real estate code of ethics

How to Handle Ethical Complaints in Real Estate

real estate code of ethics

Building trust and relationship with your clients means adhering strongly to the real estate code of ethics. Commonly known as the NAR® code of ethics, named after the guidelines established by the National Association of REALTORS®, the code is more than just a set of rules but a tool that helps professionalize real estate and grow public trust in real estate agents.  

Occasionally, there will be times when a client has a significant ethical dispute with a real estate agent. This could happen to you or agents you work with. It’s important to know what to do in these situations to handle them quickly and as professionally as possible. Of course, only licensed REALTORS® are officially bound by the NAR® code of ethics, but being able to have a professional conversation about real estate ethics is important regardless of your affiliation.

Do you know what to do when ethical complaints arise? Learn more about ethics in our course Drama and the Code of Ethics.

What clients do after a real estate code of ethics violation

If clients feel they’ve been wrongly treated per the real estate code of ethics, there are three main options they can pursue to remedy the situation:

  • Hire a lawyer to pursue litigation.
  • File the complaint with a real estate regulatory authority so disciplinary action will be taken against the real estate agent.
  • Use the NAR dispute resolution methods.

Different types of complaints

Complaints surrounding the real estate code of ethics are likely to fall into two major categories. However, not every complaint is between a client and a real estate agent. Here are some likely scenarios between parties where ethical complications can arise:

  • Client vs. REALTOR®
  • REALTOR® vs. Client
  • Customer vs. REALTOR®
  • REALTOR® vs. Customer
  • Board/Association vs. REALTOR®
  • REALTOR® vs. Board/Association

Any of the above parties can have complaints that are strictly ethical in nature or are a request for arbitration.

What are ethical complaints?

An official ethical violation involves an offense against the Board and its members generally, as distinguished from an arbitration hearing which involves a dispute between individual members, arising from some common transaction.

Many ethics violations occur inadvertently or through ignorance and so the hearing turns out to be an educational tool. There are, however, sanctions that can be levied against an offending party for an ethical breach. Here are the range of common sanctions depending on the severity of the violation:

  • Letters of warning and reprimand.
  • Fines of up to $15,000.
  • Individual suspension of membership.
  • Suspension or termination of MLS rights and privileges.
  • Mandatory attendance in particular courses or seminars.
  • Orders to cease or refrain from certain conduct.
  • Expulsion from the association or membership.

What’s an arbitration request?

Requests for arbitration are separate from official ethical complaints. They are usually disputes between the parties providing real estate services.

Usually, the heart of most arbitration complaints is in regard to fees. Often, the complaints are related to offers of cooperation within the Multiple Listing Service. One of the most common arbitrations that Boards or Associations may have to deal with involves the issue of procuring cause and the entitlement to fees from cooperating brokers.

The arbitration request is typically reviewed by a grievance committee who may decide on the following actions:

  • Dismiss the complaint if it does not meet appropriate criteria, must give notice to all parties and notify the parties of appeal rights.
  • Refer the complaint to mediation.
  • Refer the complaint to the Professional Standards Committee for arbitration.

Know your options when it comes to the real estate code of ethics

Whether you’re facing an ethical violation or have a complaint to raise against someone else, it’s important to know what the real estate code of ethics covers and how you can use it for your own protection and to uphold the integrity of the real estate profession.

Grow your ethical knowledge! Enroll in our courseDrama and the Code of Ethics, today.

About the course author: Len Elder, JD, DREI, CDEI, is the author and developer of this course. During his career, Len has accumulated over 30,000 hours of live classroom presentations and teaching. He has excelled to the top of his field and is recognized nationally as an author, speaker, course developer, and a Distinguished Real Estate Instructor (DREI) by the National Real Estate Educators Association.