Article 11 of the NAR Code of Ethics
I wrote this post earlier this year after the National Association of REALTORS(R) modified Article 11 to include land brokerage to the code of ethics. Excerpt from Article 11:
REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/10)
Article 11 emphasizes the importance for working within our area of competence. Should this situation come up, work with someone who is competent in the particular field of real estate.
Don’t Jeopardize Your Real Estate Career
NAR recently modified Article 11 of the REALTOR® Code of Ethics to include adding raw land as a real estate discipline.
What does this mean to us as REALTORS® should we come in contact with someone who wants to either purchase or sell a parcel of raw land? If we wish to work in areas that requires know-how beyond our level of competence; we should do one of three things:
- Get appropriate training.
- Get assistance from a person who has the required expertise.
- Disclose to your clients that you don’t have the necessary skills.
Warning!!!
Preferring to ignore these items and choosing to work outside of our area of expertise is an Article 11 violation of the Code.
I would like to add one more item to the list. Before getting involved in any transaction that is beyond your area of expertise and capability, refer it to a REALTOR® who has the required knowledge to do the job. Leave areas of this business where you lack sufficient knowledge to the experts. Take the referral fee. It’s a lot easier and more financially rewarding than jeopardizing your real estate career.
(Source VAR Commonwealth Online)
Michael Setunsky is the Broker and owner of Michael's Commercial LLC serving the Northern Virginia commercial real estate market. He has been licensed since 1985 and a Broker since 1990. As a commercial real estate and business broker, he has earned the distinction for being one of the top commercial real estate producers in the Mid-Atlantic Region. He also serves on the Mid Atlantic Real Estate Marketing Association's (MAREMA) Board of Directors, and is a Commonwealth of Virginia licensed Instructor. He teaches Pre-licensing, Post Licensing Education, Broker's and Continuing Education courses. Visit his company web site at http://michaelscommercial.com/.
©2011 Michael’s Commercial LLC, All Rights Reserved – Article 11 of the NAR Code of Ethics – December 10, 2011
"My Business Grows with Referrals"
©2008-2012 Michael’s Commercial LLC, All Rights Reserved
Interesting post...
If article 11 was really enforced, half the real estate population would be found guilty...there are agents out there that don't even understand a basic contract.
Eve
Michael, selling land especially, or short sales. Raw land, as NAR says, is an area I want to gain expertise. Thanks for pointing us to the revised article.
Eve: I agree, there are agents who are practicing real estate outside their area of expertise such as short sales, commercial real estate, land acquisitions, luxury homes, etc. It is the brokers responsibility to insure their agents are trained to take on these types of acquisitions.
Pamela: NAR doesn't say we cannot work in these area, but if we do we need to work with someone who is an expert until we gain that experience.
Very good post, Michael. Too many real estate agents ask for trouble with they go beyond their base of knowledge. Many of our skills also grow outdated if not used.
Have a most productive December and enjoy the holiday season.
Colonial Williamsburg Holiday Wreath IMG_1349
Photograph by Roy Kelley using a Canon PowerShot G11 camera.
Roy and Dolores Kelley Photographs
Oftentimes, the hope that everything will work out is the incentive plus the money of course, for some agents to proceed on their own.
Roy: Agents don't realize there is a very fine line crossing the boundaries where we may exceed our level of competence. Thanks and have a good holiday.
Brian: Your are exactly right. Hoping and the money often will make someone jump into the unknown. The problem is not only that it violates the COE, but it violates our fiduciary duty to our client.
Interesting * IMHO every agent who attempts to do property management and rental leasing without experience or education is violating this section of the code.
Wallace: Ablolutely! Property management is an area like commercial real estate where in my opinion agents often violate the COE.
Michael,
Good advice. The change was specifically made to address those Realtors who try to sell real for which they lack expertise. That concept should also be kept in mind when a Realtor is presented with an opportunity to work with a client on a type of property with which the Realtor is familiar but in a town or county with which the Realtor is not familiar. We should not let our desire to receive a commission overcome the necessity to provide our client with the best opportunity to their own goals. Referring business out is a great way to make a couple of dollars and make sure the client gets the level of service that the client deserves.
Thanks, Michael, for pointing this out. It's one of the reasons why I don't touch short sales - yet. Or at least engage the services of a short sale specialist...
This is one of the reasons why short sales are so much more problematic than they have to be. Too many people entrust their financial future to an inexpereinced agent and they end up paying for it.
John: I totally agree! I would think the COE would also cover lacking experience in a specific geographical area.
William: You are correct! However, if you want to start doing short sales, find a good experienced agent who will mentor you.
Phil: I totally agree! Specialized areas like short sales, property management, commercial real estate, etc. should only be done by agents who know what they are doing. Inexperienced agents should seek out proper training and work with a mentor.
The fact remains that we are all competing with one another, and that makes it difficult to gain expertise in a new field.
Good point about short sales. Thanks for the information.
Micheal - Thank you for sharing detailed quality information on Article 11 of te NAR Code of Ethics.
This is why I am a little scared to work with short sales! There is so much room for error in them that they just scare me but yet at the same time tons of homeowners seem to be toeing that line!
Liz: We are competing with each other, but that shouldn't stop us from getting appropriate training or finding a mentor. The Broker should be able to assist in this area.
Luis: You're welcome! Short sales is a good example where Article 11 applies.
John: You're welcome! Thanks for stopping by.
Rosalie: The trend seems to be a lot of short sales out there. There are several good courses out there. Ask someone in your office who is familiar with short sales, if you could work with them on their next short sale as an observer.
Good post. Too many realtors are taking on short sales without getting the basic training. The success rate to complete a short sale for a first timer is extremely low.
Keith: I would agree this is an area where proper training is a must.
Great post - we just opened a short sale division in our brokerage and have an agent that has gone through the designation training, but also met with a short sale specialist/coach for one on one training. We are excited and hope that other agents in the area recognize that we do know what we are doing and refer work to our agency.
I get a lot of referrals from other agents to do short sales. Because of the often low-dollar volume and amount of work involved, I don't pay referral fees for them, either, yet agents still send them my way because they want the best damn Sacramento short sale agent they can get for their client. They are also ethical enough to refuse to tackle a situation in which they have no experience.
Joy: You're proceeding the right way to do short sales. Hope all goes well with your short sale division.
Elizabeth: They're doing the right thing by referring short sales, if they don't have the proper training or expertise.
I've been teaching on this in my classes ! Agents often hide behind " I have a friend who wants ME to help them", when in reality their lack of subject knowledge actually disqualifies them from that outcome !
This is a little vague, and has to be hard to enforce. The reality is, most Realtors have no idea what they are doing. Most licensed agents, are part time, do one or two (or no) deals a year, hardly qualifying them to be 'specialized' in any area of Real Estate.
Michael: I agree! When I taught classes, I often hear the same thing.
Donald: I agree to a large extent; however, Article 11 is very specific. Work outside of your area of expertise and you will need to get someone to help you or you are obligated to tell your client you don't know what you are doing in that specific area of expertise. The client can then make the decision at that point. I don't think it is hard to enforce at all, if we police our own industry. This is what mentors and brokers are for when it comes to training.
I once sat next to an agent who told a seller "I can sell any property in the state of Pennsylvania." This seller had a large commercial property that was OUTSIDE her expertise level, yet she took the listing anyway. I just shook my head.
Erica: I would shake my head too. When agents work outside of their area of expertise it gives us all a bad name. Not to mention violating our fiduciary duty to our client.
Michael as I have 24 Land Listings in the MLS today and about another 10 in my hip pocket I really appreciate this Post!
Endre: Sounds like you are the land expert in Beverly Hills. Experience is a must.
Thanks for your post, Michael. I own the domain PrescottsLandMan.com as I work as a specialist on raw land. A few weeks ago, an Agent in my office was doing floor time and found a potential buyer who liked several of my vacant land listings. These were recreation properties in a remote area SW of Seligman, AZ. This agent was working outside his area of expertise.
He wanted me to act as his guide and show the properties to HIS clients and did not want to pay me a referral of any kind. I suggested he refer his clients to me so I could show them the properties. It takes me two hours to drive to the area and another two hours to return home. He wanted me to do this as a favor.
He is no longer with our firm, specifically because of his attempts to work outside of his area of expertise.
John: This is a perfect example where this agent was definitely trying to work outside of his area of expertise. You were right in asking for a referral and he should have jumped at the opportunity to pay one. Not to mention he probably had no knowledge of zoning, storm water management, etc.
Any time you're in an industry where lots of money is involved, including as commission, it is so tempting to try to do the job whether you're qualified or not.
Russel: I believe you are right especially in our industry where it isn't monitored that closely.
I hope you are having a most productive year. Best wishes for continued success.
Happy Holidays!
Holiday Wreath in Colonial Williamsburg IMG_1308
Photograph by Roy Kelley using a Canon PowerShot G11 camera.
Roy and Dolores Kelley Photographs
Roy: Thanks for stopping by. Merry Christmas and Happy New Year to you and your family.
Michael
Thanks for the post. Certainly should remind ourselves not to take on assignments without the necessary skills, or the necessary guidance/partnership of someone who is a subject matter expert.
Also thanks for the alert that a new group was formed regarding Code of Ethics. Just joined.
Pacita: This is one of the most important Article's in COE. Lenn's new COE Group should be very educational and keep us attuned to the Code.
SO TRUE! I had someone BEG me last week to take on a commercial deal for them. I have to refer that stuff out because commercial and I don't play well together and it is a completely different world than residential! It's a darn good thing I did because what he was doing requires a special use permit and the commercial agent I sent him to was able to tell him about it!
Renee: One of the things we have to look for when dealing with commercial properties. Zoning, and highest and best use play an important role. Have a great holiday! Merry Christmas!!
Russel: Thanks, hope you had a nice holiday. Happy New Year!!