Simplify Your Ethics

All agents – all people – have momentarily lost their minds and have done things that later cause them angst.

While the National Association of Realtors (NAR) is considered a “trade association” and is seen by many as merely a lobbying organization, its key reason for forming over 120 years ago was to provide standards of conduct for its members as well as a means of co-operating with other brokers.

Photo by Brett Jordan

Prior to this, many real estate “dealers” were not just perceived as being ethically unhinged, they often actually were. And brokers were reticent about cooperating with others if everyone could not be held accountable for their actions.

NAR’s Code of Ethics, with its iconic line “Under all is the land” as its opening, simply takes the Golden Rule and applies it to the business world.

Ethics are higher than the law. The law only establishes a bare minimum of what should or should not be done. An agent may not break the law, but there are many instances where what he or she has done causes harm to others – even when it was not intentional.

Here are few ways to avoid situations like this that go beyond the Code of Ethics.

• Stop doing “dual agency” transactions.

My father used to periodically say, “always know who you are working for” even when the context seemed strange. But it is a great way to ground yourself, no matter what service you provide.

Almost all states still allow the practice of an agent “representing” both the buyer and the seller in a transaction, though often in a more limited way. Whether or not your firm or state permits it, you can choose not to do this.

After all, how can you navigate pricing, inspections, and the large number of other transaction details in a way that fully represents the buyer or the seller? Is it fair to your seller that you are now also working with the buyer who you just met at an open house?

For years, I thought that I could mentally erect a Great Wall of China in my mind and serve both clients well. In fact, I enjoyed it because I didn’t have to deal with the personality of another agent. To me, it simplified things.

Until it didn’t.

I had listed the significant home of good friends. Other friends came through my open house and asked me to write an offer on it. Two weeks later, the buyers decided to back out due to some fairly minor inspection concerns. While no one blamed me in any way for the situation, I began to imagine various “what ifs” that could easily have happened.

A few other agents in my area had recently stopped doing “me and me” transactions and were helpful in suggesting alternatives.

Now, when confronted with a similar situation, I simply refer the buyer to another agent in another company. Everyone is aware that I will receive a referral fee, but that I will not be a “dual agent” for this property. No, I won’t make quite as much money in these situations, but it is one less complication in my life that has also impressed clients.

Depending on your state, you may still be a bit limited in what you can say to your “remaining client” about the other one you referred away. You usually cannot reveal confidential information you learned from them while they were your client. But it goes a long way to simplify your work.

• Get it in Writing.

It is not possible that you have not heard this from every managing broker or training session. Take notes, keep all of your paperwork… You know what to do.

Another story from my father from the involves a wealthy fellow who was later found to be suffering from a mental degenerative disease.

He and his recent wife (his former nurse) wanted to sell their significant home, but they didn’t want everyone to know about it – no advertising, no multiple listing, etc. A difficult way to market a home! Still, my father eventually found a good buyer and the home was sold.

A couple of years later, however, with the recent wife now in charge, they brought a lawsuit against several people, a bank, and my father.

In his case, they said that the home would have sold for much more if only my father had used advertising, put it on the MLS. I’m sure it would have, but for their own wishes.

Fortunately, my mother remembered that they had signed a note outlining their marketing restrictions. Since my father kept the company files in storage forever, it was a quick matter of locating it and presenting it to the court. Suit dismissed.

I’ve had similar situations. You can’t vaguely say, “I remember some confusion about that…” Keep your notes, have your clients sign acknowledgements or releases, make things clear from the outset so that they will be clear down the road.

• Inspect First and Disclose!

In most markets, buyers make as a condition of their offer a time period to conduct and respond to inspections on the property.

In our area, one to two weeks is the norm. So, just as many buyers begin to have buyers remorse, they are handed an eighty page inspection report that, to them, says they are fools for for buying the house. And the seller is usually just as surprised to learn about many of the items.

In most purchase agreement forms, however, is a line that says in so many words that anything disclosed prior to an accepted offer can’t be used to terminate the transaction.

While the verbiage differs from place to place, it is why I have long asked my sellers to have their own inspection before going on the market. We then give the report to anyone considering the property.

This gives the potential buyer the chance to see in person that the “uncovered junction box” or “unprotected Romex” is less scary than it appears in print.

By disclosing as much as possible at the outset, it creates a sense of trust between the buyer and seller. The seller has gone above and beyond what most sellers do (in most areas) by conducting the inspection. The buyer now has this knowledge and negotiates the purchase price on that basis.

It’s not an as-is situation as the buyer still has their own inspection. And should something new come up in the buyer’s own inspection report, then that would be fair game for a renegotiation. But it rarely happens. This approach eliminates the uncertainty and possible surprise that the typical inspection process produces.

So, these are just a couple of ways to simplify your work in a way that elevates your professionalism — and, in turn, helps your client.