Ethics are an essential part of the real estate industry, ensuring buyers and sellers are protected and the law is followed. To help real estate professionals navigate ethics in real estate, several codes of ethics have been established by different real estate associations. A code of ethics is a set of rules that members of an organization pledge to abide by. These guiding principles help real estate professionals operate with the highest level of integrity and help build trust with their clients, peers, and the public. Learn about the REALTOR® Code of Ethics in real estate, how it is enforced, and the training requirements.
What Is the Code of Ethics in Real Estate?
The most common code of ethics in real estate is the National Association of REALTORS® (NAR) Code of Ethics. NAR reports that over 1.5 million real estate licensees are REALTORS® and agree to comply with NAR’s Code of Ethics. According to the Association of Real Estate License Law Enforcement Officials, there are estimated to be approximately 3 million total active real estate licensees in the United States.
REALTORS® vs. Real Estate Agents
“REALTOR®” and “real estate agent” are not interchangeable terms. Not all real estate licensees are REALTORS®. Only members of the National Association of REALTORS® can use the trademarked term “REALTOR®.” Real estate licensees who are not members of the National Association of REALTORS® do not have to comply with the NAR Code of Ethics.
Other Codes of Ethics in Real Estate
Other real estate organizations that licensees belong to that have a code of ethics include the National Association of Real Estate Brokers (NAREB). It is an organization of predominantly minority brokers who refer to themselves as “Realtists.” Their code of ethics is called “The Code of Professional Responsibility.” There are also organizations of Hispanic and Asian real estate licensees and brokers in specialized fields of real estate expertise; for example, the Institute of Real Estate Management (IREM®) for property managers who pledge to comply with their “Code of Professional Ethics.”
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Why Do Ethics Matter in Real Estate?
Ethics typically establish a higher standard of behavior than the law for a real estate licensee. For example, the preamble to the National Association of REALTORS® Code of Ethics includes the golden rule, “whatsoever ye would that others should do to you, do ye even so to them.” Its members pledge to use the golden rule as a guide in their ethical practices to fulfill their duties to clients and customers. No other law or code of ethics for real estate licensees requires that.
The REALTOR® Code of Ethics’ Articles and Their Standards of Practice
Learn more about each of the Articles in the REALTOR® Code of Ethics and how they ensure members cooperate with each other and act in the best interest of their clients. Below, we summarize the REALTOR® Code of Ethics and highlight what we interpret as the most commonly violated Standards of Practice and the ones that are most timely based on today’s market conditions. To see the complete and official Code, visit the NAR website.
How Many Articles Are in the REALTOR® Code of Ethics?
There are 17 Articles that constitute the “rules” REALTORS® must follow, and approximately 90 “Standards of Practice” that clarify those 17 Articles. In addition, there are approximately 170 “Interpretations of the Articles and Standards of Practice” that consist of case studies that give examples of violations and fulfillment of the Articles.
Duties to Clients and Customers: Articles 1–9
The first nine Articles of the REALTOR® Code of Ethics outline all duties to an agent’s clients and customers:
- Article 1: Protect & promote your client’s interests; Treat all honestly.
- Standard of Practice 1-3: Must not mislead owners as to market value.
- Article 2: Avoid exaggeration, misrepresentation, and concealment of pertinent facts. Do not reveal confidential facts.
- Standard of Practice 2-1: One of the duties that is a source of the most complaints and lawsuits against real estate agents involves nondisclosure of defects in real estate property. Standard of Practice 2-1 addresses this issue. It provides that REALTORS® are not obligated to discover “latent” (hidden) defects in property, or to advise on matters outside the scope of their real estate license. For example, one of the most common questions that real estate licensees are asked about property is, “What is the condition of the roof?” To obtain a real estate license, a person does not receive any education or training on the condition of roofs. This area of expertise is that of a roofing contractor. It is ethically and legally appropriate for a real estate licensee to respond to the above question with, “If you are concerned about the condition of the roof, you should retain a licensed roofing contractor to provide you with that information.” If the real estate licensee has actual knowledge of defects in a property, such as a leaky roof, they cannot conceal them and are required to disclose their existence.
- Article 3: Cooperate with other brokers when in client’s best interest.
- Standard of Practice 3-9: Only provide access to listed property on owner’s and/or seller’s terms.
- Standard of Practice 3-10: The ethical duty to cooperate with competitors is unique to the real estate profession. It requires REALTORS® to share information on their listings and make property available to other brokers to show to prospective purchasers when it is in their client’s best interests.
- Standard of Practice 3-11: Must cooperate regardless of a broker’s color, race, religion, disability, familial status, gender, sex, ethnicity, or sexual orientation.
- Article 4: When buying or selling, REALTORS® must make their interest known to others.
- Must disclose and gain consent in transactions involving family members or ownership interests involving brokers.
- Article 5: Disclose present and contemplated interests and gain consent.
- For example, if a REALTOR® anticipates becoming the owner of property as beneficiary in a will.
- Article 6: Cannot receive commissions, rebates, side deals, or kickbacks without client consent.
- Article 7: Accept compensation from only one party except with informed consent.
- Article 8: Keep client’s money in a separate escrow account from broker’s money.
- Mixing client’s money with broker’s money is called “commingling,” which would result in the loss of your license.
- Spending a client's money for the broker's benefit is called “conversion,” which constitutes “stealing” and the broker can go to jail.
- Article 9: It is the broker’s responsibility to ensure that all transaction details are in writing.
- Standard of Practice 9-2: REALTORS® should make reasonable efforts to explain the nature and specific terms of agreements when using electronic documents.
Duties to the Public: Articles 10–14
The next five Articles of the REALTOR® Code of Ethics outline duties to the general public.
- Article 10: Must not deny equal professional services, or employment, to any person on the basis of being a member of one of the following nine protected classes of individuals:
- Race, color, religion, sex, disability, familial status, national origin, sexual orientation, or gender identity
- Local, state, and federal laws may have more protected classes that REALTORS® would legally have to comply with as well.
- Standard of Practice 10-3: Must not indicate any preference, limitation, or discrimination in advertising based on the above nine criteria.
- Standard of Practice 10-5: Must not use harassing speech, hate speech, epithets, or slurs involving the above nine protected classes.
- Article 11: There are nine specialized areas of real estate brokerage practice that licensees can provide services to the public including:
- Residential sales and leasing
- Commercial and industrial sales and leasing
- Property management
- Vacant land
- Appraisal
- Counseling
- Syndication
- Auctions
- International real estate
- REALTORS® should not provide specialized services in fields outside their field of competence. If they do, REALTORS® are expected to conform to the standards of practice and level of competence of those licensees who work in that field.
- If necessary to serve the clients’ best interests, REALTORS® should obtain assistance from an expert in the field and disclose their lack of experience to the client.
- Standard of Practice 11-1: If a REALTOR® prepares an opinion of value they must be knowledgeable about the type of property they are valuing, have access to the information necessary to prepare an accurate opinion, and be familiar with the area where the property is located.
- Article 12: REALTORS® shall be honest and truthful in all their communications and advertising to the public.
- Standard of Practice 12-1: They must not represent that their brokerage services are free, or at no cost to the client, unless they will not receive any compensation from any source for those services.
- Standard of Practice 12-6: REALTORS® have an ethical duty when advertising property they own to disclose their status not only as licensees, but also as REALTORS®.
- Article 13: REALTORS® cannot perform activities that constitute the unauthorized practice of law and should refer clients to lawyers when it is necessary to protect the client’s interests.
- An example of an activity that would constitute the unauthorized practice of law would be for a real estate licensee to write up a contract for a client. In most states, the law provides that real estate licensees can only fill in blank spaces in contract forms prepared by attorneys. This concept is often tested on state real estate license exams.
- Article 14: A REALTOR® charged with an unethical act or is asked to cooperate in any way in a professional standards investigation or hearing (ethics proceeding of a local association of REALTORS®) shall be a willing participant.
Duties to REALTORS®: Articles 15–17
The last three Articles outline duties to other real estate professionals.
- Article 15: REALTORS® must refrain from making false statements about other real estate professionals or their business practices.
- Article 16: REALTORS® cannot interfere with or solicit a relationship with a person who has an exclusive brokerage agreement with another REALTOR®.
- Standard of Practice 16-19: Another commonly tested concept on the state real estate license exam is that real estate licensees cannot place “For Sale” signs on properties without the seller’s consent. To do so would violate the NAR Code of Ethics and also most state laws.
- Article 17: REALTORS® have an ethical duty, under specified circ*mstances, to mediate or arbitrate disputes with other REALTORS® and consumers instead of litigating the dispute.
How to Apply the Code of Ethics in Real Estate
The National Association of REALTORS® Code of Ethics is an example of “applied ethics.” This means the ethical practices of NAR’s Code of Ethics are to be applied to real-world problems.
An example of how the Code of Ethics is applied in real estate is in a situation when a home has multiple offers on it. No issue encountered by real estate licensees has more capacity for confusion and dispute among licensees and consumers than presenting and negotiating multiple purchase offers on the same property. (From the Code of Ethics and Arbitration Manual Part 4, Appendix IX — Presenting and Negotiating Multiple Offers, January 1, 2023)
While there are no specific references to “multiple offers” in the NAR Code of Ethics or Standards of Practices, in the Interpretations of the Code of Ethics of the National Association of REALTORS® there are two case studies, Case #1-29, and #1-30 that address and give guidance to Professional Standards hearing panels of local associations of REALTORS®.
Who Enforces the Code of Ethics?
Members of local associations of REALTORS® act as Professional Standards hearing panels and hear complaints from REALTORS®, other licensees, and consumers. The panel interprets the NAR Code of Ethics, and renders decisions of whether or not the Articles of the NAR Code of Ethics have been violated. They then can issue sanctions and fines or suspend or terminate membership in the local association, which results in suspension or termination in NAR.
Who Can File an Ethics Complaint in Real Estate?
REALTORS®, non-member real estate licensees, and members of the public can all file an ethics complaint.
What Happens If a REALTOR® Violates the Code of Ethics?
There can be major consequences if a REALTOR® violates the Code of Ethics. If such a situation occurs, the local association of which the REALTOR® is a member can issue sanctions or fines and suspend or terminate membership in the local association of REALTORS®, which also terminates membership in the state association and NAR.
What Is the Maximum Fine for a Violation of the Code of Ethics in Real Estate?
The amount of fine for a violation of a code of ethics in real estate is ultimately at the discretion of the specific association, but aggregated fines levied against any member may not exceed $5,000 in any three-year period. Fines for specified offenses must be established in advance by local associations and should be followed consistently. Real estate associations, at their discretion, may adopt an escalating fine schedule for repeat offenses, and also may impose a training requirement in addition to or as an alternative to payment of a fine.
The REALTOR® Code of Ethics Timeline
Below, we detail when theREALTOR® Code of Ethics was founded and discuss its latest revisions.
How Old Is the REALTOR® Code of Ethics?
The original “Ethics of the Real Estate Profession” was adopted by the forerunner of the National Association of REALTORS® in 1913, which at that time was called the “National Association of Real Estate Exchanges.” It was formed under that name in 1908. In 1916, the association changed its name again to the “National Association of Real Estate Boards,” then finally adopted its current name, “National Association of REALTORS®” (NAR), in 1972.
How Often Is the REALTOR® Code of Ethics Revised?
Historically, the REALTOR® Code of Ethics was revised every few years. Since 1982, it has been revised every year through 2023.
2023 Revisions to the REALTOR® Code of Ethics
The following are the latest changes to the REALTOR® Code of Ethics, as of January 1, 2023:
- Article 3
- Standard of Practice 3-9:REALTORS® shall not provide access to listed property on terms other than those established by the owner or seller. (Adopted 1/10, Amended 1/23)
- Standard of Practice 3-11:REALTORS® may not refuse to cooperate on the basis of a broker’s race, color, religion, sex, disability, familial status, national origin, sexual orientation, or gender identity. (Adopted 1/20, Amended 1/23).
- Article 10:“REALTORS® shall not deny equal professional services to any person for reasons of race, color, religion, sex, disability, familial status, national origin, sexual orientation, or gender identity. REALTORS® shall not be parties to any plan or agreement to discriminate against a person or persons on the basis of race, color, religion, sex, disability, familial status, national origin, sexual orientation, or gender identity. (Amended 1/23)
- REALTORS®, in their real estate employment practices, shall not discriminate against any person or persons on the basis of race, color, religion, sex, disability, familial status, national origin, sexual orientation, or gender identity. (Amended 1/23)”
- Standard of Practice 10-3:REALTORS® shall not print, display or circulate any statement or advertisem*nt with respect to selling or renting of a property that indicates any preference, limitations or discrimination based on race, color, religion, sex, disability, familial status, national origin, sexual orientation, or gender identity. (Adopted 1/94, Renumbered 1/05 and 1/06, Amended 1/14 and 1/23)
- Standard of Practice 10-5:REALTORS® must not use harassing speech, hate speech, epithets, or slurs based on race, color, religion, sex, disability, familial status, national origin, sexual orientation, or gender identity. (Adopted and effective November 13, 2020, Amended 1/23)
Code of Ethics Training Requirements for REALTORS®
New members or prospective new members of the National Association of REALTORS® are required to complete an orientation program on the Code of Ethics of no less than 2 hours and 30 minutes of instructional time.
Existing REALTORS® are required to complete ethics training of no less than 2 hours, 30 minutes of instructional time every three years. The training must meet specific learning objectives and criteria established by the National Association of REALTORS®.
The current three-year cycle ends on December 31, 2024.
Failure to complete training during any cycle will lead to suspension of membership for the January and February immediately following the cycle deadline, with termination of membership starting March 1 after the cycle deadline.
Note: Many ethics courses (including real estate ethics courses offered by Kaplan) fulfill state licensing and continuing education requirements that may not fulfill NAR’s requirements. Individuals should determine which requirements ethics courses fulfill before enrolling.
REALTORS® and REALTOR® are registered trademarks of the National Association of REALTORS®, which neither sponsors nor endorses this product/site.
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