Code of Ethics Case Interpretations

This ongoing series explores the NAR Code of Ethics through various case interpretations. Please read through the following case and try to decide if there was any Code of Ethics violations. Then click the box at the bottom to find out the answer. (These cases have been provided by the National Association of REALTORS®.)


Case #2-6: Misrepresentation

REALTOR® A, a cooperating broker, had shown four houses to Buyer B, and Buyer B’s wife had asked to see one of them a second time. There was a third inspection, and a fourth. They seemed at the point of decision but said they would like to “sleep on it.” When there was no word the next day, REALTOR® A called. Buyer B said he was a bit hesitant on the price; that some transfers of executives in his company had been rumored; that this could affect him within the year; that he hesitated to buy at a price that might mean taking a loss if he should be transferred within a year.

REALTOR® A tried to reassure the prospect by telephone. Then he dictated a letter stating that the house was an exceptional bargain at the asking price and “our office guarantees to get your money out of it for you any time in the next year if you should need to sell.” Buyer B came in and signed the contract.

Six months later, Buyer B came to REALTOR® A as a seller. He was being transferred. He would need to get his equity out of the house to be able to afford a purchase in the new community. REALTOR® A listed the house at the price Buyer B had paid for it. After a month there had been no offers. Buyer B reminded REALTOR® A of his written assurance that his office had guaranteed he would get his money out of the house within the year.

REALTOR® A explained that the market had become much less active and that Buyer B might have to reduce his price by $10,000 to $15,000 to attract a buyer. Whereupon, Buyer B filed a complaint with the Board of REALTORS® charging REALTOR® A with misrepresentation, exaggeration, and failure to make good a commitment. After examination of the complaint, the Grievance Committee referred it to the Professional Standards Committee for a hearing.

In response to questioning by the Hearing Panel, REALTOR® A admitted that he had written the letter to Buyer B in good faith and, at the time the letter was written, he had been certain that his office could obtain a price for the property that would ensure Buyer B was “getting his money out of the house.” However, REALTOR® A explained that although he had held such an opinion in good faith, the market had softened and now the circumstances were different.

What do you think the Hearing Panel decided? Click here to find out.

The Hearing Panel reminded REALTOR® A that the pertinent fact being considered was not his opinion at the time of the previous sale as compared to his opinion now, but rather his written “guarantee” to Buyer B and his current failure to make good his written commitment. It was the conclusion of the Hearing Panel that REALTOR® A had engaged in misrepresentation and was in violation of Article 2.