Exploring the realm of real estate requires a grasp of its unique terminology, where abbreviations like COE carry significant weight.
COE stands for the Code of Ethics, a foundational framework established by the National Association of Realtors (NAR). This code acts as a vital guidepost within the real estate industry, consisting of seventeen individual articles, each accompanied by its own set of standards. In unity, these articles and standards offer comprehensive direction, shaping the ethical framework of the real estate field.
A deep understanding of the COE, or Code of Ethics, is absolutely essential for anyone involved in the world of real estate.
Real Estate’s Moral Compass: Understanding the COE
Central to the National Association of Realtors is the COE, often referred to as the Code of Ethics. This vital set of principles acts as a cornerstone for the world of real estate.
The primary objective of the Realtors’ Code of Ethics is to safeguard consumers, ensuring that they are represented by realtors who are committed to collaboration and unwaveringly advocating for the well-being of their clients.
Key facets of the Real Estate Code of Ethics encompass:
- A preamble that sets the ethical tone;
- Seventeen articles, each delineating distinct standards of behavior;
- Culmination with an elucidating commentary.
The COE embodies the ethical bedrock upon which the real estate sector is built, fostering professionalism and consumer protection.
NAR Code of Ethics: A Comprehensive Overview of its Articles
The Code of Ethics plays an essential role as a guiding principle for all individuals involved in real estate, carrying the same level of importance for both buyers and sellers. It defines the anticipated conduct for real estate brokers and agents, creating a fundamental basis for their actions.
Originally formulated in 1913, the Code of Ethics by the National Association of Realtors (NAR) remains one of the oldest ethical documents in the realm of business associations in the United States.
The Code’s content is organized as follows:
- Articles one to nine focus on the obligations realtors owe to their clients and customers;
- Articles ten to fourteen address realtors’ duties towards the broader public;
- Articles fifteen to seventeen delve into the ethical considerations specific to realtors.
Here, we present a succinct overview of each article within the NAR Realtors Code of Ethics, encapsulating the essence of its content:
NAR Code of Ethics Article 1 – Safeguarding and Advocating for Clients
The inaugural section of the NAR Code of Ethics elucidates the responsibilities and methodologies that realtors must employ to safeguard and advance their clients’ interests. Moreover, it explicitly emphasizes that adherence to the Code of Ethics is obligatory for all realtors engaged in real estate transactions.
Article One establishes a fundamental principle within the NAR Code of Ethics. It states that when realtors represent clients as agents, their paramount commitment is to safeguard and advance the clients’ interests. While this primary duty to the client takes precedence, realtors are simultaneously bound to maintain honesty in interactions with all parties involved. Additionally, when realtors operate in a non-agency capacity, they are still obliged to uphold honesty when dealing with buyers, sellers, landlords, tenants, or any other parties. This foundational tenet underlines the ethical obligations of realtors as outlined in Article 1 of the NAR Code of Ethics.
At the very outset of the Code of Ethics, the imperative of honesty and the safeguarding of clients’ interests is paramount. This article underscores the centrality of clients’ welfare in the realm of real estate, reinforcing its pivotal significance.
NAR Code of Ethics Article 2 – Integrity in Property Representation
Within Article Two, the NAR Code of Ethics delves into the manner by which realtors should portray properties to potential buyers. This segment also encompasses an additional set of five standards of practice.
Article Two outlines a crucial aspect of the NAR Code of Ethics. It mandates that realtors steer clear of any exaggeration, misrepresentation, or concealment of essential details linked to the property or transaction. While this duty is significant, realtors are not obligated to uncover latent defects in the property. Furthermore, they are not required to provide advice on matters beyond their real estate licensure’s scope or disclose confidential information governed by state-defined agency or non-agency relationships. This ethical guideline underscores transparency and honesty in real estate interactions, as defined in Article 2 of the NAR Code of Ethics.
This ethical guideline underscores the significance of honesty, while also acknowledging that realtors are not compelled to disclose “latent defects” in a property. Latent defects, those concealed from reasonable observation or assessment, serve as examples such as concealed damage within walls (e.g., pipes), unapparent leaks causing roof damage, or concealed electrical issues.
NAR Code of Ethics Article 3 – Collaboration Among Realtors
Article 3 of the Code of Ethics delves into the protocols dictating when and how realtors are required to collaborate. This section incorporates an additional eleven standards that delineate the specifics of realtor collaboration.
Article Three within the NAR Code of Ethics stipulates:
Article Three emphasizes an important collaborative element within the NAR Code of Ethics. It dictates that realtors are duty-bound to collaborate with fellow brokers, with the exception being cases where such cooperation would run contrary to the best interests of the client. However, this cooperative responsibility doesn’t extend to the requirement of sharing commissions, fees, or providing compensation to another broker. This ethical principle underscores cooperation among realtors while preserving the clients’ best interests and maintaining a clear line on financial arrangements, as articulated in Article 3 of the NAR Code of Ethics.
NAR Code of Ethics Article 4 – Realtor’s Responsibility in Disclosing Ownership Interest
When a realtor engages in the sale of their own property, it is imperative that they transparently disclose their ownership stake or interest in the property. Article four of the Code of Ethics underscores this obligation, and it sets a standard that demands such disclosures be formally documented.
Article Four embodies a significant ethical principle within the NAR Code of Ethics. It explicitly states that realtors are prohibited from acquiring interests, purchasing, or presenting offers concerning real property on behalf of themselves, their immediate family members, their firms, or any associated entities in which they hold ownership stakes, without disclosing their true position to the owner or the owner’s agent or broker. Moreover, when realtors sell property they own or in which they hold any interest, they must transparently divulge their ownership or interest in written form to the buyer or the buyer’s representative. This ethical guideline underscores transparency, disclosure, and conflict avoidance in real estate transactions, as set forth in Article 4 of the NAR Code of Ethics.
NAR Code of Ethics Article 5 – Transparency in Professional Offerings
Among the briefest segments within the NAR Code of Ethics, Article 5 stands devoid of accompanying standards of practice. Nevertheless, this article centers on the realm of professional services linked to property, its valuation, and the disclosure of any existing or prospective interests.
Article Five constitutes a pivotal ethical standard within the NAR Code of Ethics. It explicitly outlines that realtors are restricted from offering professional services related to a property or its valuation when they possess an existing or potential interest, unless this interest is openly disclosed to all parties impacted by the transaction. This principle underscores the significance of transparency and full disclosure in real estate dealings, as articulated in Article 5 of the NAR Code of Ethics.
NAR Code of Ethics Article 6 – Ethical Considerations in Advised Services
On occasions, realtors may extend suggestions regarding supplementary services to their clients. Should these recommendations yield a commission for the realtor, it is of legal import that this information is openly disclosed to all relevant parties. Additionally, if the realtor intends to levy a fee for any such services, your consent as the client is imperative.
Article Six stands on a singular standard of practice within the NAR Code of Ethics, and its declaration is as follows: Realtors are mandated not to accept any commission, rebate, or profit linked to expenditures made on behalf of their client without the client’s awareness and consent. Additionally, when suggesting real estate products or services such as homeowner’s insurance, warranty programs, mortgage financing, or title insurance, realtors must transparently reveal to the client or customer the financial benefits or fees, excluding real estate referral fees, that the realtor or their firm may receive due to the recommendation. This ethical guideline underscores transparency, informed consent, and accountability in financial transactions, as delineated in Article 6 of the NAR Code of Ethics.
NAR Code of Ethics Article 7 – Ethics Regarding Dual Compensation
The seventh article within the NAR Code of Ethics delves deeper into the nature and acquisition of compensation by realtors. It emphasizes the prohibition against realtors accepting dual compensation without providing full disclosure to all parties involved.
The content of NAR Code of Ethics, Article 7, can be summarized as follows: In the course of a transaction, realtors are prohibited from receiving compensation from multiple parties, even if such action is legally permissible. This rule applies unless there is full disclosure of this arrangement to all parties involved, and the realtor’s client or clients provide informed consent. This ethical principle underscores the importance of transparency and ensuring that all parties are fully aware of compensation arrangements in real estate transactions, as detailed in Article 7 of the NAR Code of Ethics.
NAR Code of Ethics Article 8 – Management of Realtor Financial Accounts
The eighth installment within the NAR Code of Ethics addresses the pivotal responsibility for realtors to maintain distinct accounts for funds received on behalf of third parties. This mandate underscores the necessity of segregating personal funds from those pertaining to real estate transactions.
Article 8 of the Code of Ethics states that REALTORS® are required to keep funds held in trust for others, such as escrows, trust funds, and clients’ monies, in a distinct account within a suitable financial institution. This account should be separate from their personal funds. This guideline is outlined in Article 8 of the NAR Code of Ethics.
NAR Code of Ethics Article 9 – Documentation Responsibilities
Article nine within the NAR Code of Ethics underscores the imperative for realtors to uphold the clarity of all documentation and contracts. This commitment aims to ensure that the language employed is comprehensible to all parties involved.
Article 9 of the NAR Code of Ethics emphasizes that REALTORS® have a responsibility to safeguard all parties involved in real estate transactions. To achieve this, they must strive to ensure that all agreements pertinent to these transactions, encompassing listing and representation agreements, purchase contracts, and leases, are documented in written form. The language used should be both clear and comprehensible, effectively delineating the specific terms, conditions, obligations, and commitments of the parties involved. Furthermore, a duplicate of each agreement must be provided to every party who signs or initials said agreements. This amendment was made in January 2004.
NAR Code of Ethics Article 10 – Policy Against Discrimination
The tenth segment within the NAR Code of Ethics elaborates on the policy concerning discrimination that applies to all realtors engaged in the field of real estate.
Article 10 of the NAR Code of Ethics underscores that REALTORS® are prohibited from withholding equal professional services from anyone based on factors such as race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity. Additionally, they are forbidden from participating in any scheme or arrangement that discriminates against individuals or groups on these same grounds. A notable amendment was introduced in January 2014.
In their practices within the real estate industry, REALTORS® are also mandated to avoid discriminatory actions. This pertains to their employment practices, and they must refrain from discriminating against any individual or group due to race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity. This aspect was also amended in January 2014.
NAR Code of Ethics Article 11 – Proficiency and Professionalism
Article eleven within the NAR Code of Ethics delves into the benchmarks encompassing proficiency and professionalism, which are reasonably anticipated within a real estate vocation. Given its status as a professional domain, real estate should be approached with due professionalism.
Integral to this professionalism is the understanding that a real estate practitioner should confine their work to areas that fall within their sphere of expertise and knowledge.
NAR Code of Ethics Article 11 establishes guidelines for the caliber of services REALTORS® extend to their clients and customers. These services must align with the expectations of competence and practice standards associated with their specific real estate domains. These domains encompass residential real estate brokerage, real property management, commercial and industrial real estate brokerage, land brokerage, real estate appraisal, real estate counseling, real estate syndication, real estate auction, and international real estate.
REALTORS® are cautioned against engaging in specialized professional services concerning property types or services that fall beyond their expertise. Unless they collaborate with a competent expert in the respective field or fully disclose the circumstances to the client, they should refrain from such undertakings. In cases where external assistance is enlisted, these individuals should be identified to the client, and their role in the assignment must be clarified. An amendment was introduced in January 2010.
NAR Code of Ethics Article 12 – Integrity in Communication
Article twelve within the NAR Code of Ethics underscores the ethical commitment for real estate professionals to uphold honesty and truthfulness in all forms of communication. This responsibility extends to clearly indicating their status as real estate professionals on documents and within organizational contexts.
NAR Code of Ethics Article 12 stipulates that REALTORS® are obligated to uphold honesty and truthfulness in all their real estate communications. They must accurately portray the reality in their advertising, marketing, and any other forms of representation. Furthermore, REALTORS® are required to make it evident in their advertising, marketing, and representations that they are professionals in the real estate field. Additionally, they must ensure that recipients of these real estate communications are aware that the information is originating from a real estate professional. An amendment was made in January 2008.
NAR Code of Ethics Article 13 – Prohibition of Unsanctioned Legal Practice
Article thirteen within the NAR Code of Ethics emphasizes the imperative for real estate professionals to refrain from participating in any activities constituting unauthorized legal practice. When circumstances warrant, these professionals should duly refer to suitable legal experts.
NAR Code of Ethics Article 13 mandates that REALTORS® must abstain from participating in actions that amount to the unauthorized practice of law. They are further obligated to suggest the acquisition of legal counsel whenever the interests of any party involved in a transaction necessitate it.
NAR Code of Ethics Article 14 – Obligations as Legal Witnesses
Article fourteen within the NAR Code of Ethics delineates the responsibilities of real estate professionals when summoned as witnesses in legal proceedings. In such instances, they are compelled to provide accurate and relevant information.
NAR Code of Ethics Article 14 asserts that if REALTORS® are accused of engaging in unethical conduct or are requested to provide evidence or cooperation during any investigation or professional standards proceeding, they are obliged to present all relevant facts to the appropriate entities within their Member Board or affiliated institute, society, or council, as per their membership. Additionally, they are prohibited from undertaking any actions that might disrupt or impede these processes. An amendment was introduced in January 1999.
NAR Code of Ethics Article 15 – Interactions with Fellow Agents
Article fifteen within the NAR Code of Ethics underscores the duty of real estate professionals to abstain from making disparaging remarks or negative comments about their peers in the industry, including their competitors.
NAR Code of Ethics Article 15 states that REALTORS® are prohibited from deliberately or negligently providing untrue or deceptive statements concerning other real estate professionals, their enterprises, or their operational methods. An amendment was implemented in January 2012.
NAR Code of Ethics Article 16 – Adherence to Agreements
Article sixteen within the NAR Code of Ethics emphasizes the commitment of real estate professionals to honor exclusive agreements made with other individuals or fellow professionals.
Article 16 of the NAR Code of Ethics stipulates that REALTORS® are not permitted to partake in any conduct or enact actions that are contradictory to the terms of exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have established with their clients. An amendment was introduced in January 2004.
NAR Code of Ethics Article 17 – Resolution through Mediation and Arbitration
The concluding segment of the NAR Code of Ethics pertains to the resolution of conflicts among members of the National Association of Realtors. It outlines the procedures for addressing such disputes, including the avenues of mediation and arbitration.
NAR Code of Ethics Article 17 outlines the course of action to be taken in cases of contractual or specified non-contractual disputes involving REALTORS® from different firms, arising from their professional relationship. When such disputes occur, and if the Board mandates its members to mediate, the REALTORS® involved are required to engage in mediation. If mediation fails to resolve the matter or if mediation is not mandatory, the REALTORS® are obligated to opt for arbitration according to the Board’s policies rather than pursuing litigation.
Moreover, if clients of REALTORS® express a desire to mediate or arbitrate contractual disputes arising from real estate transactions, the REALTORS® must oblige, adhering to the Board’s policies. This is applicable as long as the clients agree to be bound by any outcomes of the mediation or arbitration.
The responsibility to partake in mediation and arbitration as outlined in this Article extends not only to individual REALTORS® but also to the firms they represent. An amendment was made in January 2012.
Conclusion
The NAR Code of Ethics stands as a comprehensive ethical guide for every real estate practitioner. Whether you’re engaged in purchasing or selling real estate, familiarizing yourself with the code of ethics that governs all real estate professionals is highly beneficial.
FAQ
In real estate, “COE” stands for “Close of Escrow.”
The Close of Escrow signifies the final phase of a real estate transaction wherein all pertinent documents are signed, monetary transactions are executed, and the property’s ownership is officially transferred to the buyer.
During the Close of Escrow, the buyer fulfills the payment of the purchase price, the seller hands over the property’s title, and all essential legal documents are formally registered.
The Close of Escrow is a crucial juncture as it solidifies the completion of a property’s purchase or sale, symbolizing the official transition of ownership from the seller to the buyer.
Typically, an escrow officer or a title company oversees the Close of Escrow, ensuring meticulous handling of all legal and financial aspects related to the transaction.
Ownership undergoes its official transfer during the Close of Escrow when the deed is documented with the pertinent governmental entity, usually the county recorder’s office.
Indeed, there are typically expenses tied to the Close of Escrow, encompassing escrow fees, recording fees, and other incidental charges. Typically, these expenses are equitably distributed between the buyer and the seller, adhering to the terms outlined in the purchase agreement.
Related Inquiries
To become a Real Estate agent in the United States, taking the state-specific real estate exam is a requirement. Each state’s exam will encompass slightly varied real estate regulations and laws.
The term “Real Estate” has its roots in the Latin word “realis,” but it primarily pertains to the tangible and financial attributes of real property. Its usage dates back to the 17th Century. “Real Estate” stands as a legal term employed across various English-speaking jurisdictions globally.
