- Realtors are often faced with ethical dilemmas that have no ready-made answer or solution.
- The path to ethical decision making lies in asking yourself the proper questions.
As Realtors and fiduciaries (and I firmly believe we should behave as such), we are often faced with situations that put us in the precarious position of an ethical dilemma.
In a world of contracts, disclosure law, negotiations, profits, losses and people, you do not have to sell real estate for very long before the interests of one party come up against the interests of another party, with you stuck squarely in the middle. It is in these moments that you have a decision to make.
As we all know, responses to these situations vary greatly among clients, co-workers and other real estate agents.
Although we have access to guides and resources to assist in decision making, the scenarios in reality are often so varied that such resources are limited.
Legally binding agreements are nice, but they often have little to do with what is ethical and what is not. The Realtor Code of Ethics is a good resource; however, it by no means covers every eventuality that we face.
Even if the Code does address your specific conflict of interest, you may find yourself asking, “Why?” Why was the Code written in such a way, and how did the architects arrive at their conclusions?
It’s not always easy to balance the interests of one party over another, especially when that one party may be yourself.
Through my time at Georgetown University, I became familiar with three “tests,” which can be used with great effectiveness to determine the ethics of one choice over another.
I hope they can assist you as they have me. While this outline is catered to the perspective of a Realtor, these tests can certainly be applied to any ethics dilemma.
1. Generalization test
How would you view your decision if you made the assumption that you would handle all of the same (or similar) situations, in your chosen manner, from that point forward?
If you treated all of the situations the same as you were about to do, with your decision, would that work for you?
Scenario: You are selling your personal home, in which the laundry room flooded two years ago. The state property disclosure form has a specific question asking whether or not there has ever been any water intrusion or leak inside the home, of any kind.
Obviously you are aware that the problem existed. However, you had the water damage professionally remediated and there were no existing problems with the laundry room whatsoever.
A pre-listing inspection came back with flying colors. So, given that no problems exist, why should you disclose the leak? What defines a “Leak” anyways? Is a drip of water cause for disclosure?
Application: It is this line of thought and questioning that can get a seller (or Realtor) in trouble. I have a better question, as it relates to the Generalization Test.
Would you advise or advocate this approach with every single Disclosure question that came your way, by tearing into what the state board meant by a “leak” and investigate whether any current problems exist, before deciding if you want to follow the disclosure law or not?
When framed in this light, the answer to most people is a very clear “no.” The Generalization Test can help cut through the “noise” in times of ethical conflict.
2. Reversibility Test
How would you feel if the situation were turned around and someone were about to make the same decision as you, but you were in their (the affected party’s) shoes?
Scenario: A buyer comes in to your open house and is interested in making an offer on your listing. Upon further conversation, you learn that this buyer has been working with an agent for several months, but does not have a buyer rep agreement signed with that agent.
The buyer wants you to write the contract and take his or her agent’s commission out of the purchase price.
Application: We have all been there. If you have not, just keep selling real estate and you will be soon enough.
As diligent as some of us are about obtaining those representation agreements, there are always some customers with whom we neglect to put pen to paper, for a variety of reasons.
From the marketing Realtor’s perspective (listing agent); perhaps it is, “too Bad, so sad”? You should have gotten a buyer rep. Is it legal for the marketing Realtor to proceed with the offer? Absolutely. Is it ethical to do so, knowing full well another Realtor has spent a lot of time working with these people, and may very well be the procuring cause in some way?
Would you want the marketing Realtor to write the offer if you were the agent who forgot to get the buyer rep signed?
3. The Publicity Test
How would you feel about your decision if it was featured on the front page of the Wall Street Journal or New York Times?
Scenario: It may seem innocent enough to list a property for sale a bit lower than market value, in order to generate a quick offer.
After all, the seller has plenty of equity, and they will not miss the extra $25,000. They specifically told you that they did not want their house to sit on the market, did they not?
You are just doing your job as they instructed you to do. Never mind the fact that you know full well they could get another $25,000 for the home, with no more than a month or two on the market. You shouldn’t bother them with those details. They agreed to a price of $299,000 with your limited market analysis and they are busy after all — who will know the difference?
Application: The Publicity Test is my favorite. It brings to light the concept of making a decision under the light of peer (and public) scrutiny, as opposed to making the decision in secrecy.
How would you feel about your decision to deliberately list the property $25,000 low, if that decision was broadcast to the public via social media or a major newspaper? Picture the Headline, “Realtor lists seller property for $25,000 under market.” Still think it’s a good idea?
The scenarios presented herein are three among thousands of examples in which these tests could be used. I hope that you find them to be useful.
Remember, “If it’s to be, then it is up to me.”
Nick Schlekeway is the founder of Amherst Madison, a Boise, Idaho-based real estate brokerage. Connect with him on LinkedIn.