NAR COE 2008 Orientation Instructor Rev 12-15-2014

The REALTOR Code of
Ethics
New Member Orientation Program
Facilitator’s Guide
Copyright, 2008
National Association of REALTORS 
The REALTOR Code of Ethics Orientation National Association of REALTORS , Copyright, 2008
Overview Of This Course For The Facilitator
This course is based on instructional concepts designed to reach adult learners, grounded in the central
principle that different people learn differently. The format and structure, then, depends on a variety of
learning techniques to a) reach different types of learners, b) add variety and interest and c) involve
learners in participatory exercises to introduce concepts and have participants practice concepts
introduced in other formats.
You will see the course includes short (emphasis on short!) lecturettes, group discussions and case
studies. The participatory exercises can be used in a variety of ways. All are conducive to group work,
but most can also be done individually with townhall feedback discussions.
This manual corresponds exactly to the content of the participant materials. Comments for facilitators
appear on the left side pages and participant materials on the right side pages. Participants will have
only the right side pages which should be numbered in the same sequence as the facilitator’s guide.
You can use this facilitator guide as a reference to the answers to the participatory exercises and as a
guide to the concepts discussed in the participant materials. You may also want an exact copy of the
participant materials with you at all times in the class, so you can be familiar with the format of the
participant materials.
The PowerPoint presentation and overhead transparencies are numbered in the bottom left corner to
correspond to the participant materials and instructor’s guide.
This course is designed for 3 hours of instruction to meet standards for continuing education credit in
many states. In addition to three hours of instruction, two short breaks, not more than fifteen minutes
each, may be appropriate. If you find that there is too much material to be presented in 3 hours or if
you choose to present the material in the NAR minimum instructional time of 2.5 hours, you may use
some of the exercises as subsequent “reference” tools. If you use this technique, we suggest you give
the participants the answers to the “reference” exercises so that they can understand the exercises on
their own. A chart reflecting approximate time to be spent on each section appears in Appendix A. The
approximate time is also noted in each section for the facilitator.
This course is copyrighted by the National Association of REALTORS for use by REALTORS and
member associations. When these materials are copied and/or distributed, the materials must indicate
that the materials are copyrighted by the National Association of REALTORS.
Comments or questions about the license and use of these materials can be directed to the National
Association of REALTORS.
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Learning Objectives
As the course facilitator, you should be familiar with its learning objectives. You may choose to share
some or all of the learning objectives with the class.
Upon completion of the New Member Orientation program, participants will be able to:
1. Briefly describe the history of the Code of Ethics as it relates to the Code’s origins, its
influence on real estate license laws, and establishment of arbitration as the monetary
dispute resolution process between REALTORS.
2. Identify concepts in the Preamble to the Code of Ethics, including the wide distribution of
land ownership, highest and best use of the land, principles of competency, fairness and
high integrity, and the concept of adherence to the Code regardless of any inducement of
profit and/or instruction from clients.
3. Identify the Golden Rule as one of the foundations upon which the Code of Ethics is built.
4. List the major categories of Articles in the Code (Duties to Clients and Customers, Duties to
the Public and Duties to REALTORS).
5. Describe the structure of the Code and its supporting materials (Articles, Standards of
Practice and Case Interpretations).
6. List Articles of the Code which are commonly the subject of complaints.
7. Describe the concepts of these commonly cited Articles of the Code, including Articles 1, 2,
9, 12, and 16.
8. Given case studies, fact scenarios or similar interactive learning methods, identify possible
violations of the Code of Ethics, specifically related to the commonly cited Articles.
9. Describe the professional standards enforcement process of the board or association,

including the distinction between an ethics complaint and an arbitration request, and the
differences between the Grievance Committee and the Professional Standards/Arbitration
Committees.
10. Briefly describe the bases upon which a procuring cause arbitration claim is decided.
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Icebreaker Exercise
Suggested Time: 10 minutes for group work; 10 minutes for feedback
Start Time: __________ End Time: __________
An “icebreaker” exercise is an excellent tool to accomplish two objectives. One, it gets participants
involved and talking to each other very early in the class. Two, it introduces the participants to the
concepts discussed in the material quickly. You should emphasize that this is not a “graded” exercise
and that it is meant to familiarize participants with concepts that will be discussed in the class. Watch
participant progress in the groups. The group work will take about 10 minutes, depending on how
quickly the group gets to work.
After the group work is completed, use a townhall format to elicit feedback about “What are ethics?”
Some likely “answers” may be:
“Doing the right thing.”
“Standards of conduct”
“Morals”
“Right and wrong”
“Honesty”
“Integrity”
You should affirmatively validate answers and comments of this nature. You might summarize the
exercise by talking about different standards of conduct which exist in our society. These include:
1. Law
2. Religion
3. Philosophies
4. Morals or personal beliefs
5. Professional and industry codes and standards (The REALTOR Code of Ethics is in this
category.)
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The REALTOR Code of Ethics
New Member Orientation Program
Copyright, 2008
Icebreaker Exercise
The instructor will tell you how to form groups. In your group, you should:
1. Introduce yourselves if you do not already know each other.
2. Select a spokesperson.
3. Answer this question: What are “ethics?” Consider the question in all facets of life and
business, not just the real estate business. Use the space below to record your notes
and observations.
What are “ethics?”
1.
2.
3.
4.
5.
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Part 1: History and Background of the Code of Ethics
Suggested Time: 10 minutes Start time: __________ End time: __________
This section summarizes the history and background of the Code of Ethics. A short lecturette is a good
delivery method. Use the slides accompanying this part. The content with these points is summarized
below.
The National Association of REALTORS was formed in 1908 and the Code of Ethics was adopted in
1913. The purpose of the Code was to establish a professional standard of conduct for real estate
practitioners. Before this time, the real estate business had a history of speculation, exploitation, and
disorder. This was before the establishment of state regulatory licensing agencies and consumer
advocacy. It was a time when real estate practitioners, if they were licensed at all, were licensed as
peddlers. It was an era of robber barons whose motto was “let the public be damned.”
The REALTOR Code of Ethics is based on the concept of “let the public be served.” This central
concept of protection of the public is one of the foundations of the Articles of the Code.
The National Association of REALTORS was one of the first business groups to adopt a code of
ethics.
Later, when real estate license laws were established, many were based on the standards set in the
REALTOR Code of Ethics.
To this day, many judicial decisions cite the REALTOR Code of Ethics as the standard of conduct in
the real estate industry. Courts have applied the standards of conduct embodied in the Code of Ethics
to real estate licensees who are not REALTORS.
Similarly, the use of arbitration in monetary disputes between REALTORS was a pioneering effort.
While “alternative dispute resolution” systems such as arbitration and mediation are used in the civil law
system more frequently today, the requirement that REALTORS arbitrate monetary disputes between
fellow REALTORS has been in effect since the inception of the Code of Ethics nearly 90 years ago.
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Part 1: History and Background of the Code of Ethics
 National Association of REALTORS formed in 1908.
 No license laws at the time.
 Real estate industry had a history of speculation, exploitation, and disorder.
 Code of Ethics was adopted in 1913 to establish a professional standard of conduct.
 Code of Ethics formed the basis for license laws.
 From its inception, the Code of Ethics required arbitration of monetary disputes between
REALTORS.
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Part 2: The Preamble and Structure of the Code of Ethics
Suggested Time: Preamble: 10 minutes Start time: __________ End time: __________
A short lecturette covering this material, along with use of slides is the suggested presentation method.
The Preamble to the Code of Ethics is the aspirational foundation of the Code of Ethics. While the
concepts in the Preamble do not serve as the basis for disciplinary action against a REALTOR, they
are timeless principles upon which the professionalism of the industry is based.
Every REALTOR makes a personal commitment to uphold the Code of Ethics. The Code defines
high standards of ethical conduct for our industry. The Code, in fact, defines professionalism. The
REALTOR Code of Ethics is based on the overall concept of service to the public. It embodies the
values of honesty, integrity, fair dealing, and competency. The Code also protects practitioners. If
practitioners follow the Code, they will minimize their legal liabilities.
The concepts embodied in the Preamble are shown as bullet points in the participant materials. It is not
intended that every item be discussed in detail. You should pick at least three or four important
concepts to point out to participants. Many of the concepts are self-explanatory. Comments on certain
concepts follow.
“Under all is the land …”: This powerfully descriptive beginning to the Preamble to the Code sets the
stage for all that follows. The phrase clearly conveys the immense and all-encompassing nature of real
estate and the real estate calling. Land is the foundation of many aspects of society, whether it be the
basics of food and shelter, or the more sophisticated aspects of economy and prosperity. Truly,
REALTORS deal in one of society’s most important “commodities”.
“Widely allocated ownership” and “widest distribution of land ownership”: The Preamble uses
these phrases in terms of the “survival and growth of free institutions and of our civilization” and that
“the interests of the nations and its citizens require … the widest distribution of land ownership.” These
concepts in the Preamble speak to a fundamental premise upon which our nation was founded. Given
that much of our law and governance derived from England, under which the king held much of the
available land, it is easy to see why the founders of our nation would have a desire not to have a few
individuals own vast quantities of land. The accumulation of land can lead to inordinate power in the
hands of a few. REALTORS support the fundamental concept that many persons owning small
parcels of land is vital to the efficient functioning of our democracy.
Several of the Preamble’s concepts in the bullet points relate to the concept of the protecting the
integrity of the profession. Aspirations to “maintain and improve the standards of their calling,” “strive to
become and remain informed on issues affecting real estate,” “identify and take steps to eliminate
practices which may damage the public or which might discredit or bring dishonor to the real estate
profession” as well as the concept of sharing “with fellow REALTORS a common responsibility for the
integrity and honor of the real estate business” all speak to the common obligations that REALTORS
have in looking for the wider implications of their individual conduct in the daily practice of the real
estate business.
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Part 2: The Preamble and Structure of the Code of Ethics
I. Aspirational Concepts of the Preamble of the Code of Ethics
A. Under all is the land …
B. The Golden Rule.
C. “Widely allocated ownership” and “widest distribution of land ownership”
D. Maintain and improve the standards of their calling.
E. Share with fellow REALTORS a common responsibility for the integrity and honor
of the real estate profession.
F. Strive to become and remain informed on issues affecting real estate.
G. Willingly share the fruit of your experience and study with others.
H. Identify and take steps to eliminate practices which may damage the public or which might
discredit or bring dishonor to the real estate profession.
I. Urge exclusive representation of clients.
J. Do not attempt to gain any unfair advantage over competitors.
K. Refrain from making unsolicited comments about other practitioners.
L. If an opinion is sought about a competitor (or the REALTOR believes comment is

necessary), the opinion should be offered in an objective, professional manner.
M. The term REALTOR stands for competency, fairness, high integrity, moral conduct
in business relations.
N. No inducement of profit and no instruction from clients can justify departure from
these ideals.
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“Competency, fairness, high integrity …”: These words should be highlighted as watchwords of
professional conduct under the Code of Ethics.
“No inducement of profit and no instruction from clients …”: Note that this powerful principle
follows directly the words of “competence, fairness and high integrity.” This entire paragraph
summarizes, in a nutshell, the critical concepts of the Code of Ethics.
Business Ethics
This short lecturette about business ethics should give the participants a sense of how the REALTOR®
Code of Ethics fits into the overall picture of ethics in industry. You should simply discuss the fact that
business ethics can be made up of industry codes, such as the REALTOR® Code of Ethics, or have a
more general concept which would include both company policy and individual moral values. Legal
standards generally set minimum standards of conduct. Ethical standards usually encompass principles
higher than legal standards.
Structure of the Code of Ethics
For new members, it is particularly important to be able to “navigate” the Code of Ethics and to
understand the Code’s format. This module uses a short lecturette to introduce the structure of the
Code. You may want to ask participants have their copy of the Code available. You can then use the
Code as a “prop” when you discuss this material with participants.
This section moves from the broadest concepts in the Code to the most specific. The first part deals
with the “three major categories.” You may want to point out that the Code is prioritized as to the
importance of the sections, Articles and Standards of Practice. The National Association structured the
Code with “Duties to Clients and Customers” as the first section because these duties are the most
important obligations REALTORS have. Similarly, the Articles in subsequent sections are prioritized.
For example, Article 1’s concept of protecting and promoting the interests of the client is considered to
be the most important obligation REALTORS have, both in this section and, because it is the first
Article, in the entire Code. The same prioritization occurs in the Standards of Practice that interpret
each Article.
Even though this priority exists, it is important to note that no section, Article or Standard of Practice is
“less important” or the “least important.” Violations of any Article are serious and can subject the
member to discipline.
Lastly, you should note that, in contrast to a failure to attain the aspirational goals of the Preamble,
violation of any of the Articles can subject REALTORS to disciplinary action. The types of discipline
will be reviewed later in the course.
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II. "Business ethics"
A. What are "business ethics?"
1. Industry codes
2. Company policies
3. Individual moral values
B. Business ethics and legal standards
C. Business ethics and the REALTOR Code of Ethics
Note: REALTORS® engage in many specialty areas and may be subject to the various Codes
and Cannons of those fields (e.g. legal ethics, USPAP, NAA Code, the code of the NAR
Institutes, Societies, and Councils, etc.) but the one duty every REALTOR® has in common is
their adherence to the REALTORS® Code of Ethics.
III. The Structure of the Code of Ethics
A. The three major sections
1. Duties to Clients and Customers

2. Duties to the Public
4. Duties to REALTORS®
B. Articles – broad statements of ethical principles.
D. Standards of Practice – support, interpret, and amplify the Articles under which they are
stated.
E. Case Interpretations – specific fact situations to which the Articles and/or Standards of
Practice are applied.
E. Only Articles of the Code can be violated, though Standards of Practice can be cited in
support of an alleged violation.
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Pathways to Professionalism
This short lecturette should explain the differences between the objective/enforceable/ethical
standards in the Code of Ethics and the voluntary/courtesy/etiquette guidelines provided in the
Pathways to Professionalism. You should also explain that Pathways is not a complete list and
that it can be supplemented with local customs and practices.
Pathways to Professionalism Exercise
Suggested Time: 5 minutes for group work; 5 minutes for feedback
Start time: __________ End time: __________
Breaking everyone into groups (the same or different groups from the first exercise) provide everyone
a copy of the Pathways to Professionalism. Ask each group to identify three areas that relate to their
market. You might also ask if there are any local customs or practices that are not included.
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III. Pathways to Professionalism – list of service criteria for the industry and professional courtesies
for use by REALTORS  on a voluntary basis.
A. The three major sections
1. Respect for the public

2. Respect for property
3. Respect for peers
Pathways to Professionalism Exercise:
The instructor will break everyone into groups. You will be given a copy of Pathways to Professionalism
and asked to identify the three areas that relate to your market. A spokesperson for the group will
summarize the discussion.
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Part 3: Enforcement of the Code of Ethics
While the primary focus of the Orientation course is not on enforcement procedures, members should
know that the Code of Ethics has an enforcement mechanism and that local boards and associations
have a duty to enforce the Code. Members should also know the basic concepts of how the Code is
enforced.
This module should be handled briefly. The key concepts in the material are self-explanatory. Specific
points to address are listed in the comments below.
Ethics Cases and Arbitration Cases
New members should realize that local boards and associations resolve two types of cases, ethics
complaints and arbitration requests. Ethics complaints might be described as “conduct” cases dealing
with a possible violation of the Code of Ethics. Arbitration cases might be described as “money” cases
in which disputed commissions between REALTORS (generally in different firms) are handled. You
should point out that most cases dealing with commission disputes between REALTORS with different
firms are required to be arbitrated rather than litigated if any party requests arbitration.
The Ethics Enforcement Process
Who can file an ethics complaint? The answer is, of course, anyone, whether a member, a buyer, seller
or other member of the public.
The balance of this section dealing with the Grievance Committee and Professional Standards Hearing
Panel is self-explanatory. Briefly walk through the “two-step” process of Code enforcement described
here.
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Part 3: Enforcement of the Code of Ethics
I. Ethics Cases and Arbitration Cases
A. Ethics - Basic Issue - Is there a possible violation of the Code of Ethics?
B. Arbitration - Basic Issue - Is there an arbitrable issue, that is, a money dispute (typically a
dispute over which REALTOR® is entitled to the cooperative commission in a
transaction)?
II. The Ethics Enforcement Process
A. Filing a Complaint - Who can file a complaint?
B. The Grievance Committee
1. A screening committee comprised of members of the Association appointed to the

committee.
2. Key question for the Grievance Committee is: “If the allegations in the complaint
were taken as true on their face, is it possible that a violation of the Code of
Ethics occurred?”
C. The Professional Standards Hearing Panel
1. Function is to conduct a full “due process” hearing with sworn testimony,

witnesses and evidence.
2. Hearing Panel is comprised of members of the Professional Standards
Committee.
3. After conducting a hearing, the Hearing Panel decides whether there was a
violation of the Code of Ethics, proven by clear, strong and convincing proof.
4. If the Hearing Panel finds a violation of the Code of Ethics, the Panel then
determines the discipline to be imposed on the violator (respondent).
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Types of Discipline and Costs
The most important issue in this section is that the authorized disciplinary actions are the only sanctions
that may be imposed for violations of the Code. Panels may not impose a sanction not included on this
list. You should briefly walk through the list of disciplinary actions. Note that the last item, regarding the
administrative processing fee, is not discipline and is used only if the association has a policy which
imposes the administrative processing fee in all cases where a violation of the Code is found.
The Arbitration Process
Spend a few minutes discussing arbitration as defined in Article 17 of the Code. Note that arbitration of
disputes is limited to circumstances falling within the parameters of Article 17. For example, damages in
an automobile accident would not be an arbitrable matter simply because two REALTORS were
involved in an accident. This type of claim is not “arising out of their relationship as REALTORS.”
You should note that the Grievance Committee determines arbitrability when it reviews an arbitration
request.
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D. Authorized Discipline (and administrative processing fees)
1. Letter of Warning
2. Letter of Reprimand
3. Education
4. Fine not to exceed $15,000
5. Probation for one year or less
6. Suspension for not less than 30 days nor more than one year
7. Expulsion from membership for period of one to three years
8. Suspension or termination of MLS privileges.
9. Administrative processing fee (if found in violation) not to exceed $500 (“Court
Costs”)
Note: An Administrative processing fee is not considered discipline. It is charged as part

of the association’s adopted policy for enforcing the Code of Ethics. This is not to be
used on a case-by-case basis, but rather as an overall policy of the association.
III. The Arbitration Process
A. Request filed.
1. Arbitration is conducted under Article 17 of the Code of Ethics and the state
arbitration statute (if any).
2. Article 17 provides that arbitration occurs under the following circumstances:
a. Contractual disputes or specific non-contractual disputes (see Standard of

Practice 17-4);
b. Between REALTORS® (principals) associated with different firms;
c. Arising out of their relationship as REALTORS®
B. Grievance Committee
1. Committee performs a screening function similar to review of ethics complaints.

2. Key question for the Grievance Committee is: “If the allegations in the request for
arbitration were taken as true on their face, is the matter at issue related to a real
estate transaction and is it properly arbitrable, i.e. is there some basis on which
an award could be based?
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Briefly describe the concept of mediation and review the outline material with the class. You might note
that all Boards and Associations have been required to provide mediation services to their members
since January 1, 2002. Explain that mediation is the preferred dispute resolution system of the
NATIONAL ASSOCIATION OF REALTORS®. Review the differences between mediation and
arbitration. Identify the additional reading materials about mediation.
Review the Professional Standards Hearing Panel material as you did with in the Code of Ethics
section.
Lastly, note that in the event an arbitration award is not voluntarily paid, the arbitration award can be
enforced through judicial processes. Alternatively, associations can adopt procedures requiring that
awards be held by the association pending procedural review or legal challenges.
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C. Mediation
1. A voluntary process in which disputing parties meet with a mediator appointed by

the Association to create a mutually acceptable resolution of the dispute, rather
than having a decision imposed by an arbitration hearing panel.
2. Mediation can occur before or after the Grievance Committee reviews requests for
arbitration, depending on local Association policy.
3. If a dispute is resolved in mediation, the parties sign an agreement spelling out
the terms of the settlement, and no arbitration hearing is held.
4. Comparison of mediation and arbitration
Mediation Arbitration
Low-cost Moderate cost
Little delay Moderate delay
Maximum range – solutions Win/lose/split
Parties control outcome Arbitrators control outcome
Uncertain closure Definite closure
Maintain/improve relationship May harm relationship
D. Additional reading about mediation:
1. “No losers in Mediation”

2. “Win/win Solution”
E. Professional Standards Hearing Panel
1. Function is to conduct a full “due process” hearing with sworn testimony, counsel,
witnesses and documentary evidence.
2. Hearing Panel consists of members of the Professional Standards Committee.
3. After the hearing, the Hearing Panel decides which REALTOR® is entitled to the
award (typically a disputed commission in a transaction), proven by a
preponderance of the evidence.
F. Payment of the Award - Generally, the award of the Panel in an arbitration case can be
judicially enforced if not paid by the non-prevailing party. Some associations have
procedures requiring that awards be deposited with the association pending review of the
hearing process or during legal challenge.
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Part 4: Concepts of Procuring Cause in Arbitration
Following the section on procedural matters in arbitration cases, this section deals with the substantive
matters of an arbitration hearing.
This section is a simple introduction to procuring cause concepts. The objective of the facilitator should
be to create an awareness by participants that there are guidelines which address commission disputes,
and to make the participants aware where to find the guidelines. In addition, central fundamental
concepts arbitration are noted.
NAR’s Arbitration Guidelines
Make the participants aware that guidelines for determining procuring cause exist. The participant
materials will include Appendix II to Part Ten, Arbitration Guidelines. Direct participants to this
information as reference material for later use.
Key Factors in a Procuring Cause Dispute
Briefly review these four items as guiding principles in a procuring cause dispute. You may finish the
section with a brief discussion of the definition of procuring cause from Black’s Law Dictionary. Note
that REALTOR guidelines governing procuring cause disputes are similar to and based on this legal
definition, but are more extensive and tailored to typical situations found in broker to broker disputes (as
opposed to broker versus owner disputes typically the subject of litigation).
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Part 4: Concepts of Procuring Cause in Arbitration
I. NAR’s Arbitration Guidelines
A. Found in the Code of Ethics and Arbitration Manual.
B. Guidance to Hearing Panels as to how to determine procuring cause in arbitration

hearings.
C. Also referred to as “Suggested Factors for Consideration by a Hearing Panel in

Arbitration.”
D. Guidelines focus on “procuring cause” as the basis for resolving most commission
disputes between brokers.
II. Key Factors in a Procuring Cause Dispute
A. No predetermined rule of entitlement may be established by an association.
B. Hearing Panels should consider the entire course of events.
C. Matters such as the first showing of the property, the writing of the successful offer or the
existence of an agency relationship with the buyer are not, in themselves, exclusive
determiners of procuring cause/entitlement.
D. The key concepts of procuring cause are referenced in this definition from Black’s
Law Dictionary, Fifth Edition:
The proximate cause; the cause originating a series of events which, without
break in their continuity, result in the accomplishment of the prime object.
E. Or, as the Arkansas Supreme Court put it:
It’s not the squirrel that gathers the nuts, but the one who shakes the tree.
(who is entitled to be paid)
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Part 5: Summaries and Case Studies of Selected Articles of the Code of Ethics
Article 1
The first three points summarize the central concepts of Article 1. Standard of Practice 1-2 is
mentioned because it defines various terms used in the Code. In addition, you may want to specifically
note this Standard of Practice because it establishes the concept that the Code applies to all types of
agency and non-agency relationships recognized by law.
After a brief summary (use of slides is recommended), introduce the case study. Have the participants
work in groups of 3 to 6 for the case studies similar to the icebreaker exercise. Depending on the time
available, you can process the feedback from the groups through a spokesperson from several groups,
or in a townhall format. If time is short, the townhall format is recommended. In each of the Articles
studied, this same approach applies. The “answers” to the questions which follow the cases are noted
by case. Where an actual Case Interpretation is used, the number of the Case Interpretation is noted.
As a reference for facilitators, the appropriate Case Interpretations are included in Appendix B to the
facilitator guide. The participants do not have copies of the Case Interpretations.
Case Study – Article 1
What should you say to Tanya?
Whatever you say, you must be careful not to compromise your relationship with the client. For
example, you cannot say, “Yes, it’s high, but I’m sure he’ll come down soon.” You should simply
discuss the amenities of the property and the listed price. You should not offer your feelings or opinions
about the price. This approach is likely the same, whether you are in an agency relationship or non-
agency relationship. However, if you are working in a non-agency relationship, you should check state
laws for any variation from this approach.
When you listed the K’s home at $150,000, were you in violation of the Code?
No. Because you honestly told the sellers what you believed the property’s fair market value was.
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Part 5: Summaries and Case Studies of Selected Articles of the Code of Ethics
I. Article 1
A. Protect and promote the interests of the client;
B. This obligation to the client is primary;
C. But must treat all parties honestly, regardless of agency or non-agency relationship.
D. Standard of Practice 1-2 defines terms such as “client,” “customer,”

“agent,” and “broker.”
Case Study
Your community has been hit hard by a downturn in the economy. There have been many layoffs at the
local factory and property values have decreased. You’ve been talking with George and Melanie K.
about listing their house. George is stuck on the figure of $150,000. You’ve explained that nothing in
their area has ever sold for more than $130,000 -- and that was more than a year ago. But he doesn’t
want to hear that. It’s a good home. You know if it was priced right -- at fair market value -- you could
sell it. In the meantime, George has talked to other firms. In fact, licensee Denny H. at XYZ Realty (a
different company than yours) offered to list it at $150,000. But George came back to you because you
were referred by his golf partner. You decide to list it. Yesterday, you got a call from REALTOR®
Tanya P. She asks, “What’s it got? -- a tennis court? -- a swimming pool? I mean, nothing’s ever sold
in that area for more than $125,000 -- maybe $130,000 … “ You’re not sure what to say.
What should you say to Tanya?
When you listed the K’s home at $150,000, were you in violation of the Code?
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Suppose the home is sold for $150,000 to someone who is working with another company’s
licensee and that buyer is just transferring into town. Later, that buyer realizes that the price she
paid was $20,000 more than what any other property in the area had sold for. Would your failure
to disclose to the buyer or her licensee the fact that no other property had sold for more than
$130,000 be a violation of the Code?
No. Your duty is to promote your client’s best interests. Your obligation to be honest with a customer
does not permit nor require you to suggest that your client’s property may be priced in excess of market
value. If the customer wants information upon which to base a purchasing decision, you could suggest
they review comparable sales or seek independent advice. In addition, under most state laws, the
pricing of property is not generally considered to be a material fact which would require disclosure.
Many states consider pricing or statements of value to be opinions rather than facts. Reference to
specific state law or regulation may be required.
Page 11
Suppose the home is sold for $150,000 to someone who is working with another company’s licensee
and that buyer is just transferring into town. Later, that buyer realizes that the price she paid was
$20,000 more than what any other property in the area had sold for. Would your failure to disclose to
the buyer or her licensee the fact that no other property had sold for more than $130,000 be a violation
of the Code?
Page 11
Article 2
Article 2 might be called the “disclosure” article. Note that the first bullet point talks about avoiding
exaggeration, misrepresentation and concealment of pertinent facts about the property OR the
transaction. In other words, Article 2 requires more than simply the disclosure of property defects.
The second bullet point should be used to discuss the fact that REALTORS are not required to be
“experts” in every possible aspect of real estate transactions. For example, Article 2 makes it clear that
REALTORS may not be home inspectors, termite inspectors, professional engineers, architects,
accountants, attorneys or the like. These areas would generally be considered to be outside the scope
of a typical real estate licensee’s expertise and not required by the licensing statute. However, you
should also note that REALTORS have an obligation to be aware of conditions and matters which a
typical real estate licensee in the state or locality would know. In other words, a REALTOR cannot
ignore a condition of which he or she is aware simply because the REALTOR believes that a home
inspector will also note the condition. REALTORS should make the appropriate disclosures to the
appropriate parties of the information which the REALTOR is aware at the time. Note also that Article
2 does not require the discovery of “latent” defects. You should mention to the participants that a
working synonym of “latent” is “hidden.”
How does Article 2 apply to this case?
Article 2 applies in this case because the facts represented involved a nearby development which could
affect the value and desirability of the subject property.
Is Bob in violation of the Code?
Yes. This fact scenario is based on Case Interpretation #2-7. See the answers to the next questions
for further rationale.
Page 12
II. Article 2
A. Avoid exaggeration, misrepresentation and concealment of pertinent facts about the

property or the transaction;
B. But there is no obligation to discover latent defects, matters outside scope of license, or
matters confidential under agency or non-agency relationships.
Case Study
REALTOR® Bob, a home builder, showed one of his newly constructed homes to Sheila and Tom J. In
discussions about the home and the area, Sheila observed that some kind of construction was
beginning nearby. She asked Bob what it was. Bob said “I really don’t know, but I believe it’s a new
shopping center that has been planned for the area.” Sheila and Tom proceeded to purchase the
home. Some time after the closing, Sheila and Tom learned that the new construction was to be a
bottling plant and that the adjacent area was zoned industrial.
Sheila and Tom were very upset and contacted Bob about their dissatisfaction. Bob’s response was
that he had given them an honest answer at the time and that he has no positive knowledge about the
new construction. He told them that he knew that the shopping center was going up in the area and
had simply ventured a guess that the construction they had observed was the shopping center. Bob
further explained that he told them up front that he “didn’t know.”
Sheila and Tom were not satisfied with this explanation and have filed an ethics complaint against Bob
with the local association of REALTORS®.
Is Bob in violation of the Code?
Page 12
What was Bob’s obligation to Sheila and Tom?
Bob’s obligation to Sheila and Tom was to be accurate in conveying the information about the nearby
development. The fact that Bob prefaced his remarks with “I don’t know …” was not sufficient to
vindicate Bob because he then proceeded to give Sheila and Tom information upon which they were
justified in relying.
Were there better ways for Bob to have responded to Sheila’s question? If so, how should Bob
have responded?
Yes, there was a better way for Bob to respond. Bob should have known the answer or, if he didn’t
know, he should not have ventured a guess. If Bob stated that “he didn’t know”, he should not have
continued to give information or he should have offered to get the correct information. A response of “I
don’t know” alone would be sufficient. Likewise, a response such as “I don’t know, but I will find out and
get back to you” would also be appropriate.
Page 13
What was Bob’s obligation to Sheila and Tom?
Were there better ways for Bob to have responded to Sheila’s question? If so, how should Bob have
responded?
Page 13
Article 9
Four short words paraphrase this Article: “Get it in writing!” It could be said that Article 9 is easy to
understand but it could also be said that it is easy to violate! While the concepts of Article 9 are not
difficult, those concepts are specific directions regarding written agreements that can be overlooked in
the complexity of a transaction.
For example, the requirement of a copy of each agreement being given upon the signing or initialing
can be overlooked. It is not uncommon to have an agreement signed and then return to the office with
the original(s) with the promise that the REALTOR will send parties copies as soon as he or she can
get to a copy machine.
In addition, Standard of Practice 9-1 is noted because it is easy to overlook a written extension or
amendment. The case study explores these issues in detail.
Is Jake in violation of the Code?
Yes. Jake failed to have the corrected listing agreement initialed by June, the seller of the property. In
addition, he failed to give June a copy of the corrected listing agreement. Some participants might
comment that the scenario describes a minor or typographical error. While this appears to be true in
that the “error” is in one digit of the street address, that simple typographical error literally describes a
different property from the one June owns and is selling. Clearly, it is extremely important for Jake to
have authority to sell the correct property. If the listing agreement is for 5778 Sunset, he has not listed
the correct property. In each of these questions, the listing agreement and its changes must also be
properly initialed by the person in Jake’s company with authority to execute listing agreements.
What was Jake’s obligation to June?
Jake had the obligation to have June initial the correction to the address in the listing agreement and
the obligation to give June a copy of the corrected listing agreement.
What should Jake have done when he noticed the incorrect information?
He should have taken the original listing agreement back to June, had the change properly initialed, and
given June a copy of the corrected listing agreement upon June’s initialing of the correction.
Alternatively, he could have used an amendment form to make the correction, had June sign the
amendment form, and provided her with a copy.
Page 14
III. Article 9
A. Agreements shall be in writing whenever possible;
B. In clear and understandable language;
C. Expressing the specific terms, conditions, obligations and commitments of the parties.
D. A copy of each agreement shall be furnished to each party upon their

signing or initialing.
E. Standard of Practice 9-1 requires that reasonable care be used to keep

documents current by use of written extensions and amendments.
Case Study
Jake, a licensee with Smith Realty, entered into a listing agreement with June to sell her property at
5678 Sunset Lane. At the house, he gave June a copy of the completed listing agreement. After he
got back to the office, he noticed that the street address was listed on the agreement as 5778 Sunset
Lane. He corrected the error before turning the listing agreement over to his broker.
Is Jake in violation of the Code?
What was Jake’s obligation to June?
What should Jake have done when he noticed the incorrect information?
Page 14
Article 12
Article 12 is the REALTOR version of “truth in advertising.” Article 12 mandates that REALTORS® be
honest and truthful in all real estate communications, including a “true picture” in advertising, marketing,
and other representations. It also requires REALTORS® to make sure the public is on notice and
understands that all communications from a REALTOR®, including advertising, marketing, and other
representations, are from a real estate professional. Note Standard of Practice 12-7 for participants’
later reference. This Standard of Practice describes the proper use of the word “sold” in the advertising
and representations of REALTORS. Also, draw attention to Standards of Practice 12-8 through 12-12
as they relate to Article 12’s applicability to the Internet.
Bullet point C notes the concept which will be reviewed in the case study.
This fact scenario is based on Case Interpretation #12-1. The last sentence of the Article applies:
“REALTORS shall also ensure that their professional status (e.g. broker, appraiser, property manager,
etc.) or status as REALTORS is clearly identifiable in any such advertising.”
In addition, Standard of Practice 12-5 applies: “REALTORS shall not advertise nor permit any person
employed by or affiliated with them to advertise listed property without disclosing the name of the firm.”
Is Jill and/or Sandy in violation of the Code?
Yes. Both Jill and Sandy are in violation based on the part of Article 12 and as Article 12 is further
interpreted by Standard of Practice 12-5 (quoted above).
Also note that state license laws and/or rules and regulations may prohibit such advertising as well.
Such ads are sometimes called “blind” ads and are specifically prohibited under some state licensing
laws and/or rules and regulations.
Page 15
IV. Article 12
A. Be honest and truthful in real estate communications.
B. Present a “true picture” in your advertising, marketing, and other representations.
C. Ensure that status as real estate professionals is readily apparent in advertising, marketing,
and other representations.
D. Recipients of all real estate communications must be notified that those communications are
from a real estate professional.
Case Study
Every day REALTOR® Jack R. passed the vacant lot and often wondered why no one was developing
anything there. It was an excellent location. He had always meant to follow up -- but forgot about it as
soon as the lot was out of sight. But here was his chance. A “for sale” sign had appeared. It showed
what appeared to be a residential phone number -- and nothing else. What an opportunity! He jotted
down the number and hurried to his office.
As soon as he sat down he called the number. To his surprise, a familiar voice answered. It was Jill A.,
a REALTOR® he knew. She told him that her broker, Sandy G., had an exclusive on the property and
had asked Jill to use her personal telephone number on the sign.
Jack thanked her for the information and hung up. He wondered what to do now …
Is Jill and/or Sandy in violation of the Code?
Page 15
Article 16 Suggested Time: 10 minutes Start time: __________ End time: __________
Article 16 is a relatively short Article, but is interpreted by many Standards of Practice. Note for
participants that Article16 applies to both agency and non-agency relationships. The Article uses the
words “exclusive representation or exclusive brokerage relationship agreements” to include
REALTORS® in those states having adopted non-agency relationships (e.g. transaction broker,
transaction licensee, facilitator, etc.).
In order to summarize the types of issues which the Standards of Practice to Article 16 cover, use the
list in the materials. While you should not dwell on any one of these, mention each to give participants
an idea of the many different issues addressed by Article 16.
Example Standards of Practice which apply to each of these issues are noted here for you. Participants
do not have this reference list. The abbreviation “SOP” stands for “Standard of Practice.”
Examples of issues covered by Article 16 and its Standards of Practice
1. Innovative or aggressive business practices SOP 16-1

2. Advertising solicitations of agency or other relationships SOP 16-2
3. Solicitation of listings and agency relationships of clients of other brokers
SOP’s 16-4, 16-5, 16-6, 16-7, 16-8
4. Dealing with other brokers’ clients SOP 16-13
5. Obligations when entering into exclusive relationships SOP’s 16-9, 16-14
6. Agency and/or brokerage relationship disclosure SOP’s 16-10, 16-11, 16-12
7. Compensation SOPs 16-15, 16-16, 16-17, 16-18, 16-19, 16-20
What Standard of Practice under Article 16 applies to this case?
Standard of Practice 16-2.
Is Don in violation of the Code? Why or why not?
No, Don is not in violation of the Code under Standard of Practice 16-2. Because Don’s promotion was
a general mailing to all homeowners in a given area (in this case, in a particular subdivision), it is not a
violation of Article 16 as interpreted by Standard of Practice 16-2.
You may note that the alleged violation is a violation of the Article and not the Standard of Practice.
Violations of the Code are violations of the Articles of the Code. The Standards of Practice interpret
and support the Article with which they are associated. If there were a violation, the violation would be
one of Article 16.
Page 16
V. Article 16
A. Do not engage in any practice or take any action inconsistent with the agency or other
exclusive relationship that other REALTORS® have with clients.
B. Examples of issues covered by Article 16 and its Standards of Practice
1. Innovative or aggressive business practices

2. Advertising/solicitations which may be received by other REALTORS clients
3. Solicitation of listings and agency relationships of clients of other brokers
4. Dealing with other brokers’ clients
5. Obligations when entering into exclusive relationships
6. Agency and/or brokerage relationship disclosure
7. Compensation
Case Study
It was a slow summer, so Don decided to initiate an aggressive marketing campaign to build sales. A
key part of his new campaign was direct mail advertising. Don obtained a mailing list that included
every home in the Cedar Creek (a large subdivision).
Within Cedar Creek were a number of homes for sale that were listed with other brokers. After Don’s
mailing goes out, several of those brokers filed an ethics complaint against him.
What Standard of Practice under Article 16 applies to this case?
Is Don in violation of the Code? Why or why not?
Page 16
Part 6: Wrapup and Conclusion
Conclude by summarizing the points on the opposite page from participants’ materials. Use the slide
provided.
Note that there are many Articles of the Code that have not been covered due to time limitations.
Encourage the participants to read the entire Code on their own and familiarize themselves with all
17 Articles of the Code.
Page 17
Part 6: Wrapup and Conclusion
The REALTOR® Code of Ethics …
 protects the buying and selling public.
 promotes a competitive real estate marketplace.
 enhances the integrity of the industry.
 is your promise of performance.
 is your promise of professionalism.
Page 17
Handout material
1. The current REALTOR® Code of Ethics.
2. “The REALTOR’s Code of Ethics – A Gift of Vision” by William D. North
3. The 1913 Code of Ethics
4. Arbitration Guidelines (Suggested Factors for Consideration by a Hearing Panel in Arbitration)

from the Code of Ethics and Arbitration Manual.
5. Pathways to Professionalism
6. REALTORS® Pledge of Performance and Service
7. “No losers in Mediation” article
8. “Win/win Solution” article
9. Mediation brochure
Page 18
Page 18
Appendix A
Suggested Time Chart
Suggested Time Topic

10 minutes Icebreaker Exercise Group Work
10 minutes Icebreaker Exercise Feedback
10 minutes History and Background of the Code of Ethics
10 minutes The Preamble
5 minutes Business Ethics
5 minutes The Structure of the Code
5 minutes Pathways to Professionalism
5 minutes Pathways Exercise Group Work
5 minutes Pathways Exercise Feedback
15 minutes Enforcement of the Code
10 minutes Concepts of Procuring Cause
5 minutes Article 1 Summary
10 minutes Article 1 Case Study
5 minutes Conclusion
Total Time: 180 minutes
Page 19
Page 19
Appendix B
Case Interpretations
Case Interpretations to put in this appendix:
Case Interpretation #2-7
Case Interpretation #12-1
Page 20
Page 20

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The REALTOR Code of

9. Describe the professional standards enforcement process of the board or association,

Suggested Time: 10 minutes for group work; 10 minutes for feedback

Start Time: __________ End Time: __________

Some likely “answers” may be:

“Doing the right thing.”

“Right and wrong”

1. Introduce yourselves if you do not already know each other.

What are “ethics?”

Suggested Time: 10 minutes Start time: __________ End time: __________

 National Association of REALTORS formed in 1908.

 No license laws at the time.

 Real estate industry had a history of speculation, exploitation, and disorder.

 Code of Ethics was adopted in 1913 to establish a professional standard of conduct.

 Code of Ethics formed the basis for license laws.

I. Aspirational Concepts of the Preamble of the Code of Ethics

A. Under all is the land …

B. The Golden Rule.

C. “Widely allocated ownership” and “widest distribution of land ownership”

D. Maintain and improve the standards of their calling.

F. Strive to become and remain informed on issues affecting real estate.

I. Urge exclusive representation of clients.

J. Do not attempt to gain any unfair advantage over competitors.

K. Refrain from making unsolicited comments about other practitioners.

L. If an opinion is sought about a competitor (or the REALTOR believes comment is

Suggested Time: 5 minutes Start time: __________ End time: __________

Structure of the Code of Ethics

Suggested Time: 5 minutes Start time: __________ End time: __________

A. What are "business ethics?"

B. Business ethics and legal standards

C. Business ethics and the REALTOR Code of Ethics

III. The Structure of the Code of Ethics

A. The three major sections

1. Duties to Clients and Customers

B. Articles – broad statements of ethical principles.

Suggested Time: 5 minutes Start time: __________ End time: __________

Pathways to Professionalism Exercise

Suggested Time: 5 minutes for group work; 5 minutes for feedback

Start time: __________ End time: __________

A. The three major sections

1. Respect for the public

Pathways to Professionalism Exercise:

Suggested Time: 15 minutes Start time: __________ End time: __________

Ethics Cases and Arbitration Cases

The Ethics Enforcement Process

I. Ethics Cases and Arbitration Cases

A. Ethics - Basic Issue - Is there a possible violation of the Code of Ethics?

II. The Ethics Enforcement Process

A. Filing a Complaint - Who can file a complaint?

B. The Grievance Committee

1. A screening committee comprised of members of the Association appointed to the

C. The Professional Standards Hearing Panel

1. Function is to conduct a full “due process” hearing with sworn testimony,

The Arbitration Process

Note: An Administrative processing fee is not considered discipline. It is charged as part

III. The Arbitration Process

a. Contractual disputes or specific non-contractual disputes (see Standard of

1. Committee performs a screening function similar to review of ethics complaints.

1. A voluntary process in which disputing parties meet with a mediator appointed by

Low-cost Moderate cost

Little delay Moderate delay

Maximum range – solutions Win/lose/split

Parties control outcome Arbitrators control outcome

Uncertain closure Definite closure

Start Time: End Time:

Suggested Time: 10 minutes Start time: End time:

Suggested Time: 5 minutes Start time: End time:

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Suggested Time: 5 minutes Start time: End time:

Start time: End time:

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Suggested Time: 15 minutes Start time: End time:

Suggested Time: 10 minutes Start time: End time:

Suggested Time: 15 minutes Start time: End time:

Suggested Time: 5 minutes Start time: End time:

Suggested Time: 15 minutes Start time: End time:

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Suggested Time: 10 minutes Start time: End time:

Suggested Time: 5 minutes Start time: End time: