Definition• A system of moral principles“It is perhaps one of the most important qualities of any professional to have strong ethics, as one cannot succeed without them. “
Where do ethics come from?• Your Environment• Learned Behavior• Enforcement• Behavioral Science
As a Result• Varying Degree of procedures• Oversight and regulation (Voluntary)• Criminal Charges (Involuntary)• Ethics Vs. Legal• Resources for Ethical assistance
Do Ethics Change and How? 5 min. on the back of your sheet.
Ethical Dilemmas• Unintended Consequences in EthicsTrying to do the right then may open a can of worms• Admit Existence of Ethical issuesEven though no malice is evident, practice may still be edging the line• Interpretation itself is an issue Blurring the lines
Ethics in PracticeAdvising on Reservation / List Price• Suggest motivation• Subjective comparables or rates used• DOM longer for higher priced properties• Broker Motivation for accepting assignmentIs it ethical for broker to recommend price below market?
Ethics in PracticeAssignment Duration• Acceptance contract for longer than DOM• Broker Fishing• New Assignment = Higher price, nearing expiration assignments = Lower priceShould listing contracts be longer than average time on market for other property?
Ethics in PracticeAmount of Properties you are Servicing• Are you servicing all equally• Variable rates and pricing of servicing at different times of contract• Geographical issuesShould a broker take on more assignments if they are already near capacity?
Ethics in PracticePurposeful Procrastination• Office Inventory Control• Broker Finance Control• Marketing saturation• Market TimingShould Time Driven Results be mandatory?
DLLR and COMAR• Department of Labor Licensing and Regulations• Code of Maryland Regulations www.dsd.state.md.us/comar• 09.11.02.01 Licensees Relations to the Public• 09.11.02.02 Licensees Relations to the Client• 09.11.02.03 Licensees Relations to Fellow Licensees
09.11.02.01 Licensees Relations to the Public• The licensee shall remain informed of matters affecting real estate in the community, the State, and the nation.• The licensee shall be informed on current market conditions in order to be in a position to advise clients as to the fair market price.• The licensee shall protect the public against fraud, misrepresentation, or unethical practices in the real estate field. The licensee shall endeavor to eliminate in the community any practices which could be damaging to the public or to the dignity and integrity of the real estate profession. The licensee shall assist the commission charged with regulating the practices of brokers, associate brokers, and salespersons in this State.
09.11.02.01 Licensees Relations to the Public• The licensee shall make a reasonable effort to ascertain all material facts concerning every property for which the licensee accepts the agency, in order to fulfill the obligation to avoid error, exaggeration, misrepresentation, or concealment of material facts.• The licensee, acting as agent, may not discriminate in the sale, rental, leasing, trading, or transferring of property to any person or group of persons because of race, color, creed, religion, national origin, sex, handicap, or familial status.• The licensee may not be a party to the naming of a false consideration in any document.
09.11.02.01 Licensees Relations to the Public• Advertisement.• (1) The licensee in advertising shall be especially careful to present a true picture. A broker may not advertise without disclosing the brokers name or the company name as it appears on the license. A broker may not permit associate brokers or salespersons to use individual names unless the connection with the broker is obvious in the advertisement.• (2) Effective October 1, 2004, an associate broker or salesperson may not use an individual telephone number or email address in an advertisement, as defined in Business Occupations and Professions Article, §17- 527.2(a)(3), Annotated Code of Maryland, unless the identified telephone number of the broker or branch office manager also appears in the advertisement
09.11.02.01 Licensees Relations to the Public• For the protection of all parties with whom the licensee deals, the licensee shall see to it that financial obligations and commitments regarding real estate transactions are in writing, expressing the exact agreement of the parties, and that copies of these agreements are placed in the hands of all parties involved within a reasonable time after the agreements are executed.• All real estate documents shall be signed by a licensee in the licensees own name, and may not be signed in the name of a group or team
09.11.02.02 Licensees Relations to the ClientA. In accepting employment as an agent, the licensee shall protect and promote the interests of the client. This obligation of absolute fidelity to the clients interest is primary, but it does not relieve the licensee from the statutory obligations towards the other parties to the transaction.B. In justice to those who place their interests in the licensees care, the licensee shall endeavor always to be informed regarding laws, proposed legislation, governmental orders, and other essential information and public policies which affect those interests.C. A licensee may not accept compensation from more than one party to a transaction without the full knowledge of all the parties.
Ethics in Commercial Real Estate COMAR 09.11.02.02 Licensees Relations to the ClientD. Disclosure Requirement.(1) The licensee may not acquire an interest in, or purchase, personally, for any member of the licensees immediate family, for the licensees firm, for any member of the firm, or for any entity in which the licensee has any ownership interest, property listed with the licensee or the licensees firm without making the licensees true position known to the listing owner. In selling or leasing property in which the licensee, the licensees firm, or any member of the licensees immediate family or the licensees firm has an ownership interest, the licensee shall reveal that interest in writing to all parties to the transaction.(2) A licensee who provides real estate brokerage services in a group or team shall have the same disclosure requirement of §D(1) of this regulation with regard to unlicensed members of the group or team as the licensee has with regard to members of the licensees firm.
Ethics in Commercial Real Estate COMAR 09.11.02.02 Licensees Relations to the ClientE. When acting as agent in the management of property, the licensee may not accept any commission, rebate, or profit on expenditures made for an owner without the owners knowledge and consent.F. Competitive Market Analysis.(1) A licensee may prepare a competitive market analysis of a specific property for a client, prospective client, or customer. The analysis shall include the following statement printed conspicuously and without change on the first page:
Ethics in Commercial Real Estate COMAR 09.11.02.02 Licensees Relations to the Client Cont. COMPETITIVE MARKET ANALYSIS DISCLOSUREThis analysis is not an appraisal. It is intended only for the purpose of assisting buyers or sellers or prospective buyers or sellers in deciding the listing, offering, or sale price of the real property.(2) If a licensee includes a property in which the licensee has an interest as one of the comparables, that fact shall be disclosed to the client, prospective client, or customer.
Ethics in Commercial Real Estate COMAR 09.11.02.02 Licensees Relations to the ClientG. The licensee may not submit or advertise property without authority. In any offering, the price quoted may not be other than that agreed upon with the owners as the offering price.H. If more than one formal written offer on a specific property is made before the owner has accepted an offer, all formal written offers presented to the licensee, whether by a prospective purchaser or another broker, shall be transmitted to the owner for a decision.I. Unexcused failure to ensure that a prospective purchaser has the real property disclosure statement or disclaimer statement in hand before the submission of an offer to purchase may be considered a violation of the licensees obligation to protect and promote the interests of thelicensees client when this failure could result in a contractbecoming void or voidable.
Ethics in Commercial Real Estate COMAR 09.11.02.03 Licensees Relations to Fellow LicenseesA. The agency of a licensee who holds an exclusive listing, shall be respected.B. The licensee shall cooperate with other brokers on property listed by the licensee exclusively whenever it is in the interest of the client, and share commissions on a previously agreed basis. Negotiations concerning property listed exclusively with one broker shall be carried on solely with the listing broker.C. Signs giving notice of property for sale, rent, lease, or exchange may not be placed on any property without the owners prior consent.
NAR Code of Ethics• Less violations in Commercial than Residential• Most complaints are over compensation• Most violated are Articles 1, 2, 9, and 11
Article 1.When representing a buyer, seller, landlord, tenant, or other client as an agent, Realtors® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve Realtors® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, Realtors® remain obligated to treat all parties honestly. (Amended 1/01)
Article 2.Realtors® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. Realtors® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non- agency relationships as defined by state law. (Amended 1/00)
Article 9• REALTORS®, for the protection of all parties, shall assure whenever possible that all agreements related to real estate transactions including, but not limited to, listing and representation agreements, purchase contracts, and leases are in writing in clear and understandable language expressing the specific terms, conditions, obligations and commitments of the parties. A copy of each agreement shall be furnished to each party to such agreements upon their signing or initialing. (Amended 1/04)
Article 9• For the protection of all parties, REALTORS® shall use reasonable care to ensure that documents pertaining to the purchase, sale, or lease of real estate are kept current through the use of written extensions or amendments. (Amended 1/93)
Article 9• When assisting or enabling a client or customer in establishing a contractual relationship (e.g., listing and representation agreements, purchase agreements, leases, etc.) electronically, REALTORS® shall make reasonable efforts to explain the nature and disclose the specific terms of the contractual relationship being established prior to it being agreed to by a contracting party. (Adopted 1/07)
Article 11.• The services which Realtors® provide to their clients and customers shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage; specifically, 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.
Article 11.• Realtors® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/10)
Filing a Complaint• Complaints are reviewed to determine whether the complaint falls within the jurisdiction of the Commission. An acknowledgement letter is sent to the complainant. Copies of complaints are sent to the brokers of the involved companies for responses to allegations. A review process takes place and the submitted evidence determines the cases progress. The case is either administratively dismissed or sent for an investigative process. Only Commissioners, by law, have the authority to charge any violation of the law and/or regulation or to dismiss a complaint.
Filing a Complaint• Complaints must be submitted in writing on the real estate complaint and guaranty fund claim form. It is necessary that you submit supporting documentation with your complaint.• A complaint that results in recommended charges is reviewed by the Attorney Generals Office for legal sufficiency. The majority of cases set for a hearing are sent to the Office of Administrative Hearings for a hearing date.
Part 3. Predatory Lending, Flipping, and Mortgage Fraud
What is Predatory Lending?• Some Videos on Predatory Lending http://youtu.be/L_eFOvJXtH0 http://youtu.be/oORM-m4crXg http://youtu.be/kQY18xiGen4
Is Flipping Illegal?http://youtu.be/hsOUl8l8MD8http://youtu.be/5M-ZJPRidII• Profits from flipping real estate come from either buying low and selling high (often in a rapidly-rising market), or buying a property that needs repair and fixing it up before reselling.• Under the "fix and flip" scenario, an investor or flipper will purchase a property at a relatively low price (often deeply discounted from the houses market value). The discount may be due to the houses condition (e.g., the house needs major renovations and/or repairs) or due to the owner(s) needing to sell a house quickly (e.g., relocation, divorce, pending foreclosure). The investor will (usually) then perform necessary renovations and repairs, and attempt to make a profit by selling the house quickly at a higher price (closer to market value).