Finding an experienced local agent you trust is hard. There's a lot of potential for unethical behavior in real estate, but it doesn't have to be the norm. You can work with a vetted, trustworthy agent without having to worry about shady behavior.
While being a real estate agent was recently named by Forbes as one of the "happiest jobs," that doesn't mean clients are always satisfied. In fact, many clients inherently distrust even the most ethical realtors because of word of mouth or experiences in the past.
Working with a trusted top agent in your local market obviates concerns about unethical behavior, because they've been vetted by professionals and many other clients.
While it might seem that unethical behavior is inescapable, the culture of online reviews have made it rarer. Despite increased scrutiny, it persists, so here is everything clients need to know about unethical realtor behavior and how to avoid it.
1. It Might Be Illegal
Real estate agents are bound by both the law and their license to be honest and ethical in their dealing with clients. Realtors acting shady or unethical may be violating the law and could be subject to a lawsuit.
If a client discovers an issue with a home after signing papers, they might be mad at the previous homeowner. However, any defects that either agent knew about had to be disclosed to the buyer. In some states, this has to do with structural issues alone, while other states have disclosure requirements that include property stigmatized by crime or even the mineral rights related to a property.
Agents who give legal advice to their clients could be violating the law. Taxes and laws are relevant to real estate transactions but agents should always direct clients to a real estate attorney or specialist. Giving the wrong advice could lead to negative consequences for buyers or sellers and their agents can be held responsible.
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2. The National Association of Realtors Won't Condone It
Realtors who have been licensed for several years or who feel experienced in the industry might lose touch with the code of ethics. Just like anyone working at any job, it's easy to get into bad habits that make our jobs easier. However, with realtors, that behavior can directly violate their license.
According to the NAR, realtors acting as a listing broker need to submit every offer and counter offer to sellers and landlords until closing. Unless the seller waives the obligation in writing, the agent doesn't get to determine the viability or quality of an offer on behalf of the seller.
Realtors are obligated by their license not to operate outside of the jurisdiction they're licensed in. If they show or sell properties outside of that area, they might not get caught, but that doesn't make it okay. There are so many issues particular to a region, whether environmental, legal, or life in the region, that it only makes sense to work with an experienced local realtor.
3. Bias May Be Everywhere
When working with a realtor, it's common to run into the same kinds of discrimination that minorities and women have faced for centuries. While realtors might think their bias is okay or based on their experience, it's a violation.
Willful discrimination and fraud, or redlining, became illegal 50 years ago, but it still exists today. Discrimination can be difficult to define in all situations, but local consumer advocates, the NAR, and civil rights agencies all take it seriously. Agents are legally bound to treat all clients the same regardless of age, income, disability, gender, race, religion, or sexual orientation.
If your agent says something that feels illegal or even makes you uncomfortable, it's reasonable to report them to the brokerage. If it happened to you, it's likely it's not the first time and it may not be the last.
4. Dual Agents Need to Disclose It
In some markets, dual agents are more common than others. As realtors typically know how to represent the interests of both buyers and sellers, they're sometimes required to represent both parties. This is tricky territory as it can lead to some obvious conflicts of interest.
Dual agents are required to provide a contract to both parties informing them of their position. They're prohibited from giving advice on offers and counter offers and leave much of the negotiation to take place between the buyer and seller. While most times, agents will work for a lower commission, being able to take both sides of the commission, the service they provide has tight restrictions.
Dual agents are a necessity for some properties and not necessarily unethical in practice (though we advise against it). The most important thing that dual agents can do is to be transparent and stay out of the way of their clients.
5. Broker Fees Should Be Laid Out In Advance
One reason that many sellers list their home as FSBO or "for sale by owner" is because of the cost of dealing with a seller. If the margins for a seller are tight and they don't foresee earning a lot on the sale of their home, they might not want to hand over the average commission fee of 3% to a listing agent.
When buyers work with an agent, they might be charged a broker fee. While these fees have been called into question in recent years, some buyers or renters might be hit with fees that seem to keep adding up.
It's standard for fees to be laid out in advance for both buyers and sellers, put into writing, and signed before they're agreed to. Flip-flopping on fees is a sign of trouble. Buyers and sellers should have zero tolerance for this.
6. What Seems Normal Shouldn't Be
Just like when dealing with a used car salesperson, auto mechanic, or lawyer, most clients go into real estate situations on the defensive.
ChicagoNow reported a set of practices that clients think are normal even if they also think it's acceptable. One was that buyer's agents won't show properties they don't get a big enough cut from. More than half of people thought it was wrong, though most of them thought it was common, even though it's a blatant violation of the fiduciary relationship.
Another was that buyer's agents show their company's own listings preferentially. While this may happen, it's completely unethical and unacceptable. Acting in their clients' best interests is right at the top of the NAR standard of ethics and operating in this way does the opposite of that.
Thankfully, Unethical Realtor Behavior Can Be Avoided
If you're worried about dealing with unethical behavior, it's important to work with a full-service realtor who has been vetted in advance. You can find pre-vetted agents through a company like Clever Real Estate. Clever only works with agents who have five years of full-time experience and high customer ratings.
Get paired with a top agent who knows your regional market and how to get the best deal for you, all while staying above board.
