5-Minute Summary: The NAR Code of Ethics
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5-Minute Summary: The National Association of Realtors Code of Ethics
Here's a quick refresher of the NAR Code of Ethics that will outline all the important pieces of information you need to know and remember.
By: Rachel Murphy
Say you're a Realtor® and a buyer enlists your help to make an offer on a home and complete the transaction. During the process, they may ask you questions about the property, such as whether there have been previous fires or flooding in the home or any other notable events. As a member of the National Association of Realtors (NAR), you know you're obligated to disclose these details and more to clients, as detailed in the NAR's Code of Ethics. Though this document is very long, it's one that Realtors of all experience levels are expected to try to commit to memory. Why? Because, ultimately, your level of familiarity with its tenets and expectations could be the deciding factor between whether you have a successful career in real estate or a disastrous one.
To help you out, we've created a quick review of the NAR Code of Ethics that will outline all the important pieces of information you need to know and remember. Specifically, we'll cover the following topics:
What the NAR's Code of Ethics Is
Who It Applies To
What Its Basic Tenets and Expectations Are
And if you're hoping to dive deeper into a specific article or duty, don't forget that you can always review the full document on the NAR website, as well.
What Is the NAR's Code of Ethics?
The NAR's Code of Ethics was created in 1913 to ensure that a client who's buying or selling a property is treated fairly by the Realtor handling the transactions. In short, the Code of Ethics says you're legally required to divulge details about a home, apartment, condominium, or any other type of property, even if that means losing out on your commission. Current Realtor chapters and members are required to complete the ethics training every four years to remain part of the NAR.
Who Must Adhere to the NAR's Code of Ethics?
The Code of Ethics applies to state and local associations, as well as agents who have received the NAR certification. (Appraisers, brokers, and other types of licensed real estate professionals can also become members of the NAR, too.) The Code of Ethics does not apply to real estate professionals who haven't achieved the NAR's "Realtor®" label.
Breaking Down the NAR's Code of Ethics
For NAR members, the Code of Ethics is the essential guidebook that dictates how they should behave during all client interactions. This information is broken up into four parts:
The Code of Ethics Preamble
Duties to Clients and Customers
Duties to the Public
Duties to Other Realtors
Now, we'll walk you through a high-level overview of what each section covers.
The NAR Code of Ethics Preamble
As a NAR member, Realtors must apply the principles of the Code of Ethics during all client interactions and business dealings. The preamble emphasizes that Realtors should "recognize that the interests of the nation and its citizens require the highest and best use of the land and the widest distribution of land ownership."
The Code of Ethics preamble encourages Realtors to uphold its core principles and highlights the ideas of honesty, integrity, fairness, and moral conduct in real estate dealings. The document also states that Realtors will stay up-to-date on the latest news and happenings that impact clients and real estate businesses, and also to avoid any practices that may damage or discredit the real estate industry and profession.
The 3 Major Sections of the NAR Code of Ethics
The Code of Ethics includes three major sections, each of which contains a number of "articles" or declarations that dictate what a Realtor's duties are to clients and customers, to the public, and to other Realtors. While you may not remember every word, it's important to have a firm understanding of what each section covers.
Duties to Clients and Customers: The first section after the preamble states that Realtors promise to "protect and promote" their clients' interests. This means that Realtors must act fairly and be upfront and honest when helping a buyer, seller, landlord, tenant, or any other person who's part of a real estate transaction. This section says Realtors won't intentionally mislead clients, will submit offers and counter-offers promptly until the seller or landlord submits a written request to stop, and will make sure to shield confidential information per state law.
Duties to the Public: Realtors are prohibited from discriminating against clients based on race, color, religion, sex, disability, nationality, sexual orientation, gender identity, or familial status. Additionally, when dealing with the public on a sale or lease, Realtors are prohibited from disclosing information about race, religion, or ethnic makeup of a neighborhood or from engaging in anything that might cause "panic selling." And, when selling or renting a property, Realtors can't share information that shows favoritism to a particular race, color, religion, sex, gender identity, disability, sexual orientation, nationality, or familial status. However, Realtors can provide demographic information when they aren't involved in the sale or lease of a property.
Duties to Realtors: The final section of the Code of Ethics says Realtors will uphold their peers and the profession with the utmost integrity, and will avoid making intentionally false claims and statements about others in the industry, their businesses, or business practices.
A Summary of the 17 Articles of the NAR Code of Ethics
Now, let's break down each of the three major sections into their respective articles. To keep things short and sweet, we've paraphrased each of the articles and attempted to put them into plain English for you to skim.
Duties to Clients & Customers
Uphold the Code of Ethics and, most importantly, keep the client's interests at the forefront of each deal without letting personal views get in the way.
Don't omit any known facts or misrepresent pertinent information during a real estate transaction or property showing.
Play nice with other Realtors, unless it's not within the best interest of your client. Being nice doesn't mean you have to compensate the other Realtor in any way.
Neither the Realtor nor their immediate family members may buy or place an offer on a property in which the Realtor is the client's representative.
Realtors have to disclose all personal interests if they're to provide professional services about a property or its value. All parties must be made aware of the Realtors' personal investments.
Realtors may not accept a commission, rebate, or profit from clients or their transactions without the client having prior knowledge and having given consent.
If a Realtor plans to accept compensation from more than one party involved in a transaction, the Realtor must inform all parties.
Escrow, trust funds, and other client monies may not be deposited into a Realtor's bank account. Realtors must have separate accounts for personal and business matters.
The language for all documents relating to a buying or selling transaction must be presented to the client in a way that's easy to understand.
Realtors are forbidden from discriminating against clients based on race, color, religion, sex, disability, nationality, sexual orientation, gender identity, or familial status.
Realtors should only offer services that fit within the realm of real estate. They should avoid offering services outside of their wheelhouse.
Realtors must be honest and truthful in all client communications about a property or transaction. They may not mislead or give the client false or ambiguous information.
Realtors must make sure that all real estate transactions and business are done in accordance with the law.
Realtors must comply with the Realtor Member Board's investigation if accused of unethical practices or other violations.
Duties to Realtors
Realtors may not make intentionally untrue statements about industry colleagues, real estate companies, or their business practices.
When acting in an agent capacity, a Realtor must not "scoop" a sale out from under another real estate agent, especially clients who have already entered into an exclusive deal with another Realtor.
If there are contractual or non-contractual disputes between Realtors, the Realtor Board — not the Realtor — will step in to intervene.
For more detailed information or examples of any of the above articles, you should refer directly to the NAR's Code of Ethics itself.
Interested in Becoming a REALTOR? Here's How
If you aren't already a Realtor but would like to become one, your first step will be to join your local Realtor association. You'll also need to pay the $150 membership fee. Non-principal applicants are also welcome to apply to join an association. (According to the NAR, non-principal applicants refers to individuals who work in the real estate industry other than as sole proprietors, partners, corporate officers, or branch office managers, and are associated with a Realtor member.) Here's what else you'll need to do to officially become a Realtor:
Hold a valid real estate license
Currently work with a real estate firm that's based in the state where the association is located
Have no record of civil judgments within the past seven years relating to the violation of civil rights laws, real estate license laws, or other laws prohibiting unprofessional conduct. (Although if you do, you can still potentially become a Realtor depending on mitigating factors.)
Agree to always follow and implement the NAR's Code of Ethics, bylaws, rules, and policies
Be actively engaged in the real estate business and its recognized fields (i.e., agents, brokers, appraisers)
Currently employed by or affiliated with a Realtor as an independent contractor
Written application for Realtor or Realtor associate membership
Submit membership application and have it "acknowledged" by a Realtor principal
Additionally, applicants should also be prepared to disclose information pertaining to:
All final findings of Code of Ethics violations and violations of other membership duties in any other association within the past three years
Pending ethics complaints (or hearings)
Unsatisfied discipline pending
Pending arbitration requests (or hearings)
Unpaid arbitration awards or unpaid financial obligations to any other association or association MLS
Any misuse of the term "Realtor®" or "Realtors®" by the applicant or in the name of the applicant's firm.
You're also required to attend an orientation course if you're hoping to become a member.
Image courtesy of iStock.com/cyano66
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The views expressed in this article are those of the author and do not necessarily reflect those of Berxi™ or Berkshire Hathaway Specialty Insurance Company. This article (subject to change without notice) is for informational purposes only, and does not constitute professional advice.
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Rachel Murphy is a contributing writer for Berxi. She has a journalism degree from the University of Central Florida and previously worked as an editorial producer for ABC News. Her bylines include INSIDER, Mashable, Elite Daily, Care.com and other publications. She lives in Orlando with her husband, two children, and two English bulldogs.
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