Having a younger brother who is a medical doctor and watching the TV show "House," I have come to learn a little about the Hippocratic Oath. It serves as a "code of ethics" for a profession that is highly demanding and which plays a roll in everybody's life.
Apparently, the "First, do no harm" part of this is not even part of the modern Hippocratic Oath, nor is it found in the original version from the ancient Greeks. Nonetheless, we'll use the TV version which includes "First, do no harm," as it is the basis of a new concern that real estate professionals need to consider. You see, the REALTOR® Code Of Ethics has always been loosely observed and rarely enforced, but the current state of the real estate market requires our industry to reconsider our view of the code.
Specifically, our profession has always had a problem with agents, brokers, and companies who were willing to list properties at prices above which the market would bear. In the past, when "values never fell in real estate," there was little harm, as an overpriced property which sold "later" was eventually worth more and the seller's inconvenience was rewarded with a higher sales price.
But this is not the case today. Home values are dropping. A home seller who asks us to "try it at the higher price" does not understand the real implications that this failure to sell will have on the seller's net sheet (the bottom line). When valuable months go by, the seller will have to lower the price to a point that is less than what the seller could have received when the property first hit the market. Thus, the "First, do no harm" portion of our code needs to be enforced.
Duties To Clients And Customers
The first article of our Real Estate Hippocratic Oath, the REALTOR® Code Of Ethics, states:
When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client.
Reading this very first article of our code, you can see that the original authors of the code knew that the advice we give in our profession would be important and could have a significant impact on the financial welfare of the customer or client. I believe they also assumed that members would figure out how to apply this article and would know that our opinion of values for a property falls under Article 1. Unfortunately, overpriced listings were a big problem, so the article was amended to include Standard of Practice 1-3:
REALTORS®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value.
I believe this spells it out pretty clearly, right?
Why REALTORS Take Over-Priced Listings
The very first question most home sellers want to ask at a listing appointment is "what do you think my home is worth?" This is a huge mistake. You see, REALTORS® have come to learn that a bidding war exists and the seller most often selects the first real estate agent that will agree to list the property at their desired price. So, rather than come-up empty handed, many REALTORS® choose to honor the home seller's wishes and take the listing overpriced. In doing so, many have violated Article 1 of the REALTOR® Code Of Ethics.
The real estate graph on the right shows that roughly 60% of the homes that were listed in the Tallahassee MLS over the past 12 months failed to sell! Yes the market is bad, but there are agents taking these listings that will not sell.
If the REALTOR® profession would stand by its guns, the market would correct at a much faster rate. Unrealistic and unmotivated sellers would have to sell "For Sale By Owner," and the market would learn that the values in the markets are those listed by the professionals. But that is not the case today.
Our profession must step forward to police its own. With the failure rate projected to reach 70% within the next 12 months, it will be a sad time for many home sellers, especially ones that fail to properly select the correct real estate company. Without enforcement of a Real Estate Hippocratic Oath, it will be difficult for home sellers to tell the difference between REALTORS® and "everyone else."
Home sellers should demand a demonstration of the Progressive Marketing Plan that will sell the home, and only address home value after they have chosen the real estate company that they will hire.
Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.