How to Handle Common Ethical Dilemmas in Real Estate

Five Common Scenarios That Could Get Real Estate Agents in Trouble

Did you know that many agents unknowingly violate the National Association of REALTORS® (NAR) Code of Ethics every day? Whether you’re a new agent or a seasoned professional, you’re likely to face ethical dilemmas at some point in your career. From mishandling offers to using questionable marketing tactics, here are five common ethical challenges real estate agents may encounter, along with tips on how to handle them ethically.

1. Mishandling Offers
   In a competitive market, unethical practices like submitting insincere offers can surface. For example, Thomas Satas, CEO of Windy City Homebuyer, faced pressure from clients to submit a high offer with no intent to follow through, just to eliminate competition. Satas refused, choosing to uphold his ethics rather than risk his reputation and commission.

2. Engaging in Misleading Marketing Practices
   Ethical communication extends beyond face-to-face interactions—it applies to all marketing channels, including social media, billboards, and flyers. Misleading claims, inaccurate photos, or showing bias toward certain clients can breach Article 12 of the NAR Code, which emphasizes honesty in all communications.

3. Prioritizing Commissions Over Ethics
   It’s easy to be tempted by high commissions, but integrity should always come first. Ohio-based agent Judie Seitz faced an ethical crossroads when offered an extra 3% commission to bypass another agent. She declined, prioritizing her ethical standards over financial gain, and ultimately felt good about her decision.

4. Failing to Disclose Property Defects
   Disclosing property issues like mold, termites, or structural problems is not just ethical but often required by law. If a seller attempts to conceal defects, agents must still disclose this information to potential buyers to avoid legal consequences and uphold professional standards.

5. Encouraging or Accepting Buyer ‘Love Letters’
   Personal letters from buyers can sway decisions, but they also pose ethical risks and potential fair housing violations. Many states are now banning the practice, and NAR has publicly discouraged it. Instead, agents should focus on crafting competitive offers based on the merits of the deal, rather than emotional appeals.

Building an Ethical Real Estate Business

Understanding and upholding the NAR Code of Ethics is crucial for building a reputable real estate practice. Education is key, and various courses are available to help agents navigate ethical dilemmas and maintain high standards of conduct. By continually educating yourself on ethical practices, you can foster trust, enhance your reputation, and ensure a successful career in real estate.