Living by the Code of Ethics

Illinois REALTOR® Magazine | July 2013

Living by the CODE

For a century NAR’s Code of Ethics has set the standard for the industry

By Theresa Grimaldi Olsen

Chris Read revels in how the Code of Ethics maintains relevancy 100 years after it was created.

The code’s centennial is a significant milestone because “the system works,” says Read, a Naperville REALTOR® since 1977 who serves as vice chair of the Illinois Association of REALTORS® Professional Standards Committee.  “It’s continually being changed to address the issues of the day.  It’s just as relevant today as it was in 1913.”

The Code of Ethics is a document that has endured change about 40 times since it was created 100 years ago. Recent changes reflect the impact of the Internet, social media and emerging technology.

“The code sets the standards for the industry,” says Cliff Niersbach, vice president of Board Policy and Programs for the National Association of REALTORS®. The code came before many of the state real estate licensing laws and can be more restrictive than state laws. “The code expects more from REALTORS®,” he says. 

NAR members, including 41,000 in Illinois, agree to abide by the code and could face disciplinary action from the national association including suspension and fines. REALTORS® agree to arbitrate or mediate conflicts regarding property instead of resorting to lawsuits. 

Read takes pride in the high standards. “This is a system to hold REALTORS® to a high level of ethics,” Read says. “We are in an industry that cares about the level of professionalism within our system.”

Code a response to housing conditions 

The business climate and living conditions in 1913 precipitated the development of the code. REALTOR® Doreen Roberts, who has served on the Professional Standards Committee for NAR, describes the conditions in the video “Early Origins of The Code of Ethics.” 

At that time, about 75 percent of Americans lived in apartments or flats that lacked ventilation, were crowded, dirty and dangerous. Roberts says: “Decent housing was desperately needed.”

The emergence of the automobile brought new possibilities. For the first time, people could live away from the city in single-family homes and drive to work. Land was ready to be developed, and suburbs were created.

The rapid demand for development of land required more complicated paperwork, Roberts says. Until then, most land was sold by auction, given away at government hearings or passed on to families. As the transfer and development of land became more complex, a need was created for people familiar with local real estate practices and knowledge of available properties in the area.

Real estate practitioners began forming local organizations to share information about properties for sale and to get to know other practitioners who could be trusted, Roberts says: “And there were many who could not be trusted.”

Anyone could sell property and there were no regulations, she says.  It was an era of fraudulent transactions. People were lured to buy property in phony subdivisions, she says.  Some sold the same parcel of land multiple times. There was rampant land speculation, exploitation and disorder.

Not only were ethical real estate practitioners interested in protecting their reputations and good business practices, they wanted to protect the consumer, Roberts says.

“It’s pretty remarkable that a group of REALTORS® back at that time sought to put together a set of standards which in fact were primarily for the protection of the public,” says Bruce Aydt, a lawyer, REALTOR® and trainer from St. Louis who writes an ethics column for REALTOR® Magazine. “That continues today. It really does set the standards for the industry.”

Read says changes to the code can begin at the grass roots.

A change to the code that was adopted in January 2010 began with complaints to the Mainstreet Organization of REALTORS® about lock boxes being accessed without a REALTOR® present. Discussion at the state and then the national level on the issue revealed that other REALTORS® throughout the country were voicing similar complaints. Now Article 3, Standard of Practice 3-9 states: “REALTORS® shall not provide access to listed property on terms other than those established by the owner or listing broker.”

“This code change wasn’t an issue five years ago,” Read says.

Aydt says ethical practices can be challenging. The proliferation of the Internet and social media have complicated advertising and marketing. “Always present a true picture in your advertising, marketing and other representations,” Aydt says. “This mandate applies not just to traditional marketing but also to Facebook, Google+, Twitter, texts and other social media. Check out Standard of Practice 12-5 for guidance on the right way to present your identity as a real estate profession in social media venues.”

Theresa Grimaldi Olsen is a freelance writer based in Springfield.