The client’s interests come first

Losing sight of what your client wants can lead to a violation of Article 1.

REALTOR® B was a sales associate with XYZ, REALTORS®. To promote XYZ’s in-house listings, the firm’s principals offered $1,000 bonuses to the company’s sales associates at time of closing on each of XYZ’s listings they sold.

Dr. Z, a recent transferee to the town, entered into a buyer-representation agreement with XYZ through REALTOR® B. Dr. Z explained he had specific needs, foremost of which was that any home he purchased be convenient for and readily accessible by Dr. Z’s spouse, who was physically challenged. "Part of my wife’s physical conditioning program is swimming," said Dr. Z, "so in addition to everything else, I am looking for a home with a pool–or room to build a pool."

REALTOR® B knew there were a number of homes for sale meeting most of Dr. Z’s general specifications, several of which were listed with XYZ.

Over the next few days, REALTOR® B showed Dr. Z several properties in the Blackacre subdivision, all of which were listed with XYZ, including one with an outdoor swimming pool. Not included among the properties shown to Dr. Z were several similar properties in Blackacre listed with other firms, including one with an indoor pool.

After considering the properties shown to him by REALTOR® B, Dr. Z made an offer on the home with the outdoor pool. His offer was accepted and the transaction closed shortly thereafter.

Several months later, REALTOR® B received notice of an ethics complaint filed against him by Dr. Z. Dr. Z had learned about the home with the indoor pool from a colleague at the hospital who lived on the same block. The complaint alleged that REALTOR® B had put his interests, and those of his firm, ahead of Dr. Z’s by promoting XYZ’s listings exclusively and by not telling Dr. Z about a similarly priced property with an indoor pool, which suited his family’s needs better than the property he had purchased. The complaint went on to indicate that REALTOR® B had received a bonus for selling one of XYZ’s listings and that Dr. Z suspected that REALTOR® B’s failure to tell him about the home with the indoor pool was motivated by the opportunity to receive a bonus.

At the hearing, REALTOR® B defended his actions, stating that properties rarely meet all of potential purchasers desires; that he had made Dr. Z aware of several properties that met most of his requirements, including one with an outdoor pool; and that Dr. Z must have been satisfied with REALTOR® B’s service since he had purchased a home.

Upon questioning by Dr. Z’s attorney, REALTOR® B acknowledged that he knew about but had not shown the house with the indoor pool to Dr. Z. He conceded that a pool that could be used year round was better suited to the family’s needs than one that could be used only four months each year. He also admitted his failure to tell Dr. Z about the house with the indoor pool had at least in part been motivated by the bonus offered by his firm. "But," he argued, "aside from the indoor pool, that house was no different than the one Dr. Z bought."

The hearing panel concluded that REALTOR® B had been fully aware that one of Dr. Z’s prime concerns was his wife’s ongoing physical conditioning needs and REALTOR® B’s decision to show Dr. Z only properties listed with XYZ and to not tell him about the home with the indoor pool had been motivated by the possibility of earning an in-house bonus. The hearing panel determined that REALTOR® B had placed his interests ahead of those of his client and had violated Article 1.

Reprinted from the NAR Code of Ethics and Arbitration Manual.

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