Why do we have a Code of Ethics?

To truly understand something you need to look at its origins and trace its development. Therefore, any discussion of the Code of Ethics should start with a look at its history.

In 1908 a group of real estate brokers (before their was any real distinction between brokers and agents) gathered to form an organization called the National Association of Real Estate Exchanges. Their first objective was to establish rules of conduct that would serve as a guide for individuals involved in the brokerage of real estate.

At the time the need for these rules was obvious. This was the era of laissez-fairre government when regulation of industry was almost nonexistent. Those states that did have licensing regulations only required a person to have a peddler’s license in order to participate in the brokerage of real estate. There were no mandatory 60 hours of principles class, no licensing test and no continuing education requirement.

This was an era when land speculation and exploitation of customers were all too common. Purchasers were sold farmland in California only to learn after the fact that the property lacked the water rights necessary in the west to irrigate the land. Or they might buy a large plot of land in Florida with plenty of access to water in the place called the Everglades.

It was in this climate that our predecessors came together to develop common sense guidelines that would become an inherent part of the real estate industry. The goal was to improve the professionalism in the real estate industry. The individuals who founded the organization that would latter become known as the NATIONAL ASSOCIATION OF REALTORS^® recognized that real estate brokerage was a service industry. Therefore, it was vital that the public perceive the services provided by real estate brokers as having real value. If the public were to lose trust and confidence in real estate brokers or the overall integrity of the industry then the public would look to other service providers to meet their needs.

Ninety years ago these rules of conduct were adopted as a voluntary standard for members of the association. By 1924 it became a mandatory requirement for membership that anyone joining or remaining a member of the association agree to abide by the rules of conduct. At the time this was a revolutionary step for a business industry. However, it was a necessary step to transform real estate brokerage from an occupation to a profession.

Over the last ninety years these rules of conduct have grown into the Code of Ethics that we know today. In order to remain relevant and meaningful it has strived to keep pace with the changes in our industry and our nation. The Code of Ethics was our guide in addressing the challenges in our past including the development of the first multiple listing services, the implementation of fair housing initiatives that prohibited illegal discrimination, and the introduction of buyer agency. Then as now, the Code of Ethics was not intended to discourage or impede innovative changes to our industry; it was meant encouraged and promoted a higher level of service to the public.

While the Code has undergone a significant number of changes through the years, its underlying principles have remained constant. At its core are the principles of honesty and integrity along with a prohibition against self-dealing. "No inducement of profit and no instruction from clients ever can justify departure from this ideal" (Preamble to the Code of Ethics).

The need for the Code of Ethics is still evident today. There are still unscrupulous individuals out there who prey upon unwary or ill-informed consumers. While the Code of Ethics did serve as a model for many of the state licensing regulations we have today, these laws are only a minimum standard. However, by working together we can create a higher standard of integrity and service, which will serve our clients and our industry. In order to protect the professionalism and reputation of our industry we need to maintain a commitment to self-policing.

The ethics enforcement process does more than protect the public and our industry's reputation. It also protects REALTORS^® from the unethical conduct of others. Pam Mc Coach once said that the best thing a REALTOR^® can have in a real estate transaction is an ethical agent on the other side of the table. You know the agents she means, the ones that do their job, make every effort to provide a smooth transaction for everyone and work with you to overcome the obstacles that may arise. If you have participated in enough transactions you may have experienced the problems that can emerge with the other kinds of agents. These are the agents who do not fulfill their obligations or keep their promises. They can cost you money by derailing a transaction and harm your relationship with your client if you are blamed for the other agent's mistakes.

It is important to remember that the Code of Ethics is written and revised by REALTORS^®, not association staff. The ethical obligations they have created are not meant to restrain our members' ability to do business or create unreasonable obligations. The REALTORS^® who have helped write and revise these rules over the years have worked hard to develop ethical obligations that are realistic, practical and relevant. Thanks in large part to their effort, the Code of Ethics remains an important guide for REALTORS^® as they face the challenges of our current real estate market.