Ethics, Wall Street, and Real Estate

by Dan Krell © 2010

Watching the recent Congressional hearings on the financial crisis makes you wonder about ethical leadership in Corporate America. The hearings can be characterized by Senator Carl Levin (D- MI) trying to explain to a seemingly confounded Goldman Sachs CEO Lloyd Blankfein about an alleged conflict of interest. Senator Levin made a salient point when he said, “…you want people to trust you…I wouldn’t trust you…”

My purpose is not to pass judgment on anyone; however, I feel there is a parallel to real estate practice. These hearings remind me why the National Association of Realtors has maintained a code of ethics since 1913 ( Much like security traders who take their code of ethics seriously, as well as Goldman employees (yes, Goldman posts their code of ethics that on their website under corporate governance); Realtors comply with the NAR code of ethics communicates to ensure there is integrity in all dealings.

Unfortunately, having a code of ethics does not guarantee that all members adhere to it; adherence is up to individuals and enforcement is based on the general milieu. Fortunately, in some states such as Maryland, aspects of the NAR code of ethics are incorporated into the real estate licensing law protecting consumers from rogue agents.

The preamble to the NAR code of ethics states, “In recognition and appreciation of their obligations to clients, customers, the public, and each other…” So, if you’re involved in a transaction with a Realtor, you can expect ethical conduct that includes (but not limited to) honesty, disclosure, commitment, and truthful communication.

Article 1 of the NAR code of ethics states that even though a Realtor’s “primary interest is to promote and protect the interests of their client”, they are obligated to treat all parties in the transaction honestly. An example that is given by the NAR is to present a client’s ability to purchase honestly even when they have issues that may interfere with a home purchase (such as credit issues). Another example is that a seller should not be mislead in an attempt to obtain a listing (standard of practice 1-3).

Article 2 indicates that Realtors are obligated to disclose any material facts they know of without exaggeration or misrepresentation. For example, a Realtor must disclose all property condition facts they are aware of, as well as a true picture of the nature of the problems if known.

Article 11 states that Realtors are committed to provide professional services for which they are trained and to ask assistance in situations where they lack training, while disclosing that fact. If the transaction exceeds a Realtor’s competence, the agent must seek competent assistance and disclose that fact to their client.

And finally, article 12 states that Realtors are required to be truthful in all communications including advertising. Besides identifying themselves as real estate professionals, Realtors are obligated to accurately depict all information communicated to the public. A contemporary example is the use of photo editing software- room photos should not be distorted such that rooms appear larger.

The point that is brought home is that ethics and business (including real estate) are not diametrically opposed, but rather coincide with each other. Ethics is not only good business, but as Senator Levin pointed out, it’s ultimately a matter of trust.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 3, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell

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