The National Association of REALTORS^®' Code of Ethics spells out the professional responsibilities and expectations of REALTOR^® members within their relationships with clients, customers, fellow REALTORS^® and the general public. This living document spells out the high standards of professional conduct that protects sellers, buyers, landlords, tenants and others who place their trust in REALTORS^®.

Each year, NAR makes changes to the Code and to the Code of Ethics and Arbitration Manual (CEAM) to ensure that these high standards keep pace with an ever-changing regulatory environment, rapidly evolving technology and new practice challenges for real estate professionals. For 2014, some of these updates address changes to cooperative commissions, avoiding discrimination in the provision of REALTOR^® services based on gender identity, and ensuring professional quality when rendering Broker Price Opinions (BPOs). Other changes involve increased maximum fines for ethics violations and provisions to prevent attempts to circumvent arbitration by laying low for 180 days and then filing in court.

Cooperative commissions

Article 3 requires cooperation with other brokers unless such cooperation is not in the best interest of the client. Standard of Practice 3-2 provides that any change in cooperative commissions must be communicated to a cooperating broker before that cooperating broker submits an offer to purchase. Unless the cooperating broker agrees to the change, once the offer to purchase has been submitted, the listing broker may no longer unilaterally amend the offer of compensation shown in the MLS.
This thought is explicitly confirmed in the 2014 amendment to Standard of Practice 3-2: “After a REALTOR^® has submitted an offer to purchase or lease property, the listing broker may not attempt to unilaterally modify the offered compensation with respect to that cooperative transaction. (Amended 1/14)”

Gender identity 

In 2011, Article 10 of the Code of Ethics was amended to prohibit REALTORS^® from denying equal professional services to any person based upon sexual orientation. A protected class had not been added to the NAR Code of Ethics since 1998, when the federal fair housing law changed to include people with disabilities and families with children. That was the first time Article 10 included a protected class not already protected by federal fair housing law — NAR was ahead of Congress.

As a follow-up to that change, there was some concern over whether the term “sexual orientation” was sufficiently broad to protect all LGBT (lesbian, gay, bisexual, transgender) persons, as do recent HUD policies. Although “sexual orientation” as used in the Article 10 amendment was intended to include gender identity, some states and municipalities use the terms separately and draw some distinctions. In general terms, “sexual orientation” refers to who I might choose as my partner, while gender identity refers to my perception of my gender. The right to rent or purchase shelter should not be abridged because of sexual orientation or gender identity. Confirming this right in the 2014 amendment to Article 10 of the Code of Ethics demonstrates NAR’s all-inclusive support of fair housing opportunities for all and keeps NAR in step with HUD. 

Article 10 was revised as follows: 

REALTORS^® shall not deny equal professional services to any person for reasons of race, color, religion, sex, handicap, familial status, national origin, or 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, handicap, familial status, national origin, or sexual orientation, or gender identity. (Amended 1/14)
REALTORS^®, in their real estate employment practices, shall not discriminate against any person or persons on the basis of race, color, religion, sex, handicap, familial status, national origin, or sexual orientation, or gender identity. (Amended 1/14)

Standard of Practice 10-3 was similarly revised to add gender identity to the group of protected classes, which must not be the basis of any preference, limitation or discrimination in any advertisement or statement with respect to selling or renting real estate. 

Broker price opinions

As stated in the NAR Responsible Valuation Policy, credible independent valuations of real estate are critical to the health of the real estate industry. Valuations that are not credible, objective or independent harm communities and create public distrust. Non-appraisal opinions prepared by REALTORS^®, such as Broker Price Opinions (BPOs), must contain, at a minimum, the information specified in Standard of Practice 11-1 of the NAR Code of Ethics. While BPOs may not be used as the primary basis to determine the value of real property for loan originations secured by residential properties, BPOs have numerous important uses including short sales, foreclosures and loan modifications. The policy recommends that BPOs include a review of the subject property, a subject neighborhood review and analysis, local and regional market information and trends, and a description of comparable properties that are similar to the subject property.

Standard of Practice 11-1 has been revised to add additional safeguards that implement many of the Responsible Valuation Policy recommendations (added language is underlined, deletions are stricken):

When REALTORS^® prepare opinions of real property value or price, they must:

1) be knowledgeable about the type of property being valued,
2) have access to the information and resources necessary to formulate an accurate opinion, and
3) be familiar with the area where the subject property is located.

Unless lack of any of these is disclosed to the party requesting the opinion in advance.
When an opinion of value or price is prepared other than in pursuit of a listing or to assist a potential purchaser in formulating a purchase offer, suchthe opinions shall include the following unless the party requesting the opinion requires a specific type of report or different data set:
1) identification of the subject property
2) date prepared
3) defined value or price
4) limiting conditions, including statements of purpose(s) and intended user(s)
5) any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants
6) basis for the opinion, including applicable market data 

7) if the opinion is not an appraisal, a statement to that effect
8) disclosure of whether and when a physical inspection of the property’s exterior was conducted
9) disclosure of whether and when a physical inspection of the property’s interior was conducted
10) disclosure of whether the REALTOR^® has any conflicts of interest.
(Amended 1/14)

Code of Ethics and Arbitration Manual

Increased penalties for ethics violations

Various disciplinary provisions throughout the CEAM, as amended for 2014, indicate that the maximum fine that may be imposed for an ethics violation has been raised from $5,000 to $15,000. The increased fines first apply with respect to ethics violations committed after December 31, 2013. 

Arbitration end-around precluded

As explained in the CEAM, Appendix I to Part Ten, Arbitrable Issues, an issue involving procuring cause is properly subject to arbitration when there has been a successful transaction, in other words, a sale that closes or a lease that is executed. However, a listing broker’s obligation to pay a cooperating broker who is procuring cause may be excused if it is impossible or financially unfeasible for the listing broker to collect a commission, but only if the arbitration hearing panel finds that this occurred through no fault of the listing broker who has exercised good faith and reasonable care in the matter.

Some brokers reportedly have thought it desirable to avoid REALTOR^® arbitration, preferring to take their disputes directly into the court system. They wait 180 days after closing and then proceed directly to court, believing they have bypassed their obligation to first submit their disputes to REALTOR^® arbitration. Accordingly, the CEAM discussion of arbitrable issues has been amended to add:

Still another common question is whether a REALTOR^® (often a cooperating broker with an arguably-arbitrable claim) can thwart the process by remaining silent for one hundred eighty (180) days and then bringing a lawsuit against another REALTOR^® (often the listing broker). As noted previously, arbitration requests must be filed within one hundred eighty (180) days after the closing of the transaction, if any, or within one hundred eighty (180) days after the facts constituting the arbitrable matter could have been known in the exercise of reasonable diligence, whichever is later. REALTORS^® cannot reasonably be expected to request arbitration in circumstances where they have no reason to know that a dispute with another broker or firm even exists. Under these circumstances, a listing broker with no prior knowledge of a dispute would have one hundred eighty (180) days from receipt of notice of a lawsuit to invoke arbitration with the other broker. (Adopted 11/13)

Resources

Code of Ethics and Professional Standards Resources: www.realtor.org/policy/code-of-ethics-and-professional-standards
2014 Summary of Key Professional Standards Changes: www.realtor.org/governance/governing-documents/2014-summary-of-key-professional-standards-changes
Code of Ethics videos: www.realtor.org//videos/code-of-ethics-pathways-to-professionalism-video-series
NAR Responsible Valuation Policy: www.realtor.org/appraisal/responsible-valuation-policy Code of Ethics and Arbitration Manual