COLLECTORS EDITION: 100 YEARS OF THE REALTOR® CODE OF ETHICS April/May 2013
A journal for real estate professionals published by the Virginia Association of REALTORS® • www.VARealtor.com
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firstword ANDREW KANTOR
CODE OF ETHICS Published by The Virginia Association of Realtors® The Business Advocate for Virginia Real Estate Professionals Mary Dykstra, ABR, CRS President Roanoke Bradley Boland President-Elect Reston Deborah Baisden, GRI Vice President Virginia Beach Bill White Treasurer Richmond Trish Szego, CRB, CRS Immediate Past President Haymarket Richard Lugg Chief Operating Officer rick@VARealtor.com Amanda Arwood Vice President of Marketing & Communications email@example.com Andrew Kantor Editor & Information Analyst firstname.lastname@example.org For advertising information, Katie Lindner at (410) 584-1968 or e-mail email@example.com The mission of The Virginia Association of Realtors® is to enhance its membership’s ability to achieve business success. Commonwealth magazine (ISSN#10888721) is published bi-monthly by the Virginia Association of REALTORS®, 10231 Telegraph Road, Glen Allen, VA 23059-4578; (804) 264-5033. Virginia Association of REALTORS® members pay annual dues with a one-year subscription included within their dues. Periodicals postage paid at the Glen Allen, VA post office and additional mailing offices. USPS Per. # 9604. Postmaster: Send address changes to: Commonwealth magazine, 10231 Telegraph Rd., Glen Allen, VA 23059-4578. Custom Publishing Services provided by Network Media Partners, Inc.
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Here's looking at... us The one thing that unites all human beings, regardless of age, gender, religion, economic status, or ethnic background, is that, deep down inside, we all believe that we are above-average drivers. —Dave Barry I challenged a friend of mine once, as we were beginning a four-hour, multi-state drive, to obey every single law — obey it to the point that even the most desperate small-town cop couldn’t find fault. It didn’t seem that hard, because you tend to think of things like speed limits, turn signals, and stop signs, all of which were easy to obey. (It helps to learn to drive in a small upstateNew York town where cops will pull you over in a 25-MPH zone for “barreling though my town at 26 miles per hour.”) I got him in Ohio, though, on a highway, when passed another car. “Gotcha.” “What?” he said. “I didn’t go over 65!” “You didn’t honk.” “Honk?” “Ohio law requires you to honk when passing another vehicle.” “You have got to be [kidding] me.” I wasn’t. Silly law? Yep. Often ignored? Oh, yes. But still — my friend had broken it. He was a criminal. There are people who ignore traffic laws because they don’t
like them or don’t care. (You know who I mean.) There are people who break them because they’re simply not aware of them. And there are people who think they’re obeying them but aren’t. (In most states a turn signal means “I am going to turn.” For many Virginians it seems to mean “I am turning.”) If you ask these people whether they’re good drivers, I can guarantee you almost all will say they are — although there are a lot of other idiots on the road. Ethics and Realtors. Everyone’s ethical in her own mind (well, almost everyone), but everyone has war stories about the other guy who bends, breaks, or twists the rules. Would a moment of self-examination be a bad idea? That’s why we decided — on the 100th anniversary of the Code of Ethics — to offer a different way of looking at it. Think of it as a call for reflection. As you read the stories starting on page 18, think to yourself about how easy it would be to make mistakes and break the code, even unwittingly. And then think about that next time you see someone — someone else, obviously — breaking the Code. Andrew Kantor, Editor andrew@VARealtor.com april/may 2013
CODE OF ETHICS
April/May 2013 Volume 20 ● Issue 2
departments 4 quickhits The latest news and announcements for Virginia’s Realtors
10 statswatch The numbers that shape your world
12 legallines Questions and answers about Virginia real estate law
14 lifelessons When real estate pros break the rules — and get caught
17 formfactor Tips for speeding up license applications and renewals
and see if maybe, just maybe, you’re one of them?
Online disclosure rules: What, where, and how
1 firstword 36 rpacreport
Like it or not, even Realtors with the best intentions sometimes make mistakes — and don’t even realize it. Is it time to take a look
in every issue
Do unto others
Basic training Fresh out of real estate school, are new licensees really ready to get into the game? Probably not, but what’s missing — and what can we do to help them in the big leagues?
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THIS CORRESPONDENCE IS NOT INTENDED AND SHALL NOT BE DEEMED TO CONSTITUTE ANY OFFER TO SELL A FRANCHISE. FRANCHISE OFFERING SHALL ONLY BE MADE BY A FRANCHISE DISCLOSURE DOCUMENT. PLEASE DISREGARD IF YOUR COMPANY IS CURRENTLY UNDER A FRANCHISE AGREEMENT.
CODE OF ETHICS
XXXXXX action Legislative
Advocacy pays off — transportation bill passes We asked and you responded. Realtors from across the state put pressure on their representatives in the Virginia General Assembly, which — after much debate, arguing, and compromise — passed a bipartisan transportation bill that Governor Bob McDonnell is expected to sign. Transportation is a critical issue for Virginia. Without reliable roads and public transportation systems, the state becomes less attractive for businesses looking to move or expand. The bill, which at press time was awaiting action by the governor, would eliminate the $0.175 pergallon gas tax that consumers pay at the pump, and it raises revenues through a variety of new and increased taxes: • A new 3.5 percent tax on gasoline at the wholesale level (about $0.12 per gallon at current prices) • A new 6 percent tax on Diesel at the wholesale level • Raising Virginia’s sales and use tax from 5 percent to 5.3 percent • Raising the motor vehicle sales tax from 3 percent to 4.3 percent over five years • A new $100 annual tax for hybrid, electric, and alternative fuel vehicles (except for those powered by natural gas). The plan is expected to raise about $880 million a year by 2018 (or $3.5 billion over five years) much of it earmarked for 4
transportation. There are also “Regional Congestion Relief” plans for the Northern Virginia and Hampton Roads areas respectively, which include the following: In Northern Virginia (Planning District 8 to be exact), additional transportation revenue will be created by implementing: •A n increase in the regional sales tax of 0.7 percent, for a total of 6 percent •A n increase of 3 percent in the Regional Transient Occupancy tax (hotel/motel tax) •A n increase to $0.35 per $100 in the regional grantor’s tax from the current $0.10 per $100 In Hampton Roads, additional transportation revenue will be created by implementing: •A n increase in the regional sales tax of 0.7 percent, for a total of 6 percent •A n increase in the local gas tax of 2.1 cents These additional taxes are expected to raise between $300 to $350 million annually for Northern Virginia and between $175 and $219 million per year for Hampton Roads by 2018. By stepping up and taking a leadership role in the legislative process, Virginia Realtors played an important part in passing such a
comprehensive transportation plan. Realtors want communities to thrive and we’ve used our political clout to help make that happen — thank you for your efforts in writing your legislators, urging clients and friends to take action, and participating in the process.
Keep up to date If you want to learn more about the details of the transportation plan — and the other bills VAR worked on in 2013 — just visit RealtorsChoose.com. You’ll find explanations of key bills, plus a video about the transportation funding package from VAR lobbyist Martin Johnson.
Lenders and short sales
Banks, short sales, and MLS listings If you list a short sale, and the lender involved instructs you to list it a certain way in the MLS, be sure you keep your local MLS rules in mind. Bank of America, for example, was requiring that agents who list a short sale with a B of A mortgage list the property as “active” on the MLS, even after contract ratification — until a short sale approval letter is issued. It’s all well and good to request that, but be aware that MLSs have different rules for inputting short sales, and that the Bank of America policy could cause agents to violate those rules. When VAR heard about this, we immediately got in touch with NAR, which in turn reached out to Bank of
America. NAR tells us that B of A was responsive, and indicated it will revise what it asks of brokers so as not to make demands that violate MLS rules. (It doesn’t want to discourage potential offers, but it understands that Realtors must abide by MLS rules and the Code of Ethics.) The CoE, you should recall, requires you to present a true picture in the representations you make, including those made through MLSs: Article 12 Realtors shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations.
Fannie and Freddie
FHFA unveils plan to replace Fannie and Freddie Fannie Mae and Freddie Mac will begin winding down, with a new company taking their place. That’s the plan unveiled by the acting director of the Federal Housing Finance Administration — the agency that has overseen Fannie and Freddie since they were taken over by the government in 2008. In a conference call with reporters, Edward DeMarco outlined the plan to create a new company that would combine the mortgagesecuritization operations of the two government-owned enterprises. For the most part, Fannie and Freddie do the same thing: Buy mortgages from lenders (the “secondary mortgage market”) and repackage them into securities that can be bought and sold as stocks. They were private, Volume 20 ● Issue 2
government-sponsored enterprises until 2008, when they essentially took a bullet for the housing-finance industry and had to be taken over by the federal government. When private lenders fled the market, it left the government as the dominant player; it now owns 90-something percent of the secondary mortgage market. And it’s not interested in being such a major player. So the goal is to pull back Fannie and Freddie’s involvement, while still keeping some government backing available. Hence, DeMarco’s plan. A few highlights: • It will create a new company — completely separate from Fannie and Freddie — that would combine many of the back-end operations of the the two companies.
• It would continue to increase the fees charged for government guarantees to help encourage private companies to take up the slack. • It will direct Fannie and Freddie to each sell at least $30 billion of the mortgage-backed securities they hold to private investors, taking taxpayers off the hook for those. • It will reduce the companies’ presence in the multifamily housing business by 10 percent. It’s still a plan, and it isn’t expected to take effect until next year, so many things could change. So keep an eye out as the details emerge. april/may 2013
Important clarification about license transfers (you need to read this) When a Realtor transfers her license from one brokerage to another, there is a period of time in which she cannot practice real estate (essentially, while the transfer is in progress). Some members have received incorrect information about when they can resume practicing. Here is what DPOR says: • You can only resume your practice when DPOR has approved your application. You may have been told or taught that you can practice real estate when DPOR receives your transfer application. This is incorrect. Once again: If you switch firms, your license does not take effect until the transfer has been approved by DPOR. Or as DPOR director Gordon Dixon put it, “The transfer is not effective until Board staff completes processing of the application.” Further, he explains: The licensee is not authorized to practice until his affiliation with the new firm is approved. The update is displayed on License Lookup, and the license is mailed, the day after the activ[ation] or transfer is approved. This is how VREB has interpreted the regulation for more than a decade, according to VREB executive director Christine Martine, despite what some trainers may have taught. Why do you have to wait for DPOR to process the application? Why is receiving it not enough? Simple, according to Martine: DPOR will not approve the license-transfer application if, for example, the licensee has insufficient CE, has been inactive for over 30 days, or the new firm is out of compliance. More likely, though, it’s because of an error in the paperwork. According to DPOR, about 30 percent of applications have to be returned due to an error. Want some tips for speeding the process? Check out Form Factor on page 17.
IDX listings and your liability Like many Realtors, Jeff Launiere, a Realtor in Clearwater, Fla., had an IDX feed coming into his website, with all the listings from his area. The feed comes directly from the Multiple Listings Service, and agents don’t have control over it — they either show all listings, or none. One of those listings — not Launiere’s — appeared to violate the Fair Housing Act, by stating, “Adults Only, No Children Under 16 Allowed.” A private citizen saw the listing on Launiere’s site, and, not realizing that Launiere wasn’t the source, filed a lawsuit naming Launiere (incorrectly) as the listing agent. Although it took some phone calls (and led to some confusing and scary moments for Launiere), the lawsuit against him was dismissed. NAR general counsel Laurie Janik explained that “It is NOT true that an agent who posts IDX listings on her website is liable for the content in those listings.” The reason? “The Communications Decency Act of 1996 provides a defense for those who are only posting content created by others.” Section 203 of the CDA says, essentially — with some specific caveats — that providers and users of “interactive computer services” who publish information provided by others cannot be held liable for that information. In Launiere’s case, he fits that description perfectly: He was a provider of an interactive computer service (his site) that published information provided by someone else (the originating broker via the IDX feed). (There are some ways you can end up liable for third-party information, usually because you edit it, add a headline, etc. Talk to your firm’s attorney about this.) And in case you’re wondering, Janik says the listing agent who DID create that listing has been dismissed, “but the case continues against the broker because the agent who wrote the discriminatory comments is licensed with this broker.”
quickhits Smart staging
Using scent for sales: Research says keep it simple You know the ol’ “cookies in the oven” trick — the scent of something freshly baked can make a home feel more inviting. (Scent is the most powerful of our major senses, as it’s connected directly to the brain. That’s why a smell can trigger such a strong memory.) Anyway, some scientists decided to test the details to see how odors can be used to sell things. The conclusion they reached is that simple scents sell better than complex ones. The smell of baked goods or potpourri might actually dampen enthusiasm because they’re too complex. It’s based on a study of shoppers in Switzerland, where simple and complex scents were piped into a store to see buyers’ reactions. According to Prof. Eric Spangenberg of the college of business at Washington State University, who conducted the study: Complex scents, even if they’re pleasant, can be a distraction because some people subconsciously dedicate time and energy to figuring out what the aroma is. At open houses, “they are not there to process the smells. They are there to process whether this is a place they want to live.” Take-away: Use a pleasant floral or fruit scent as opposed to chocolate-chip oatmeal cookies. 8
In the news: Drug-related explosions (but not meth labs this time) Exploding suburban meth labs are old news. The latest trend in drugrelated detonations: hash oil explosions. So warns FEMA in a recent weekly Bulletin of Fear (aka “InfoGram” for emergency services personnel). As FEMA explains, “Some explosions in residences and hotels around the country are being traced back to a process using butane to extract and concentrate compounds from marijuana.” What madness is this? you ask. Since when does marijuana lead to explosions? (Increased Cheetos consumption, maybe.) Basically, hash oil is extracted from cannabis plants by soaking them in butane (you know, lighter fluid) and then carefully boiling off that butane, leaving hash oil behind. The key word here is “carefully.” As Wired eloquently puts it: Butane is highly flammable and it tends to sink, meaning that if you use it indoors or don’t ventilate well, you’ll run into serious trouble. Let some butane puddle in your living room, throw in a thoughtless spark from a cigarette, stove, or — dare I suggest — bong hit, and suddenly your apartment is missing a wall. There’s some good news. Unlike meth production, which leaves behind uninhabitable homes and seriously messed-up users, hash oil production, while dangerous, doesn’t taint the property (or wreck the users — the resulting drug is akin to really high quality pot, according to Wired.) So while you’ll be required to start disclosing when a home used to be a meth lab, at least you won’t have to ask if anyone ever made hash oil. On the other hand, the giant hole in the wall might be a hint. l www.VARealtor.com
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statswatch ANDREW KANTOR
CODE OF ETHICS
Legal Hotline Top 10: 2011 to 2013 The VAR Legal Hotline gets more than a thousand calls every year from brokers across the state looking for professional legal guidance. It’s one of VAR’s most popular member services. But what are they asking about? We looked over the records for 2011 and 2012, and for the first quarter of 2013, and noticed that while some things change, some things remain the same. Not counting requests for general legal information or about the Legal Hotline itself, here are the top-ten topics of Legal Hotline questions.
2013 (first quarter)
1. Contracts 2. Property management 3. VREB regulations 4. Disclosure 5. Escrow 6. Compensation/commission 7. DPOR/licensing 8. Advertising 9. Agency 10. Federal law
1. Contracts 2. DPOR/licensing 3. Agency 4. Disclosure 5. Property management 6. VREB regulations 7. Earnest money deposits 8. Advertising 9. Compensation/commission 10. HOAs/POAs
1. HOAs/POAs 2. Agency 3. Property management 4. DPOR/licensing 5. Compensation/commission 6. Disclosure 7. Earnest money deposits 8. Advertising 9. Ethics 10. Buyer rebates
Find a ton of information about Virginia real estate law in VAR’s Legal Resources Center: VARealtor.com/legalresources. And don’t forget to check out the “25 Most Common Legal Hotline Questions & Answers” from our crackerjack legal staff — ask your broker or find it in the Legal Resources Center.
10 April/may 2013
Lots of people try to predict the market, and it seems like everyone has an opinion about what’s happening. Stick with the facts: the monthly Virginia Home Sales Report. It’s got clear charts, insightful analysis — and it’s all in the numbers, not in the cards. Visit us at VARealtor.com/HomeSales
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legallines BLAKE HEGEMAN
CODE OF ETHICS
Ethics and the law NAR has made clear that the Code of Ethics must never conflict with state law, but where the Code imposes a higher standard, it should be followed. Virginia has laws and regulations governing the practice of real estate, but many of these rules are basic; the Code of Ethics sets a much higher duty to other licensees and the public. This Legal Lines will focus on where the Code imposes a more rigorous standard than Virginia law, and on situations where the Code simply provides more clarity. Before you read this article, I ask that you do one thing for me: Stop what you are doing and pat yourself on the back for voluntarily agreeing to hold yourself to such a high standard.
Article 15 Article 15 is a great place to start when examining the duties that are greater than Virginia’s license law and regulations. Its main focus is to keep the peace by setting specific standards on how Realtors must interact with other members of the profession. For example, Standard of Practice (SOP) 15-3 states: The obligation to refrain from making false or misleading statements about other real estate professionals, their businesses, and their business practices includes the duty to publish a clarification about or to remove statements made by others on electronic media the Realtor controls once the Realtor knows the statement is false or misleading. (Emphasis mine.) This SOP is unique to Realtors. Federal law and the courts have generally made clear that electronic media hosts (e.g., blog operators) are not responsible for statements made by others on the host’s site. But SOP 15-3 imposes a duty on Realtors to publish a clarification about — or to remove — statements made by others on sites they control when they become aware the post is false or misleading. Therefore, we have a higher duty than many other information “publishers.”
12 April/may 2013
Article 12 Article 12’s main focus is presenting a true picture in advertising. SOP 12-5 requires greater disclosure than other licensee advertisements. The Virginia Real Estate Board (VREB) regulations allow a licensee to include his required online advertising disclosures (see below) or a link to those disclosures on the online viewable page. For example, if Firm A advertises online at a local newspaper’s site, it would have to include its firm name, city and state of main office, and all jurisdictions in which the firm is licensed or a link to those required disclosures on the viewable page of the advertisement. The VREB rule is not dependent on whether there is enough room to put all the required disclosures on the viewable page. However, SOP 12-5 requires the firm name to be displayed in a reasonable and readily apparent way in advertisements and only allows the link to replace the firm name “in electronic displays of limited information (e.g., “thumbnails, text messages, ‘tweets,’ etc.).” Therefore, if Firm A advertises online, and there is ample room to put the firm name, it must at least include the firm name — it could link to the other required disclosures (city and state of main office and all jurisdictions of licensure). If Firm A advertises online using Twitter, where there is no space for the firm name, then just a link to the required disclosures will suffice. (For more on this, see Accessible Tech on page 32.) Remember, where the Code of Ethics and the law conflict, the Code must give way to the requirements of the law. Where the Code establishes a higher standard than is required by law, Realtors are obligated by that higher standard. In this case, the Code establishes a higher standard. Also, please remember there is an additional Code requirement for firm and Realtor websites - they must at a minimum clearly display the firm’s/Realtor’s name and states of licensure (see SOP 12-9). As a reminder, below is a list of disclosures required by the Real Estate Board for online advertising. I recommend you include them all rather than a link. www.VARealtor.com
VAR Legal Hotline (804) 622-7955 Monday through Friday, 10 a.m. – 4 p.m.
Online ads for a firm must have: •F irm name; •C ity and state of main office; and •A ll jurisdictions (usually states) in which the firm is presently licensed. Online ads for a licensee (not a firm) must have: •L icensee’s and firm’s name; •C ity and state of the licensee’s office (not necessarily firm’s main office); and • J urisdictions (usually states) in which the licensee holds a license, active or not.
Article 16 Article 16 sets specific guidelines focused on how we must interact with other real estate professionals. The guidelines in Article 16 are not found or specified so clearly anywhere in Virginia law. SOP 16-16 is one of the most commonly invoked sections of this Article: Realtors, acting as subagents or buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing brokerʼs offer of compensation to subagents or buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing brokerʼs agreement to modify the offer of compensation. This SOP makes clear what not to do, but the issue comes up on the Hotline more than we would like. For example, may a buyer’s agent submit a purchase offer in which he increased his commission? No, this action is specifically prohibited by Article SOP 16-16. In summary, never use the terms of an offer or the threat of withholding an executed offer to increase your commission. SOP 16-9 sets another good and clear standard that prevents a lot of misunderstandings and disputes. It sets in stone that Realtors have an obligation to attempt to determine if a prospect is in an exclusive agreement before entering into the same type of agreement.
Conclusion There are many places where the Code and Virginia law overlap, but there are also many gray areas addressed by the Code alone. I’ve only mentioned a few to illustrate this point, but there are many other examples. The Code is a wonderful resource for Realtors and a great guide to doing things the right way. I encourage all Realtors to sit down at least once a year and read this valuable tool to practice. l Volume 20 ● Issue 2
The VAR Legal Hotline is a free, members-only benefit for brokers. You can receive answers to questions about Virginia real estate law, and timely information on legal and regulatory issues concerning the real estate industry. The Legal Hotline provides legal information, not legal services. You should consult your attorney if you need representation or advice. You must register for the Hotline before you can call. Registration is free and quick. Go to www.VARealtor.com/legalhotline; you will need your NRDS ID number.
Who can use the Hotline? • You must be a principal or supervising broker.* • You must be a VAR member. • You must have registered for the Hotline (see above). • You must have your NRDS ID number available when you call. (* Each office can have one other person designated by the principal broker for Hotline access.)
E-mailing the Hotline You can e-mail your questions to hotline@VARealtor.com. • Responses will be by phone; we no longer provide written answers to Hotline questions. • You must include your full name, phone number, and NRDS ID. We cannot respond to messages that do not include all three. • We will try to respond within 24 hours, but response time depends on Hotline activity.
Not a broker or member? If you aren’t eligible to use the Hotline, you can browse and search our Hotline archives at www.VARealtor.com/hotlinearchive and find more legal and risk management information in VAR’s Legal Resources Center at www.VARealtor.com/legalresources. You will need your NRDS ID number to log into the site.
Questions? If you have questions about the Hotline, contact VAR at (800) 755-8271 or (804) 264-5033, or by e-mail at info@VARealtor.com The VAR Legal Hotline should not replace your own legal counsel. We will not answer questions on matters 2013nor can 13 unrelated to real estate or april/may real estate brokerage, we help with pending arbitrations.
lifelessons Kathleen Toler
CODE OF ETHICS
Broker supervision, anyone? Licensees who run afoul of Virginia real estate regulations can find themselves in the crosshairs of the Virginia Real Estate Board, facing punishment ranging from a small fine to loss of their license. Here are a few real-world examples taken from the actions of VREB. These narratives are based on the Board’s official findings; participants may disagree with VREB’s conclusions and version of events. They are provided solely as examples of Board actions. All of the names have been changed.
Forging ahead In July, Suzanne Goodman asked Roberta Reid to be her agent for the new home she was having built, as well as for the sale of her old home. Reid was an agent with Magellan Realty. However, by September, Reid and Goodman had developed “irreconcilable differences” and Reid’s team leader at Magellan Realty, Michael Rumsey, took over. Goodman complained that the reason for the breakup was that Reid had forged her name on documents. When the Board’s investigators interviewed Reid, she adamantly denied signing her client’s name on any documents; she asserted that she took all of the documents to Goodman for her to sign. During a second interview with the Board, Reid maintained her story. At the beginning of her third interview, Reid continued to deny that she had signed her client’s name and she said didn’t know “how to be more clear in stating that.” However, after the investigators confronted her about differences between dates and handwriting styles, Reid finally broke down in tears, admitting to signing a total of nine documents without her client’s knowledge. She also confessed to having forged the names of the listing agent as well as the signatory for the homebuilders. The investigation further revealed that Michael Rumsey, the team leader who took over the deal for 14 April/may 2013
Reid, was also the agent who originally trained her. Reid felt she was doing what Rumsey had trained her to do and that she hadn’t signed anything she “wasn’t supposed to sign.” (Apparently, she thought forgery was a perfectly acceptable way to move the deal along more quickly.) She also claimed that she was new to real estate since she was licensed only a year prior to her dealings with Goodman. However, Reid was a paralegal for 14 years before to getting into real estate and the Board found it difficult to believe she ever honestly thought she was authorized to sign on her client’s behalf. Reid was fined $1,000 and her license was revoked.
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lifelessons It’s a matter of trust While Linda Gulliver was principal broker of Riverside Realty, she hired Jack Newsome as a salesperson despite the fact that he was young and inexperienced. After Riverside Realty became the listing and leasing firm for 10 properties, Newsome asked Gulliver for the property management position. She was surprised, as Newsome had only been selling real estate for about a year, but she gave him the job anyway because he was “like a son” to her and she “trusted him completely.” Two years passed before Gulliver began to realize she shouldn’t have been so trusting. Her office manager reported having difficulty collecting records from Newsome. Bank statements were missing and bills for property maintenance were being paid out of escrow. Newsome wasn’t turning in documents or making deposits. Clients complained that he wasn’t returning their calls. Gulliver let his behavior slide for six more months until she finally fired him. Her efforts were too little and too late. One of her clients filed a complaint with the Board when Gulliver couldn’t produce a copy of a lease for a rental property. During the investigation, Gulliver blamed everything on Newsome, despite the fact that she had allowed him to continue handling accounts for another six months until she fired him. She said, “I
really should’ve pulled the record to see and confronted Newsome about that. I didn’t do that. I trusted him.” Gulliver said that “the light did not really come on” until an audit revealed that files — and $8,000 — were missing from escrow accounts. She admitted several times that “I am truly not a bookkeeper” and she was unable to even balance her personal checkbook. But even when she was well aware that she had an employee who needed to be carefully watched, she failed to do her job. Gulliver was fined $1,500 and her license was revoked.
Brothers in crime While working for Mountainside Real Estate, Jason Hickson acted as a buyer’s agent for his brother to help him purchase a house and get a loan. Unfortunately, Hickson’s helpfulness quickly crossed the line into deceitfulness. In order to increase his brother’s income for the loan application, Hickson provided the loan officer with the contact information of an associate at a construction company who would verify his brother’s employment. The problem was that his brother didn’t work for the company, and Hickson had asked the associate to lie about his brother’s income so he could qualify for the loan. Hickson also provided a falsified lease agreement to the loan officer. Based on the false information, the bank gave Hickson’s brother a mortgage and an equity line of credit for the property. 16 April/may 2013
Hickson’s lies didn’t go unnoticed. He pled guilty to one count of wire fraud, a felony, and was sentenced to eight months in prison and ordered to pay restitution of $179,000. Hickson sent a letter to the Board disclosing his guilty pleas to the felony charge. The Board’s investigation revealed that Hickson quit construction work after injuring his shoulder. Then he tried to get a real estate license. He admitted that he failed “many of the tests” before he finally passed. Hickson defrauded the bank to get his brother a loan only two months after obtaining his real estate license. Hickson’s license was revoked. In addition, his license was placed on probation until he had successfully retaken the salesperson 60-hour Principles of Real Estate prelicense education course. l www.VARealtor.com
formfactor andrew kantor
CODE OF ETHICS
Speeding up transfers One concern among Realtors who change firms is the amount of time it takes for their licenses to become active with their new brokerages. (Read the story in Quick Hits — you have to wait to receive DPOR approval before resuming your practice.) Christine Martine, executive director at DPOR, said that in a vast majority of cases delays are caused by forms that are not correctly filled out — Realtor error, in other words. Here are some things to watch out for.
Make sure your current license isn’t expired. You’ll need to renew it before transferring.
Be sure you have the correct license number for the new firm, especially if the new company has different types of businesses with similar license numbers (e.g., full service and referral firms).
+ Use the most current form, which can always be found on the Real Estate Board’s website in the Forms and Applications section. The most current Activate/Transfer application is dated 2/27/2013. + Remember to enclose the $60 fee; DPOR accepts Discover, MasterCard, and Visa, but not American Express. And of course, be sure you have sufficient funds in your checking account or sufficient available credit. + Attaching your current license will help speed the process as well.
Verify that the firm you are transferring to and its principal broker are in good standing. You can find this information through License Lookup on DPOR’s website.
The new principal or supervising broker must sign, and you must send the original — the board does not accept faxes.
Forms — they’re the bread and butter of a deal. They’re full of fine print and legalese, and not everyone “gets” the details. And that often ends up as a call to our Legal Hotline. (Shameless plug: (804) 622-7955.) So we asked our intrepid legal counsel (read: lawyer), Blake Hegeman, to take one of the forms the Hotline gets the most questions about and illuminate it for us. They’re all available, free for download, at: www.VARealtor.com/standardforms.
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By Andrew Kantor and Blake Hegeman
Good intentions arenâ€™t always enough
18 April/may 2013
CODE OF ETHICS
others Have you ever noticed that anyone driving slower than you is an idiot, and anyone driving faster than you is a maniac? —George Carlin If it wasn’t so serious it would almost be funny. We asked brokers across the state what they found most lacking in other companies’ Realtors. Top of the list: ethics. Then we asked what kind of training their own agents needed most. Answer: contracts, negotiation, marketing. Ethic issues, it seems, are confined to other firms. Maybe George Carlin had a point. It’s always the other guy. Guess what? To everyone else, you’re the other guy. That’s not to say you’re an unethical agent. In fact, the vast, vast majority of Realtors do their best to not only adhere to the Code of Ethics, but to take its message to heart: Treat others the way you want to be treated. You are not a salesman or -woman. You are a Realtor, and being one sets you apart. It imposes, as the Code of Ethics puts it, a “grave social responsibility and a patriotic duty to which the Realtor should dedicate himself.” Face it: You should be proud. There aren’t a lot of professions that hold their members to so high a standard. Volume 20 ● Issue 2
Face it: You should be proud. There aren’t a lot of professions that hold their members to so high a standard. april/may 2013 19
But even the most ethical agent can slip. The best of us make mistakes, often without realizing it. Unless you do something egregious (see “Life Lessons” in any issue of Commonwealth), chances are the Realtor sitting across the table isn’t going to tell you about it, let alone file a complaint. We hesitate before accusing someone else of being “unethical.” Instead, she’ll walk away with a professional smile on her face and a bad taste in her mouth. Her client, too. Maybe even yours.
Doing the right thing
This isn’t another “Make sure you know the Code” article. Instead, we want to show you just how easy it is — with all the best intentions — to break the Code... and be someone else’s “other guy.” Be prepared: This isn’t a quiz, and we’re not going to give you answers. The point is to consider the kinds of situations you might be in, and how to think about them from an ethical perspective. So don’t expect a legal Q&A. It’s about the process itself. No scenario we dream up can possibly mimic what happens in real life. Real life is nuanced — full of details and caveats. Because of that, ethics boards aren’t predictable. A ruling could hinge on any number of factors, from the consequences of the offense to the attitude of the Realtors involved. Realtors break the Code all the time, often without realizing it; it’s the ethical version of rolling through a stop sign. VAR’s Legal Hotline gets regular questions demonstrating that even experienced brokers don’t always know the Code as well as they should. There are things you might do all the time, thinking they’re A-OK, when in reality they aren’t. (To continue the driving analogy, think of people who use their turn signal instead of their hazard lights to mean “I’m pulled over.”) You might believe you’re acting within the spirit of the rule, although others might not agree. Or you might rationalize that no one’s really being hurt, and that you’re actually helping your client. Whatever rationalization you might have, in the long run it’s not worth it. People remember what you did, even if it’s to help them — and it will leave a bad taste in their mouths. It’s easy to offer up simple and obvious scenarios — to make right and wrong obvious. But that’s not what trips most people up. What we have here are some examples that are hopefully a bit more thought provoking. Think about them, and then decide whether you can see yourself in the same place.
Realtors break the Code all the time, often without realizing it; it’s the ethical version of rolling through a Stop sign. 20 April/may 2013
Protect, but serve Jane’s client had lost his job, but he managed to find a new one... in another state. He needed to move quickly, but he didn’t want to take a bath on his house. Even priced reasonably well, though, Jane wasn’t able to find as much interest as she hoped. She explained this at lunch to her colleagues. “I really like this guy,” she said. “He’s having a hard time. He just needs to break even with the house. I know he really can’t afford to pay rent and his mortgage.” One of her colleagues perked up. “You know, I think I know someone. One of my clients is looking to get into investing. If the price is right, this might be a good place for him to start. Lemme get him in touch with you.” End result: Jane made her sale. No, her client didn’t get quite as much as he had hoped for, but he wasn’t underwater and didn’t have to go months making both rent and mortgage payments. Jane was wrong. Yes, she helped her client, but to do so she had to reveal personal information — including information about her client’s financial situation. As Kemper Funkhouser, COO of Funkhouser Real Estate Group in Harrisonburg (and 2013 chairman of the NAR Professional Standards Committee), explained, “Too often we hear listing agents mention to other Realtors their clients’ personal or financial situations. This violation of confidence could affect the terms of a purchaser’s offer at the seller’s detriment.” So what might happen? In the back of their heads, Jane’s colleagues around the lunch table might well realize that Jane is quick to share some inside info on her clients — useful next time she has a listing. Or they simply may not refer clients her way. (Hopefully one will do the right thing and quietly tell her, “You really shouldn’t have said that.”) Jane wasn’t ill-intentioned; she was trying to do right by her client and simply let her frustration get the better of her. But she still violated the Code.
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Chris was the listing agent for a home that was part of an estate; the owner had recently passed away and his family was selling it. A prospective buyer responded to Chris’s ad, and — as the sale was simple and straightforward — with the consent of the sellers and the buyer Chris decides to act as a (disclosed!) dual agent. An offer was prepared, submitted, and accepted. Then Chris got a bit of a shock. He discovered that the buyer was convicted of sexually assaulting a child. Two of the sellers (relatives of the deceased owner) still lived in the neighborhood. They both had children. Chris called the buyer and explained the situation. “I want to tell them about your conviction,” he said. “I think they have a right to know.” “No,” said the buyer. “It’s my business. I’ve served my time.” But Chris knew he had a duty to disclose something like this to the sellers, and that it’s almost always better to keep things above board. He was afraid of what would happen after the sale, so he explained the situation to the sellers. Chris made a mistake. He has a legal and ethical duty to preserve his clients’ confidential information, unless disclosure is required by law. In this case, he is not required to make a disclosure to the seller, and doing so would be detrimental to the buyer; if the sellers back out, Chris’s buyer client could file a complaint. (This is yet another good reason to approach dual agency with caution.) The right thing to do is to remain silent about the buyer’s situation and hope the sellers are full of human understanding when they find out that Chris knew this important fact, and why he couldn’t tell them. Article 1 says you must act in the best interests of your client. Confidentiality is a high ethical duty — and one you must follow … even in unpleasant circumstances.
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Be honest and open Mark was walking around the house his client was planning to sell, getting the full tour. Although the backyard was only medium sized, it backed up to some beautiful woods (owned by the HOA). “The woods are great,” said his client, “Except for the spring.” He laughed. “That’s when the creek floods.” “Floods?” “Yeah. Every April or May the creek soaks the backyard.” “Er...” said Mark. “I think that’s something I have to disclose to anyone before they sign a contract.” “Huh?” said his client. “What d’ya mean? This is just us talking — I don’t want you to tell people about the flooding.” “I kind of have to. It’s the law. If I know something like that, I can’t hide it.” His client was shocked. “I thought we had some kind of confidentiality,” he said. “Like lawyers. I wouldn’t have told you that if I knew you had to share it!” “Sorry,” said Mark. “It’s the law. It’s called a ‘material adverse fact,’ and if I know about it I have to disclose it. And yeah, flooding is material.” “You have got to be kidding me.” “Look,” said Mark. “I have to disclose the flooding, but they probably would have found out about that anyway. Just don’t tell me about anything else like that, OK?” Mark was right to stick to his guns about disclosing the backyard flooding. Yes, client confidentiality is a high ethical duty, but sometimes the law requires you to disclose things your client may want kept secret. But when he said “don’t tell me about anything else,” Mark entered dangerous territory. Sticking your fingers in your ears might work when you’re six, but it doesn’t when you’re a professional. Willful ignorance is always a bad idea, and it certainly doesn’t reflect well on the profession.
22 April/may 2013
Regina and her client were sitting down to go over the details of selling the client’s home. Inventory in the area was low, so Regina expected to see several offers. “Do you care if buyers know if you get other offers?” she asked. “No,” said her client. “I don’t care. People have to expect we’ll get other offers. Just don’t give the details.” Indeed, within a week they had two offers, including one from another agent in Regina’s firm. Then a third buyer expressed interest. Regina was concerned. The buyer’s agent was well known in the area for filing complaints with the Real Estate Board for what Regina thought were minor things. She was worried that if his client lost out on the house to a Realtor from Regina’s firm, the agent would insist there was a conflict of interest. Luckily, though, Regina knew the Code: Just because her client said she could disclose that there were other offers, it didn’t mean she had to. When the agent asked about any other offers, Regina politely declined to answer, saving herself a headache. Regina didn’t know the Code as well as she thought. In fact, because she had her client’s permission to disclose the existence of other offers, she is required to (if asked). Further, she’s also required to disclose — again, if asked — where the offer came from. (“[W]hether the offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker.”) The lesson is one for buyers’ agents: There are two questions to ask if you’re interested in competing offers: whether any other offers exist, and — separately — “whether [those] offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker.” If the agent she’s so afraid of ever found out that Regina had permission to disclose the information, he could make a much bigger stink. If everything’s above board, making a deal within the firm would easily stand up to scrutiny — like it or not, you can’t circumvent the Code just because you’re uncomfortable sticking to it.
Barry’s clients are interested in buying a home that includes a set of beautiful oak bookcases. Although they aren’t firmly attached to the wall, they each have a single screw and bracket at the top (as a precaution to keep them from tipping over). “Will those bookcases convey?” the clients ask. Barry checks with the listing agent, who informs him the next day that yes, the seller — who is already living out of town — never intended to take the bookcases. The contract is signed. During final walkthrough, though, Barry and his clients are surprised to see the bookcases are gone. “Where are the bookcases?” Barry asks the listing agent. The listing agent calls the seller: “Where are the bookcases?” The seller slaps his head. “Shoot. I forgot to tell the movers to leave them. Sorry.” “I don’t think the buyers are gonna be happy with ‘Sorry’,” the seller’s agent tells him. “You need to send them back, or we’re going to have to pay at closing.” “No we won’t,” says the seller. “They didn’t put it in the contract, and the shelves weren’t attached to the house. Besides it’ll cost a mint to have the movers bring them back.”
One of Kevin’s listings was waaaay out in the rural side of the county. He asked a photographer friend to take some photos for him for the listing. When she got to the house, the photographer noticed that, while on one side was a beautiful open field, on the other was a small power substation very close to the house. Knowing that Kevin was going to use the pictures for marketing, the photog was careful to take her shots from such an angle that the substation wasn’t visible. She delivered them to Kevin and explained what she did. “Good idea,” he said. “Worst comes to worst, they grumble a bit. But at least I get them to see the place.”
There’s a reason Article 9 requires that, whenever possible, agreements and specific terms should be in writing “in clear and understandable language expressing the specific terms, conditions, obligations and commitments of the parties.” Specific language isn’t just about protecting your clients from someone who tries to pull a fast one. It’s also about protecting them from well-meaning people who simply make mistakes. If Barry’s clients try to get out of closing, they’re the ones that could be found in breach of contract.
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There’s no telling how an ethics panel would rule on this case. Did Kevin present less than “a true picture in [his] advertising, marketing, and other representations”? People who had to drive all that way were bound to be annoyed — it would be obvious that he had deliberately worked to hide the substation. Not only is there a possibility of an ethics complaint, he’s also doing a great job of reinforcing the cliché “Realtors will do anything for a sale” perspective. And anyone who’s actually interested in the home will be wary of working with him. No, that doesn’t mean you have to take pictures of all the ugly parts of a property. Think to yourself, though, whether people comparing the property to your photos would feel like you were trying to mislead them.
Did Kevin present less than a “true picture in his advertising, marketing, and other representations”?
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It was late November when Luese’s clients listed their home with her — a nice place with a large front lawn. Only trouble: By the time Luese got to take pictures, the lawn had turned brown for the winter. Not a problem. It didn’t take long in Photoshop to turn the brown lawn green and make the pictures a lot nicer. “I dunno,” Luese’s broker said upon seeing what she did. “Photoshop is a no-no.” “I’m not adding a tree or taking out power lines,” Luese said. “I’m just tweaking the color a bit. It looks green most of the year. Think of it as ‘virtual outdoor staging’.” Realizing she was right, her broker agreed. “No adding or removing things,” he cautioned her. Bad advice. The house sold, but come springtime, when the lawn filled in it wasn’t green at all. It was mostly green, but with big brown patches. And the green was almost all weeds. Needless to say, the buyers weren’t happy. Most people know that making a big change in Photoshop is verboten — they aren’t going to add windows or remove power lines from a picture, but what’s wrong with a little color adjustment? Plenty. Even a minor tweak can easily cross the line so you’re not presenting a true picture of the property. If someone is annoyed enough to file an ethics complaint, it’s going to be hard to argue with the evidence.
Don’t play lawyer Lawrence was an excellent Realtor, and was finalizing a deal for a $900,000 home. His client had some details they wanted added to the contract regarding a powercompany easement. Lawrence was smart enough to know he wasn’t a good writer, though, so he turned to his friend Karen, who happened to work at a different real estate firm. She not only had a way with words, she had just finished a deal with a similar easement issue. Lawrence knew that Article 11 required him not to practice in areas he wasn’t competent in — and to ask for help. So he asked Karen, “Can you write the clause for me?” “I’m kinda busy...” Karen said. But Lawrence knew Karen’s weak spot. “I have two tickets to the Hokies game next Saturday,” he said. Karen laughed. “Good seats?” “Section 14.” “Sold.” Lawrence may have been smart to think of Article 11, but Karen should have remembered Article 13: Do not engage in the unauthorized practice of law. In Virginia, real estate licensees may prepare contract language for others, but only if A) it’s “incidental to a real estate transaction,” B) she’s involved in the deal, and C) she does not charge a separate fee for doing it. In this scenario, not only was Karen not a part of the transaction — her firm isn’t involved in the deal — she’s accepting a fee (Hokies tickets) for doing it.
Lawrence knew that Article 11 required him not to practice in areas he wasn’t competent in — and to ask for help.
24 April/may 2013
Don’t mess with other brokers Philippe had been a Realtor at Towne Halle Properties for years, and had a great relationship with his broker and his clients. But when his childhood friend opened a brokerage nearby, he gave his broker notice and switched firms. He made the move while working with a client, and arranged for another Realtor at Towne Hall to take over for him. But that now-former client called Philippe a few days later. “I know I’ve got a contract with Towne Halle,” he said, “but I’d rather work with you. What do I need to do?” Phillipe explained that he couldn’t move in on another brokerage’s client. “Besides,” he said, “There are a lot of good agents at Towne Halle you can work with.” His former client refused to listen. “You’ve been great and I don’t want to start from scratch.” “All right,” said Philippe. “Tell you what. Your agreement with Towne Halle runs out in a few weeks. If you don’t find anything by then, give me a call at my new place and we’ll get together.”
Pop quiz: Did Philippe violate the Code? If so, when? A. Probably. As soon as he engaged in any conversation with another brokerage’s client. He should have politely declined to discuss the situation. B. Probably. He was fine until he discussed the status of the client’s agreement with Towne Halle. C. Probably not. The client called him, and he didn’t actively try to interfere with an existing relationship. The answer is C (although it’s impossible to know how an ethics panel will rule). Article 16 prohibits interfering with an exclusive brokerage relationship of another firm. But Philippe didn’t “directly or indirectly [initiate] such discussions,” and in fact encouraged that client to work with agents at Towne Halle. Nor did he suggest something like, “Just ignore Towne Halle’s calls for two weeks and then call me.” The Standard of Practice for Article 16 (SOP 16-6, if you’re interested) addresses this very situation, saying that Philippe and his former client “may discuss the terms upon which they might enter into a future agreement.” They could even “enter into an agreement [that] becomes effective upon expiration” of the contract with Towne Halle.
The bottom line Only on the Disney Channel are ethical choices crystal clear. In the real world, it’s not always obvious what the right thing to do is. Even worse, the right thing may not be the thing you want to do. More situations than not have conflicting factors that have to be weighed when you make a decision. When that happens, take a moment to think about what you’re doing (or are about to do). The most important part of the Code of Ethics is simply the Golden Rule: Do unto others.... So ask yourself whether your actions are the best reflection of you, your firm, and your profession — and whether your actions truly reflect all that you stand for as a professional Realtor. l
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Basic 26 April/may 2013
CODE OF ETHICS
Are new licensees ready for prime-time — and how can we get them there? Basic training is just that — basic. When you get a real estate license, it means (or should mean) that you have a solid, basic knowledge of how to conduct a real estate transaction. It’s the equivalent of knowing how to steer, accelerate, and break — it doesn’t mean that you’re ready to take on the Washington Beltway at rush hour*. So while new licensees may not be ready to practice real estate on their own, they should be ready to be ready. The foundation should be built; experience will take care of the rest. That’s the theory. Does it work that way? It’s a question we posed: In 2009, we formed a workgroup to look at the issue of licensee competency. And early this year we polled nearly 4,000 Virginia brokers about what they thought of the quantity and quality of real estate education in the state. We brought it all together at our GetActive legislative conference, with an open panel and town hall discussion. The questions before the panel and the audience: Do Virginia
Realtors get enough training — and the right kind of training — before being licensed? And if not, what’s to be done?
Easy does it “Could someone walk out of the exam and help someone with the biggest investment of their lives?” asked Paul DiCicco, executive vice president of McEnearney Associates, rhetorically. (He’s since joined Keller Williams as regional director.) No, obviously. “They could be showing homes and writing contracts without knowing what they were doing.” His issue is that real estate education is less about how to do real estate than about how to pass the course. Students learn how to get a good grade, he said, but “There was no way someone could come out of these classes and be able to sell a home.” Greg Davis, a recently licensed real estate agent with Long & Foster in Richmond, agreed. While he said that the 60-hour prelicensing requirement is enough to pass the exam, “When I
BY ANDREW KANTOR
*Or any time, really Volume 20 ● Issue 2
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“[New] agents are coming into the office and they’ve never seen a contract.” 28 April/may 2013
walked out of there, did I want to list somebody’s house? Did I want to help somebody buy a house? No.” The issue, he pointed out, is that it’s not always clear to the newly licensed that they aren’t quite ready yet. A licensee’s got to know his limitations. “I can see why some new licensees would want to rush out,” Davis said. “They think they need to start making money.” And while that kind of enthusiasm might be praiseworthy in a general sense, without some experience under their belts, new Realtors can be prone to making mistakes that can cost clients money, and do permanent damage to their reputations — not to mention the profession as a whole. “The licensees are going to have to take some responsibility themselves,” he said. They’ll have to realize what they’re lacking. (Davis has an advantage in that regard — his wife Pam has been a Realtor for seven years.) Members of the audience were quick to agree: Getting a real estate license is easy … too easy, for some. As one audience member groused, why are we giving somebody a license right after they finish a class? After all, student drivers first need a permit. But what does that mean, ‘too easy to get a license’? For at least some people, the ease of getting a real estate license equates to lack of respect for the industry. If it takes more training to become a barber, how can we expect consumers to accept Realtors as the professionals they are? (For a comparison of various professions’ licensing requirements, see the chart.) Licensee competency is about more than general professionalism. What
we wanted to know was what specific training issues rear their heads when a newly-minted real estate agent hits the streets.
Missing pieces So what’s wrong with new licensees? What kinds of training are they missing? Ask 10 people and you might get 10 different answers… or you might not. Contracts (and the understanding thereof) was a common issue. “[New] agents are coming into the office and they’ve never seen a contract,” said Ben Mills, an associate broker with William E. Wood in Virginia Beach. He’s not entirely surprised — the “Principles of Real Estate” course doesn’t talk about completing contracts, he said. Result: “Nine times out of 10 I ask ‘What does the contract say?’ and they don’t know.” Others in the audience agreed. “Understanding the contract is the biggest issue I run into, and not with just new agents,” said one. “It’s the biggest investment in your clients life, and its got to be taken more seriously.” Kit Hale — audience member, general manager of MKB in Roanoke, and 2006 VAR president — said the issue isn’t even about the nitty-gritty. “[It’s about] understanding a contract,” he said, “not the contract.” An example: an agent asking him to review a contract that included the line “subject to short sale.” That begs the question: What about the short sale? DiCicco had a different issue: “Folks are coming out [of real estate school] with no idea how to negotiate.” Schools may teach the nuts and www.VARealtor.com
bolts of a transaction, but not the people angle — and real estate is all about people. Of course, there wasn’t agreement on everything. Some audience members thought there wasn’t enough training in at least the basics of specialties such as property management. Others, though, complained about spending time learning things they’ll never use — appraisals and financing were two examples. “It’s good to be smart,” said one, “but we don’t need to be experts.” Whatever the specifics that are missing, the consensus seemed clear: It’s time to look at licensure requirements. The better the quality of real estateschool graduates and new licensees,
the better it is for everyone. Problem: It’s not entirely clear what’s missing. The number one violation found by the Virginia Real Estate Board, said Christine Martine, executive director at the Department of Professional and Occupational Regulation, is “unworthiness and incompetence.” Although the board is working to narrow that definition, it’s clear that too many agents are not quite ready for prime time. Sure, there are always some people who intentionally do the wrong thing, but in the vast majority of cases it’s a case of simple sloppiness, or just not understanding the rules well enough. (Incorrect handling of earnest money deposits is a common problem.) So what’s to be done?
Schools may teach the nuts and bolts of a transaction, but not the people angle — and real estate is all about people.
Virginia licensure education requirements Classroom training required to sit for licensing exam Real estate appraiser (35)
Nail technician (150)
plus 50 certified inspections*
Real estate salesperson (60)
Esthetician (cosmetologist) (600)
Auctioneer (80) Surveyor
Real estate appraiser (650)
Graduate of 4-year course
Wax technician (115) Contractor (240) and four years practical experience
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= 20 hours * Other combinations of classroom training and certified inspections are allowed.
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Ideas Boland’s workgroup generated plenty of ideas. Some have already been put into action: broker self-audits, short sales being incorporated into the licensure curriculum, rules for unlicensed assistants, and carryover CE credits. One idea that piqued interest was simply increasing the required prelicensing hours from 60 to 120. Not only would that (in theory) better prepare agents, it could help improve Realtors’ image overall as well-trained professionals. There was one significant problem with that: The workgroup quickly realized that it wasn’t the amount of time students spend doing coursework, but the material they were learning (and the quality of the courses and instructors). “If you could quadruple the number of hours, it wouldn’t make a
difference,” Boland said. “[Students] learn more working in an office than they can from books and classes.” Quality, in other words, needs to trump quantity; a stronger and more flexible pre-license curriculum — one that teaches to today’s markets — is more important than arbitrary increases in hours. So, once again, what’s to be done? More classes on standard forms, was one suggestion. Requiring an apprenticeship or at least hands-on experience. (The idea that no one should be allowed to list or show houses without first visiting and evaluating properties was met with enthusiasm.) How about changing the curriculum to match the need? As Charlee Gowin, a Realtor with Prudential Towne Realty in Virginia Beach put it, “We know what we want them to know.”
Virginia and its neighbors — real estate licensure requirements HS diploma or equivalent required?
Classroom hours required for real estate license*
Additional requirements for broker’s license*
180 hours of coursework
Two years as salesperson for at least 20 hours per week; 336 hours of additional coursework; 48 hours in brokerage management coursework
Three years as salesperson; three-hour ethics course for brokers
75 hours of coursework for “provisional” status; additional 90 hours within three years for full status
120 additional hours of coursework, including 30 hours of “office/broker management” classes; 120 more hours within three years of passing broker exam
Two consecutive years as salesperson; 135 additional hours of coursework
Two years active experience as salesperson; 90 additional hours of coursework
* Some states will count experience and/or general college credit toward these requirements ** Includes three hours of ethics training *** NC considers all licensees to be brokers 30 April/may 2013
Maybe clarifying the role of postlicensure education as focusing on the practical side of the business? Or what about one of the simplest ideas: Require more and better broker supervision, especially of new agents. VAR legal counsel Blake Hegeman understood that sentiment completely. “It’s clear from the many [Legal] Hotline calls I get that broker supervision is a key issue,” he said. “I think the broker is the key to this.” That’s the way John Ince of Nest Realty in Charlottesville was also thinking. His suggestion: “Why not require a broker sign-off on all contracts for a probationary period?” Many in the audience agreed, and some suggested going a step further: Brokers should be doing that already, and for all licensees. More broker supervision garnered plenty of head-nodding and general assent, but there’s also the inverse — converse? — approach: Make Virginia an all-broker state, like North Carolina. There, every sales agent is responsible for his or her own contracts to a much greater extent than in Virginia and indeed in most states. There is less buck-passing and more individual responsibility… and more pressure, especially on new licensees. The idea of requiring a morethorough education for real estate licensees was appealing to Boland’s workgroup — N.C. requires 75 hours of training for “provisional” status, and an additional 90 hours within three years for a full license — not to mention the benefits of that extra responsibility put on agents. (For more on what nearby states require for licensing, see the box opposite.) Volume 20 ● Issue 2
But what works in a lab doesn’t always fly out in the wild. So it was with the all-broker-state idea. “There was a lot of excitement about that,” Boland said, “until we ran it by some folks.”
Problem and solutions, dancing in the dark There is general agreement that new licensees could be better trained. There is slightly less agreement on exactly what that better training would be: ethics? contracts? negotiating? And there’s always the question of the overall goal: Is it to keep as many Realtors out of trouble as possible? Is it to enhance the profession’s image? Is it to reduce some of the weight on brokers’ shoulders? And there are solutions: More required hours, updated curricula, closer supervision, and so on. Each has champions and detractors, of course. The trick is finding where the two sets mesh, and mesh in a way that accomplishes the goal(s), addresses the current training shortcomings, and is palatable to a majority (preferably a large majority) of members. No easy feat. But if the first step to solving a problem is admitting there is one, we’re at least on our way. l
“If you could quadruple the number of training hours, it wouldn’t make a difference. Students learn more working in an office than they can from books and classes.”
april/may 2013 31
accessibletech ANDREW KANTOR
CODE OF ETHICS
What and where to disclose online With more and more electronic communication being done in public — the “social” part of social media — you’ll find that you can never really remove your Realtor hat. That means you need to be extra careful when you’re writing an e-mail, crafting a blog post, or replying to a tweet. There are disclosure rules from both the Virginia Real Estate Board and the Realtor Code of Ethics that apply online whenever you engage in “advertising.” And believe me, the definition of “advertising” is pretty broad (See “What is advertising?”).
But first, the basics. You must disclose the following in any communication that could be construed as advertising: •Y our name •Y our firm name and where it’s located (either the main office or the office you work out of) •W hat states or regions you’re licensed in But that doesn’t mean you have to put all that information in every message. The one-click-away rule: Those disclosures must be made either in the message itself or on a Web site that’s one click away from the message. (Twitter is an exception; more on that in a moment.) As we’ll see, that makes meeting your disclosure requirements very simple. 32 April/may 2013
E-mail This is the easiest one of all: Simply add a signature line to all your e-mails that includes the disclosure information. (We’re not talking paragraphs of legalese. Your non-business contacts will understand.) Jane Doe, Realtor® Schlobotnik Realty, Blacksburg Licensed in Virginia and North Carolina. If even that’s more than you’d like to stick on the end, just include a link to a Web page that contains it: Learn more about how Schlobotnik Realty and I can help you at www.janedoerealtor.com/about. That meets the Code’s requirement of having your firm name included, and it takes advantage of one-click-away to keep the whole disclosure thing down to one line.
Twitter Twitter presents a unique problem in that posts — tweets — are limited to 140 characters; adding a link to your disclosure page is pretty much impossible without severely limiting your tweeting ability. That’s why the Code makes a specific (and simple) exemption for Twitter in the Code: Your individual tweets don’t need a link to your disclosure statement, but your Twitter profile page must have it. Unlike Facebook, Twitter does allow you to include whatever you want on that profile page (well, up to 160 characters), so it’s easy to put the entire disclosure text right there.
Facebook Facebook makes things a little more difficult because there’s no “About Me” section on your main page. Therefore, unlike with Twitter, your disclosures will be more than one click away, as visitors will have to go to your “About” page. That means — in order to meet your disclosure requirement, you need to put your firm name and a link to your disclosure page on every Facebook post that could be considered advertising. It might seem odd at first, but after a while your “friends” will expect it.
Blog posts (including Tumblr) Another easy one. Whether you use Tumblr, have a blog on your company site, or run your own, the simplest way to meet your disclosure requirements is to make sure they appear on every page of your blog or site — in the sidebar, perhaps. Presto — your disclosures are taken care of. A slightly less simple way: Have your blog software automatically add your disclosures — or a link to them — on every one of your posts. (How you do this depends on your site. Ask whoever manages it for you; it should be a simple process.) If worst comes to worst, you can manually add your firm name and the disclosures link to each post. (See the e-mail example on the left.) If you’re posting a message or reply to a public message board — for example, on Reddit, a local news site’s forum, or someone else’s blog — you’ll need to manually add a disclosure link to the bottom of anything you write that could possibly be construed as real estate related. (You may want to create a simple text file with the information — “disclosures.txt” — so you can cut and paste it as needed.) Remember to include your firm name with the link.
Volume 20 ● Issue 2
What is advertising? Imagine you’re the world’s pickiest person, or the state’s slimiest lawyer — what would you consider advertising? Sometimes it’s obvious, such as if you post a new listing. Other times, not so much. For example, if you tweeted this: Rams make the Final Four — now I really want that new 50” HDTV! Send me some business, peeps! That would be advertising. Ditto for a blog/Facebook post like this: I’m tired of hearing how hard it is to get a mortgage. Just helped a young couple with so-so credit buy their first home. Sure, it took a little extra work with the lender, but I got to see the looks on their faces when we closed. It’s just not that bad! And here’s an example from a Realtor’s Pinterest profile page: Follow me into the lifestyle we enjoy in Virginia: four seasons of beauty. Message me for listings and updates! “Message me for listings and updates.” Yep, that’s advertising — and it requires a disclosure.
april/may 2013 33
accessibletech Pinterest, Flickr, and other image-oriented sites If you use a photo- or video-sharing site, you’ll find that, like Facebook, they don’t always have a space on your profile page for your disclosures. (Flickr — the large image to the right — is a good example.) That means visitors will have to click a separate link to get there — e.g., “About Me” — and that violates the one-click-away rule. In those cases you’ll need to do what you do with Facebook: Include your firm name and a link to your disclosures in the caption of every photo or video. Annoying, yes. But that’s the rule.
Cheat sheet: online disclosures You must include on any message that could be considered advertising: • Your name • Your firm name and where it’s located (either the main office or the office you work out of) • What states or regions you’re licensed in Where those disclosures (or a link directly to them) need to go:
E-mail — At the bottom of every message (i.e., in your signature line) Your blog or site: So it’s visible on every page of the site (e.g., in the sidebar) or on the bottom of every post Message-board post: At the bottom of each message Twitter: In your profile, so it appears under your picture on your main page Facebook: At the bottom of every message (because Facebook doesn’t show your “About Me” information on your profile page) Image/video sharing site (e.g., Pinterest, Flickr, YouTube): In the description of every picture or video
34 April/may 2013
CHILDREN FAMILY FUTURE INVEST IN RPAC, INVEST IN YOUR BUSINESS NEIGHBORHOOD SCHOOLS COMMUNITY FRIENDS CLIENTS FELLOW REALTORS AMERICAN DREAM
VISIT REALTORSCHOOSE.COM FOR MORE INFORMATION.
Contributions are not deductible for federal or state income tax purposes. Contributions to RPAC are voluntary and are used for political purposes. You may contribute more or less than the suggested amount. You may refuse to contribute without reprisal and the National Association of REALTORS速 or any of its state associations or local boards will not favor or disfavor any member because of the amount contributed. Up to 100% of your contribution is sent to National RPAC and is charged against your limits under federal law (2 U.S.C. 441a); National RPAC returns up to 70% of your contribution to Virginia RPAC for use in connection with the election of state and local candidates in Virginia.
rpacreport ANDREW KANTOR
CODE OF ETHICS
As of January 15, 2013, the following Realtors® and local associations have joined RPAC of Virginia as Major Investors. For more information on the value of RPAC and how your investment works to protect your business, contact Heidi Schlicher at heidi@VARealtor.com or (804) 264-5033. Or, if you want to get invested today, please visit www.realtorschoose.com/contribute.
Crystal R Investors ($2,500)
Golden R Investors ($5,000)
Charles Burnette Burnette Real Estate Sales, Blacksburg
Billy Chorey Chorey & Associates Realty, Suffolk
Dennis Cronk Poe & Cronk Real Estate Group, Roanoke
John Dickinson Hall Associates Union Hall
Joe Funkhouser Coldwell Banker Funkhouser, Harrisonburg
Deborah Baisden Prudential Towne Realty Virginia Beach
Mary Dykstra MKB, REALTORS Roanoke
Dorcas HelfantBrowning, Coldwell Banker Professional, Virginia Beach
Steve Hoover MKB, Realtors® Roanoke
Thomas Jefferson, III Joyner Fine Properties Richmond
John McEnearney McEnearney Associates Alexandria
John Powell Long & Foster Real Estate Colonial Heights
Cindy Hawks Keller Williams Realty Virginia Beach
Shane McCullar Keller Williams Realty Alexandria
Muraji Nakazawa Re/Max Allegiance Herndon
Forrest Odend’hal Long & Foster Real Estate, Gainesville
Golden R Associations ($5,000) •N orthern VA Association of Realtors, Fairfax
Tom Stevens Coldwell Banker Residential, Vienna
Melanie Thompson Century 21 AdVenture Realty, Fredericksburg
Jack Torza Long & Foster, Realtors® Mechanicsville
•C harlottesville Area Association of Realtors®, Charlottesville • R oanoke Valley Association of Realtors®, Roanoke • W illiamsburg Area Association of Realtors®, Williamsburg
all of Famers have contributed a cumulative H amount of at least $25,000 to RPAC.
Crystal R Investors ($2,500)
Jason Outten The Buyer Brokerage LLC Ashburn
Jane Quill RE/MAX Presidential Fairfax
Trish Szego ERA-Elite Group, Realtors®, Fairfax
Bill White Joyner Fine Properties Richmond
Sterling R Investors ($1,000) Sterling R — Hall of Fame Sandee Ferebee Prudential Towne Realty, Virginia Beach Tom Innes RE/MAX Commonwealth, Richmond Robert Adamson McEnearney Associates, Inc., Arlington Elizabeth Atkinson ERA Atkinson Realty, Virginia Beach Dennis Bane Century 21 Valley Real Estate, Dublin James Barb Jim Barb Realty, Inc., Winchester C.C. Bartholomew Long & Foster Real Estate, Inc, Manassas Mary Bayat Bayat Realty Inc, Alexandria Laura Benjamin Roanoke Valley Association Of REALTORS®, Roanoke Mary Ann Bendinelli Weichert Realtors, Manassas Bradley Boland Keller Williams Realty, Reston Beckwith Bolle Carter Braxton Preferred Properties, Leesburg, VA Suzanne Brady Century 21 Adventure Redwood, Fredericksburg Patricia Buck McEnearney Associates, Inc., Potomac Falls Robyn Burdett Re/Max Allegiance, Chantilly Peggy Burke Long & Foster Real Estate, Woodbridge Bill Burke Long & Foster Real Estate, Woodbridge Keith Canty greg garrett realty.com, Newport News Dale Chandler greg garrett realty.com, Newport News Flo Chittenden Long & Foster Real Estate, Manassas Moon Choi Re/Max Presidential, Fairfax Vic Coffey RE/MAX All Stars Realty, LLC, Daleville Hugh Cross Cross Management, Suffolk Elizabeth Dalton NRVAR, Radford John Daly Rose & Womble Realty, Virginia Beach Sheila Dann Abbitt Realty Co, LLC, Newport News Claire Forcier-Rowe Coldwell Banker Elite, Fredericksburg Virgil Frizzell Long & Foster Real Estate, Reston Beverly Frowen Long & Foster Real Estate, Inc, Manassas Anne Gardner Charlottesville Area Association of Realtors, Charlottesville Gail Gowin Prudential Towne Realty, Virginia Beach Art Grace Hunzeker & Lyon, PC, Manassas Lynn Grimsley RE/MAX Peninsula, Newport News George Grundy George Grundy & Assoc Realty, Petersburg Todd Hetherington Century 21 New Millennium, Lorton
Jeanne Hockaday Virginia Country Real Estate, Ordinary Amy Hudson RE/MAX 8 - Blackburg, Blacksburg Nathan Hughes Bandazian & Holden, Richmond Charles Hulett Keller Williams Realty, Chesapeake Jo Anne Johnson Westgate Realty Group, Inc, Falls Church Karen Kidwell Long & Foster Real Estate, Falls Church Betty Kingery Mountain to Lake Realty, Rocky Mount Patricia Kline Avery Hess Realtors, Locust Grove Jody Korman RE/MAX Commonwealth, Richmond Vonda Lacey Lacey Real Estate Group, Fishersville Barbara LeFon Rivah Realty LLC, Montross George Lyons Long & Foster Real Estate, Woodbridge Keith May Cottonwood Commerical, Harrisonburg Jim Mellen RE/MAX Peninsula at New Town, New Town, VA Thomas Meyer Condo 1, Inc., Falls Church Brooke Miller Long & Foster Real Estate, Inc, Fredericksburg Percy Montague Montague Miller & Co Westfied , Charlottesville Fred Morgan 1st Choice Real Estate, Staunton Susan Oh New Star Realty & Investment, Mc Lean Gwen Pangle Pangle and Associates, Leesburg, VA Gail Penman William E. Wood & Associates, Virginia Beach Fatima Pereira-Shephard Long & Foster Real Estate, Manassas Robert Perkins Long & Foster Real Estate, Inc, Colonial Heights Tracy Pless Long & Foster Real Estate, Reston Kimberly Plourde Exit Realty Central , Norfolk Denise Ramey Roy Wheeler Realty Co., Charlottesville Anne Rector Rector-Best Property Management Alexandria Katy Richards Joyner Fine Properties, Midlothian
Sterling R Associations ($1,000) • Fredericksburg Area Association of Realtors • Greater Augusta Association of Realtors • Harrisonburg-Rockingham Association of Realtors • Lynchburg Association Of Realtors • New River Valley Association of Realtors
rpacreport Sterling R Investors ($1,000) Fetneh Schacht Long & Foster Real Estate, Herndon Henry Scholz MKB, Realtors, Roanoke R. Scott Shaheen Long & Foster REALTORS, Richmond Katrina Smith Long & Foster/Webber & Assoc., Winchester Karen Smith RE/MAX Commonwealth, Richmond Patricia C. Snyder Coldwell Banker Four Seasons, Mt. Jackson Susan Spellman Long & Foster, Realtors, Williamsburg Wes Streans MO Wilson Properties, Woodbridge Patricia Steele Coldwell Banker Professional, Virginia Beach Minnie Stevenson 1st Choice Real Estate, Staunton Suzy Stone Century 21 AdVenture Realty, Fredericksburg Mack Strickland Strickland Realty, Chester Patricia Sury Montague Miller & Co. Downtown, Charlottesville Derrick Swaak Tutt Taylor & Rankin R.E, Mc Lean Christine Todd Northern Virginia Association of Realtors, Fairfax Loretta Trayer Mountain Sotheby’s Intl Realty, Banner Elk Mary Ann White RE/MAX Commonwealth, Mechanicsville Shanna Wiseman Parr & Abernathy, Hopewell Jon Wolford Long & Foster Real Estate, Springfield
WHY I INVEST I’m a big supporter of RPAC because of the impact that we as Realtors — as an association — are making on homeownership and the rights of consumers. —Jody Korman, Re/Max Commonwealth, Richmond
Visit RealtorsChoose.com/RPAC-101 to hear about what inspired Jody to become an RPAC investor. VAR’s lobbying can only be as effective as the REALTOR® support behind it. RPAC and VAR work everyday to ensure that your business, and your clients, are protected from laws that threaten the American dream of homeownership.
See how your RPAC investment is paying off: Visit www.RealtorsChoose.com!
38 April/may 2013
We’d love to hear from you 1913-2013
CODE OF ETHICS
We’re online at www.VARealtor.com Our official blog is VARbuzz, at www.VARbuzz.com If you have questions, we’re ready to help. During normal business days, our receptionist is available from 8:30 a.m. to 5:00 p.m.
Our phone number is
(804) 264 -5033 For membership and dues questions Ask for Amy Hafer Membership Records Manager email@example.com
For questions about professional standards and the Code of Ethics Ask for Erika Almstead Professional Standards Administrator erika@VARealtor.com
If you’re interested in marketing or advertising opportunities Ask for Christine Hodges Marketing and Communications Mgr. firstname.lastname@example.org
To reach our Legal Hotline
If you’d like to have someone speak at your association or brokerage
To find out about conferences, seminars, and professional education
Ask for Lynne Wherry Director of Member Outreach email@example.com
Ask for Glenda Puryear Conferences Specialist or Lili Paulk, Director of Education glenda or lili @varealtor.com
If you need to know about professional designations Ask for Kim Martin, Specialties and Chapter Manager firstname.lastname@example.org
If you have comments or questions about Commonwealth magazine or our Web sites Ask for Andrew Kantor, Editor and Information Analyst email@example.com VAR Member Service Partners
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Call (804) 622-7955*
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Our COO is Rick Lugg (804) 249-5703 rick@VARealtor.com
Volume 20 ● Issue 2
Zipform, electronic forms solutions Vertical Response, social media management platform
For information about RPAC Ask for Heidi Schlicher Director of Political Operations firstname.lastname@example.org VAR 2013 Leadership Team
Mary Dykstra, ABR, CRS President MKB, REALTORS® Roanoke (540) 989-4555 email@example.com Bradley Boland President-Elect Keller Williams Realty Reston (703) 437-1717; firstname.lastname@example.org Deborah Baisden, GRI Vice-President Prudential Towne Realty, Virginia Beach (757) 486-4500 email@example.com Bill White Treasurer Joyner Fine Properties Richmond (804) 967-2740 firstname.lastname@example.org Trish Szego, CRB, CRS Immediate Past President ERA Elite Group Haymarket (703) 359-7800; email@example.com Rick Lugg Chief Operating Officer (804) 249-5703; firstname.lastname@example.org
april/may 2013 39
VARworks ANDREW KANTOR
CODE OF ETHICS
Bearing the higher standard VAR President Mary Dykstra, Roanoke We all know that ethics are important; we all know to “do the right thing.” So why do we sometimes do the wrong thing? It’s not because we’re bad or greedy or lazy. I believe that, in most cases, it’s simply because we don’t recall what the Code of Ethics asks of us, or we simply don’t realize that what we’re doing has an effect on those around us. I have worked with many, many Realtors, and I can say without hesitation that I can hold them up against anyone when talking about dedication, professionalism, and integrity. Do we slip? Of course. Are there bad apples? I challenge you to name a profession without them. But they are by far the exception among an exceptional group — a group that is held to a higher standard than the law. More importantly, Virginia’s Realtors know that being held to the Realtor Code of Ethics isn’t a burden, it’s an opportunity. I challenge each and every one of you to take advantage of it — every day, with every client.
The Code of Ethics through the ages The language of the Code of Ethics has changed and expanded with the times. Here’s a perfect example of the evolution of the requirement that Realtors always act within the areas of their expertise.
If an agent can not efficiently handle a proposition, he should refer the matter to some competitor who can.
The acceptance by a Realtor of an exclusive listing imposes the obligation of rendering skilled and conscientious service: when a Realtor is unable to render such services either himself or with the aid of his fellow-Realtors, he should not accept the listing.
The Realtor should not undertake to make an appraisal that is outside the field of his experience unless he obtains the assistance of an authority on such types of property, or unless the facts are fully disclosed to the client. In such circumstance the authority so engaged should be so identified and his contribution to the assignment should be clearly set forth. 40 April/may 2013
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. 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.
Coverage and protection.
Some things you shouldn’t take chances with — and your real estate license is one of them. VAR helps protect you from whatever your clients throw at you with our Legal Resources Center. Search legal columns from our extensive library, read articles, and watch videos that can help you know what’s a safe move — and what’s likely to hurt. Visit us at VARealtor.com/LegalResources
Another great member service brought to you by the Virginia Association of REALTORS®
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VAR's Commonwealth Magazine brings you a 2013 collectors edition, focusing on the Centennial of the REALTOR® Code of Ethics throughout.