationship, or be perceived to be such an individual or in such relationship. Prohibits owners and operators of HUD-assisted housing, or housing whose financing is insured by HUD, from inquiring about the sexual orientation or gender identity of an applicant for, or occupant of, the dwelling, whether renter- or owner-occupied. These include the Federal Housing Administration (FHA) mortgage insurance programs, community development programs, and public and assisted housing programs. It is important to remember that the regulations apply only to federally supported housing programs and not to programs that are not HUD related. This rule does not recognize sexual orientation and gender identity as protected classes under the federal Fair Housing Act. This provision does not prohibit voluntary and anonymous reporting of sexual orientation or gender identity pursuant to state, local, or federal data collection requirements. Note also that this is a federal regulation, and state fair housing laws and regulations may have their own regulations with respect to this new protected cla
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Illegal Discrimination Forms of illegal discrimination. The Fair Housing Act specifically prohibits activities such as the following in residential brokerage and financing: Discriminatory misrepresentation.
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An agent may not conceal available properties, represent that they are not for sale or rent, or change the sale terms for the purpose of discriminating. For example, an agent may not inform a minority buyer that the seller has recently decided not to carry back second mortgage financing when in fact the owner has made no such decision.
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Discriminatory advertising.
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An agent may not advertise residential properties in such a way as to restrict their availability to any prospective buyer or tenant.
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Providing unequal services. For example, if it is customary for an agent to show a customer the latest MLS publication, the agent may not refuse to show it to any party. Similarly, if it is customary to show qualified buyers prospective properties immediately, an agent may not alter that practice for purposes of discrimination.
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An agent may not alter the nature or quality of brokerage services to any party based on race, color, sex, national origin, or religion.
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Steering. For example, an agent tells Buyer A that a neighborhood is extremely attractive, and that desirable families are moving in every week. The next day, the agent tells Buyer B that the same neighborhood is deteriorating, and that values are starting to fall. The agent has blatantly steered Buyer B away from the area and Buyer A into it.
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Steering is the practice of directly or indirectly channeling customers toward or away from homes and neighborhoods. Broadly interpreted, steering occurs if an agent describes an area in a subjective way for the purpose of encouraging or discouraging a buyer about the suitability of the area.
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Blockbusting. For example, Agent Smith tells neighborhood owners that several minority families are moving in, and that they will be bringing their relatives next year. Smith informs homeowners that, in anticipation of a value decline, several families have already made plans to move.
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Blockbusting is the practice of inducing owners in an area to sell or rent to avoid an impending change in the ethnic or social makeup of the neighborhood that will cause values to go down.
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Restricting MLS participation.
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It is discriminatory to restrict participation in any multiple listing service based on one's race, religion, national origin, color, or sex.
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Redlining.
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Redlining is the residential financing practice of refusing to make loans on properties in a certain neighborhood regardless of a mortgagor's qualifications. In effect, the lender draws a red line around an area on the map and denies all financing to applicants within the encircled area.
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Title VIII exemptions. The Fair Housing Act allows for exemptions under a few specific circumstances. These are: Jones v. Mayer. In 1968, the Supreme Court ruled in Jones v. Mayer that all discrimination in selling or renting residential property based on race is prohibited under the provisions of the Civil Rights Act of 1866. Thus, while the Federal Fair Housing Act exempts certain kinds of discrimination, anyone who feels victimized by discrimination based on race may seek legal recourse under the 1866 law.
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A privately owned single-family home where no broker is used and no discriminatory advertising is used, with certain additional conditions. Rental of an apartment in a 1-to-4-unit building where the owner is also an occupant, provided the advertising is not discriminatory. Facilities owned by private clubs and leased non-commercially to members. Facilities owned by religious organizations and leased non-commercially to members, provided membership requirements are not discriminatory.
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Equal Opportunity in Housing poster. Amendments to federal fair housing laws prohibit discrimination based on sex and discrimination against handicapped persons and families with children. Discrimination by the client. Fair housing laws apply to home sellers as well as to agents, with the exception of the exemptions previously cited. If an agent goes along with a client's discriminatory act, the agent is equally liable for violation of fair housing laws. It is thus imperative to avoid complicity with client discrimination. Further, an agent should withdraw from any relationship where client discrimination occurs. Examples of potential client discrimination are: Refusing a full-price offer from a party. Removing the property from the market to sidestep a potential purchase by a party. Accepting an offer from one party that is lower than one from another party.
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In 1972, HUD instituted a requirement that brokers display a standard HUD poster. The poster affirms the broker's compliance with fair housing laws in selling, renting, advertising, and financing residential properties. Failure to display the poster may be construed as discrimination. Exemptions. Federal fair housing laws do not prohibit age and family status discrimination under the following circumstances: In government-designated retirement housing. In a retirement community if all residents are 62 years of age or older. In a retirement community if 80% of the dwellings have one person who is 55 years of age or older, provided there are amenities for elderly residents. In residential dwellings of four units or fewer, and single family houses. If sold or rented by owners who have no more than three houses.
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Violations and Enforcement Filing an OFHEO complaint. Complaints alleging fair housing violations must be filed with the Office of Fair Housing and Equal Opportunity within one year of the violation. HUD then initiates an investigation in conjunction with federal or local enforcement authorities. If HUD decides that the complaint merits further action, it will attempt to resolve the matter out of court. If efforts to resolve the problem fail, the aggrieved party may file suit in state or federal court.
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Persons who feel they have been discriminated against under federal fair housing laws may file a complaint with the Office of Fair Housing and Equal Opportunity (OFHEO) within HUD, or they may file suit in a federal or state court. Filing suit. In addition to or instead of filing a complaint with HUD, a party may file suit in state or federal court within two years of the alleged violation. If discrimination is confirmed in court, the aggrieved party can seek: Injunctive relief (restraining order); Actual damages; Punitive damages not to exceed $1,000. A violator who exhibits discriminatory patterns or who intentionally or manifestly violates equal opportunity rights is also subject to criminal prosecution.
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Fair financing laws. Equal Credit Opportunity Act (ECOA). Enacted in 1974, the Equal Credit Opportunity Act requires lenders to be fair and impartial in determining who qualifies for a loan. A lender may not discriminate on the basis of race, color, religion, national origin, sex, marital status, or age. The act also requires lenders to inform prospective borrowers who are being denied credit the reasons for the denial.
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Parallel anti-discrimination and consumer protection laws have been enacted in the mortgage financing field to promote equal opportunity in housing. Home Mortgage Disclosure Act. This statute requires lenders involved with federally guaranteed or insured loans to exercise impartiality and non-discrimination in the geographical distribution of their loan portfolio. In other words, the act is designed to prohibit redlining. It is enforced in part by requiring lenders to report to authorities where they have placed their loans.
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Professional Practices Trade associations representing the real estate industry have instituted their own codes of ethics and professional practices covering every facet of brokerage activity. The standards of most of these codes concern the following general areas of practice. Job performance: A real estate professional must also recognize the limits of the agent's role and avoid practicing other professions beyond the agent's qualifications--such as law, investment counseling, securities brokerage, and tax advising.
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A professional real estate agent must understand the skills and knowledge the profession requires, and then make a commitment to maintain and improve expertise in these areas. Of particular importance are: Market knowledge. Real estate laws. Evolving standards of practice. Other aspects of professional performance that are usually supported include: Promoting exclusive listings. Promoting the professionalism of the real estate industry. Promoting arbitration of disagreements rather than litigation. Obtaining transactional agreements between parties in writing.
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Duties to clients: Most codes of ethics uphold the commitment to fulfill fiduciary duties. Specific applications include: Honestly representing market value and property condition. Respecting rights and duties of other client-agent relationships. Submitting all offers. Avoiding commingling and conversion. Keeping transaction documents current.
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Working with Customers Some of the guidelines for working with customers are: Honestly representing market value and property condition. Avoiding calling a service "free" that in fact is contingent on receiving a commission. Advertising truthfully. Disclosure: In compliance with applicable laws and to promote respect for the real estate profession, licensees should be careful to disclose: That the agent is going to receive compensation from more than one party in a transaction. Property defects if they are reasonably apparent; however there is no duty to disclose a defect which it would require technical expertise to discover. Any interest the agent has in a listed property if the agent is representing a party concerning the property. Any profits made on a client's money. The agent's identity in advertisements. Non-discrimination: Real estate professionals must comply with fair housing laws in spirit and letter.
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Professional relationships:
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Professional conduct excludes disparagement of competitors. Real estate professionals also: Forgo pursuit of unfair advantage. Arbitrate rather than litigate disputes. Respect the agency relationships of others. Conform to accepted standards of co-brokerage practices
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Real Estate Associations and Boards Most associations/boards also maintain an "affiliate" classification of membership that is open to financial institutions, trust companies, title companies, escrow companies, and others whose duties or interests are related to the real estate business. The CALIFORNIA ASSOCIATION OF REALTORSĀ® is an organization composed of the members of local associations/boards of REALTORSĀ® throughout the State.
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A trade association is a voluntary nonprofit organization of independent and competing business units engaged in the same industry or trade, and formed to resolve the industry's problems, promote its progress, and enhance its service. A real estate association/board is a voluntary organization whose members are engaged in some phase of the real estate business. Real estate licensees who fulfill the membership requirements of a local association of REALTORSĀ® are eligible for REALTORĀ® or REALTOR-ASSOCIATEĀ® membership. Membership in a local association/board automatically makes one a member in the CALIFORNIA ASSOCIATION OF REALTORS and the NATIONAL ASSOCIATION OF REALTORSĀ®.
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REALTORĀ® Defined The NATIONAL ASSOCIATION OF REALTORSĀ® unites and unifies the organized real estate interests of the Nation and presents a common cause and program regarding national issues affecting real property. The terms REALTORĀ®, REALTORSĀ®, and REALTORASSOCIATEĀ®, as well as the logo "REALTORĀ®", are collective membership marks owned by the NATIONAL ASSOCIATION OF REALTORSĀ®. It is only through membership in the National Association that the right to use the term REALTORĀ® and its related marks is granted.
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A REALTORĀ® is a person engaged in the real estate business who is a local and state association/board member and therefore a member of the NATIONAL ASSOCIATION OF REALTORSĀ®. Therefore, a REALTORĀ® is subject to its rules and regulations, observes its standards of conduct, and is entitled to its benefits. REALTORĀ® members and REALTOR-ASSOCIATEĀ® members are defined in the association's constitution, Article III, Section 1 (C). In California, REALTORĀ® members of local associations/boards are also members of the CALIFORNIA ASSOCIATION OF REALTORSĀ®. Under Section 10140.6 of the California Business and Professions Code, a real estate licensee must indicate in real estate advertising that he or she is performing acts for which a license is required. Appropriate designations, such as agent, broker, REALTORĀ®, and loan correspondent (or abbreviations such as bro., agt.) satisfy the requirement. Licensees entitled to use the term "REALTORĀ®" must spell out the word in accordance with the N.A.R. trademark guidelines. There are also a few associations/boards in California that are not affiliated with the NATIONAL and the CALIFORNIA ASSOCIATION OF REALTORSĀ®. Only those local associations/boards who are affiliated with N.A.R. may identify themselves as "Associations/Boards of REALTORSĀ®."
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Multiple Listing Service Most associations/boards operate a multiple listing service (MLS) that serves consumers and brokers as a marketing tool. The purpose of an MLS is to provide a means by which authorized MLS broker participants establish legal relationships with other participants by making a blanket unilateral contractual offer of compensation and cooperation to other broker participants. In part, the MLS accumulates and disseminates information to enable authorized participants to prepare valuations of real property.
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An MLS is a facility for the orderly correlation and dissemination of listing information among the participants so that they may better serve their clients and the public. California Civil Code Section 1087 defines an MLS as ". . . a facility of cooperation of agents and appraisers, operating through an intermediary which does not itself act as an agent or appraiser, through which agents establish express or implied legal relationships with respect to listed properties, or which may be used by agents and appraisers pursuant to the rules of the service, to prepare market evaluations and appraisals of real property." Qualified real estate brokers and certified or licensed appraisers are eligible to be participants in the Multiple Listing Service. A real estate salesperson may obtain access through his/her broker. An MLS will have local rules and regulations regarding the use of the service, including listing, showing, negotiating, presenting offers, and lockbox usage. Most California MLSs use the California Model MLS Rules, approved by C.A.R. Many MLSs are part of a regional MLS or have reciprocal agreements with other MLSs. Some MLSs participate in the statewide reciprocal agreement that allows broader exposure of listings and varying levels of access to other participating MLSs.
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REALTIST Defined The NATIONAL ASSOCIATION OF REAL ESTATE BROKERS, INC. (NAREB) was formed in 1947 in Miami, Florida. NAREB's membership is comprised primarily of African-American real estate brokers. NAREB members are known as REALTISTS. This organization has local boards in major cities of most states.
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The CALIFORNIA ASSOCIATION OF REAL ESTATE BROKERS, INC. (CAREB), affiliated with the NATIONAL ASSOCIATION OF REAL ESTATE BROKERS, was organized in 1955 and now has eight board affiliates: Associated Real Property Brokers, Oakland; Sacramento Association of REALTISTS, Sacramento; Consolidated Realty Board, Los Angeles; Solano Board of REALTISTS, Fairfield; Inland Valley Board of REALTISTS, Ontario; San Francisco Board of REALTISTS, San Francisco; North Bay Board of REALTISTS, Richmond; and the San Diego Board of REALTISTS, San Diego. A REALTIST must be a member of a local board as well as a member of the national organization. REALTISTS, nationally and locally, are working for democracy in housing and better housing for the communities they serve. The NATIONAL ASSOCIATION OF REAL ESTATE BROKERS, INC. has several affiliated institutes, societies, and councils. Membership in NAREB is a prerequisite to obtaining membership in any of these groups.
