Resources from NAR can help you develop more inclusive business plans.

Your association can help you make real strides toward a more inclusive business. For a decade, the National Association of REALTORS® Code of Ethics has gone beyond the law when it comes to fair housing. But many real estate practitioners are looking for ways to make a deeper and more visible commitment to equality. Resources from NAR can help.

1. Display the Equal Housing Opportunity logo on your company windows and in advertising. Decals, as well as a customizable poster, are available from the REALTOR® Team Store(link is external), or download the logo from nar.realtor.
2. Write a diversity and inclusion statement to promote as part of the personal or company mission. NAR’s statement says, in part: “We fully embrace perspectives from all walks of life—regardless of race, ethnicity, gender, religion, age, sexual orientation, gender identity, disability, national origin, socioeconomic status, political affiliation or any other qualities by which we may define ourselves. We commit to bringing out the best in ourselves, uncovering our hidden talents, and celebrating differences in our day-to-day interactions. These beliefs are essential as we serve our members who help fulfill the dream of home and property ownership in America.”
3. Be open to self-examination. For insights into how your mind perceives and responds to differences, check out the fascinating, no-cost workshop from NAR, “Bias Override: Overcoming Barriers to Fair Housing.” This 50-minute video program was developed in partnership with the Perception Institute, an organization that worked with other professionals, including judges and teachers, to overcome implicit bias. Watch the video, and use the online tool to test your own implicit biases.
4. Adopt the Equal Professional Service Model(link is external) for your practice. Developed by NAR, the model has four key steps that should be applied consistently in interactions with buyers:
   
   • Do I use systematic procedures?
   • Do I have objective information?
   • Has my customer set the limits?
   • Have I offered a variety of choices?
    
5. Earn NAR’s At Home With Diversity® certification. This day-long, interactive workshop—recently retooled—offers a wide range of insights and exercises to help you not only provide equal service but also transcend racial and cultural differences. Bonus: The program is available for continuing education credit in many states and counts as an elective credit toward several NAR designations.

For more resources—including information on diversity and inclusion grants available to local and state REALTOR® associations—visit nar.realtor/diversity.

©National Association of REALTORS®
Reprinted with permission

Not only do social distancing, masks, and good hygiene during showings keep you and your clients safer, these steps help you manage legal risks.

Not only do social distancing, masks, and good hygiene during showings keep you and your clients safer, these steps help you manage legal risks. Sellers were more likely than buyers to sue their broker or agent if they or a family member became infected with the coronavirus soon after a home showing, according to a May survey of 1,040 buyers and sellers by the Engagious public opinion research firm. Among the findings:

38%

The percentage of buyers who indicated that they would be very likely to sue their broker if they became sick with COVID-19 after learning that a resident of the home they had visited had contracted the disease.

48%

The percentage of sellers who indicated that they would be very likely to sue their broker if one of their visitors contracted the coronavirus soon after a showing.

29%

The percentage of ­buyers who indicated that they would still consider suing, even if they had signed a release holding their real estate broker harmless if they or a family member contracted COVID-19.

41%

The percentage of sellers who indicated that they would still consider suing, even with a signed release.

58%

The percentage of buyers who were willing to waive their right to sue the seller or their agent for COVID-19–related claims.

©National Association of REALTORS®
Reprinted with permission

Fair housing lawsuits are one tool for addressing illegal discrimination in the real estate and mortgage credit industries.

Fair housing lawsuits are one tool for addressing illegal discrimination in the real estate and mortgage credit industries, though the bar is high for determining liability. Cases alleging discrimination in lending practices were highlighted in NAR’s 2019 Legal Pulse report. Here’s a summary of three notable cases:

1. The city of Miami Gardens, Fla., sued mortgage lender Wells Fargo alleging that it had engaged in discriminatory or predatory lending in violation of the Fair Housing Act between 2004 and 2008, citing its use of redlining and reverse redlining tactics. The city asserted that Wells Fargo denied credit to particular neighborhoods based on race (redlining) and of “flooding a minority community with exploitative loan products” (reverse redlining).

Result: Miami Gardens was unable to prove that it suffered an injury as a result of alleged redlining and reverse redlining by Wells Fargo. The court determined that “the undisputed evidence confirmed that none of the 153 loans originated by Wells Fargo [within the limitation period] foreclosed.” Thus, the city could not have suffered an injury as a result of any of these loans.

2. The U.S. Department of Justice filed a civil complaint against First Merchants Bank alleging violations of the Fair Housing Act and the Equal Credit Opportunity Act committed between 2011 and 2017. The suit alleged that the bank engaged in unlawful redlining by not providing mortgage credit services to majority Black areas in Marion County, Ind. The complaint further alleged that the bank failed to have any branch locations in majority Black areas, refused to market in majority Black counties, and had a disproportionately low number of loan applications and loan originations from majority Black neighborhoods.

Result: The parties filed a settlement agreement. In it, the bank denied the allegations but agreed to take all actions necessary to ensure that it offers and provides all persons with an equal opportunity to apply for and obtain credit, retains an independent third-party consultant to assess its fair lending risk management program, maintains a fair lending monitoring program, and provides training to all employees.

3. Prince George’s County and Montgomery County, Md., filed suit against Wells Fargo for alleged predatory and discriminatory residential mortgage lending, servicing, and foreclosure practices in violation of the Fair Housing Act. In the complaint, the counties alleged five categories of injuries: foreclosure processing costs; the increased cost of municipal services; economic injuries to the counties’ tax bases; lost municipal income; and non-economic injuries.

Result: The court held that the counties sufficiently pleaded claims associated with foreclosure processing costs but found the alleged non-economic injuries were too far removed from the alleged discriminatory conduct to have been plausibly caused by Wells Fargo.

©National Association of REALTORS®
Reprinted with permission

Force majeure is a contractual clause relieving one or both parties of obligations because of circumstances beyond their control.

Force majeure (“strong force” in French) is a contractual clause relieving one or both parties of obligations because of circumstances beyond their control. It’s lately become a hot topic in real estate.

The doctrine may be invoked by tenants (primarily commercial) who are having difficulty coming up with rent, landlords who could not perform a service during the force majeure event, or contractors or vendors to justify project delays. While it’s too early to assess how courts will view such claims connected to the pandemic, legal experts offer insights about how such provisions may be presented in contracts and whether pursuing claims makes sense.

• Pay attention to the wording and facts in an agreement to consider whether a force majeure claim seems viable.
• Then, check to see if the clause specifies circumstances such as “epidemic,” “pandemic,” “quarantine,” “acts of government,” or general language such as “any cause whether similar or dissimilar to the foregoing.”
• Attempt to settle disputes out of court. Courts are likely to be backed up for a long time with criminal and other matters of greater urgency.
• If you do pursue a court case, don’t assume a decision in one state will bolster (or weaken) your claim. States may interpret a similar set of facts differently. Force majeure is very specific to the contract at hand, which influences courts, even within state.

©National Association of REALTORS®
Reprinted with permission

Procuring cause issues can be confusing. Here’s how to avoid disputes.

Key Takeaways:

• To earn a commission, a broker must be the procuring cause of the sale.
• There is no one definitive factor to determine procuring cause but rather the interplay of many factors.
• If a procuring cause dispute is inevitable, allow the sale to close and determine resolution afterward.

It sounds simple enough: To earn a commission, a broker or agent must be the procuring cause of the sale. But misunderstandings can arise about how that term applies in some transactions. Knowing the factors that establish procuring cause can help you avoid disputes and deliver better client service.

Determining Procuring Cause

NAR’s Arbitration Guidelines, created pursuant to Article 17 of the REALTOR® Code of Ethics, define procuring cause as “the uninterrupted series of causal events which results in the successful transaction.” In practice, the broker whose efforts set off that unbroken chain of events will be regarded as procuring cause.

Which practitioner do you think is the procuring cause in this scenario?

A buyer contacted broker Jim to show her several homes over a period of weeks. The buyer liked one home, and asked broker Jim to reshow the property to her and her mom, dad, and sister. Broker Jim showed the property a third time to the buyer, her dad, and a plumbing inspector. As they were leaving the home, the buyer said she would email broker Jim to follow up. A few days later, broker Jane, who had not shown the property, called broker Jim and offered a 25% referral fee, as broker Jane wrote an offer on the property for the buyer, which the seller then accepted.

If you think broker Jim is the procuring cause, you’re falling into the common trap of believing it’s based on one definitive factor—in this case, showing a property. Many more facts, including follow-up communication with the buyer, the buyer’s motivations, and how broker Jane entered the picture, should be considered.

Like the scenario above, most procuring cause issues arise when two cooperating brokers claim they’re entitled to the buyer’s side commission. Article 17 requires REALTOR® principals to submit procuring cause disputes to mediation and arbitration. An arbitration hearing panel will consider all relevant details of the underlying transaction, guided by a number of factors to determine procuring cause. Those may include: 

• The nature and status of the transaction.
• Roles and relationships of the parties.
• Initial contact with the buyer.
• Continuity and breaks in continuity.

What’s important to keep in mind is that it’s the interplay of these factors that indicates procuring cause. One factor alone will not decide a case.

Avoiding a Dispute

Being aware of the factors that affect procuring cause can assist real estate professionals in their day-to-day dealings with clients. Here are tips to help avoid a dispute:

• Ask prospective buyers if they are working with another broker and whether they signed an exclusive representation agreement.
• Always use a buyer brokerage agreement. Attend open houses and tour model homes with buyer clients, and sign in as their broker.
• Stay in contact with buyer clients, keep a communications log, and, when they’re interested in a property, ask if they want to write an offer.
• If you discover you’re writing an offer on a property that buyers saw with another broker, ask the buyers why they didn’t pursue the property with the other broker.

When a dispute is unavoidable, don’t interfere with the transaction. Allow the sale to close. Then, the cooperating broker who believes he or she is the procuring cause may request mediation and, if that is unsuccessful, may file an arbitration request with the local REALTOR® association. To learn more, visit nar.realtor and search for “procuring cause.”

©National Association of REALTORS®
Reprinted with permission

Problems can arise if a home doesn’t meet a buyer’s expectations in real life.

Key Takeaways: 

• More buyers than ever are making offers without setting foot inside a home
• Disappointed purchasers most often bring claims against a real estate broker when they discover a previously unidentified defect or other undesirable feature of the home.
• Disclosure laws and the REALTOR® Code of Ethics still apply in virtual transactions.

Buying a home “sight unseen” was not a phenomenon invented during the COVID-19 pandemic. It’s long been common for investors and military buyers who are relocating, among others, who sometimes must make purchases without visiting a property. With the shift to virtual tours and showings in the past year, however, more buyers are making offers without setting foot inside a home. It’s important for real estate pros to know the risks in “sight unseen” sales that can lead to liability—and take steps to mitigate those risks.

When buyers purchase a property relying only on photos and online tours, problems can arise if the home doesn’t meet their expectations in real life. Disappointed purchasers may bring claims against the listing broker, the buyer’s broker, or both when they discover a previously unidentified defect or other undesirable feature. Such claims typically involve a failure to disclose a material fact or a misrepresentation of the property’s condition or characteristics.

Use these best practices to limit surprises—and potential liability—in a “sight unseen” transaction.

Advise the purchaser of all known material defects. Disclosure laws and the REALTOR® Code of Ethics still apply in virtual transactions. Seller disclosures must be accurately and fully completed and provided as required by state law. A buyer’s broker should follow up with the listing broker for any missing responses and ask the buyers what additional information they need related to any disclosed defect. For example, if a seller discloses prior water damage, the buyers may want to ask for proof of remediation and request additional inspections.

Avoid misrepresentation or exaggeration in listing photos and virtual tours. Resist adding or removing anything of material substance—Standard of Practice 12-10 requires REALTORS® to present a true picture to the public. Enhancing the lawn color during the dull winter months might be okay, but airbrushing out the power lines across the backyard is not.

Watch out for red flags. REALTORS® have a duty under Article 2 of the Code of Ethics to avoid exaggeration, misrepresentation, or concealment of pertinent facts, but do not have a duty to discover hidden defects. Carefully view the property during a virtual showing to identify any observable defects. Point these out to the buyers on camera and put them in writing after the show- ing. Follow up with the listing broker on any issues where the buyers want more information.

Avoid assuming buyers’ duties. Ask buyers to write down issues they’re concerned about (such as noises, smells, or proximity to neighbors). Observe and report objectively, but don’t make the decisions or assume something “isn’t a big deal.”

Protect yourself, and your clients, in writing. Ensure that the purchase agreement includes an appropriate due diligence period and contingencies like inspections and a final walkthrough. Work with an attorney to draft an addendum to clarify your role and emphasize the buyer’s responsibilities. The addendum should specify that the buyers—not the brokers, agents, or seller—are responsible for verification, walkthroughs, and professional inspections to confirm that the property is satisfactory. Many state or local REALTOR® associations have “sight unseen” addendums available to members.

Encourage the use of other professionals. Recommend the use of home inspectors and other relevant professionals in writing. If buyers insist on waiving inspections, document both your advice and their informed waiver in writing.

Acting with care, reason, and diligence may not prevent all surprises when buyers move into their “sight unseen” home. But having these practices in place will help you significantly to defend against liability.

©National Association of REALTORS®
Reprinted with permission

The Code of Ethics’ ban on discriminatory hate speech and conduct reinforces the association’s commitment to fair housing.

At its November 13, 2020, meeting, the National Association of REALTORS® Board of Directors approved recommendations from the Professional Standards Committee that address discriminatory and other harmful speech and conduct.

Most notably, a new Standard of Practice 10-5 under Article 10 of the Code of Ethics prohibits REALTORS® from using harassing speech, hate speech, epithets, or slurs based on race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity, in any context.

When REALTORS® pledge to abide by the Code of Ethics, they must follow the highest principles and ethics of REALTORS® in all their activities. We can’t abandon those principles in a profession dedicated to protecting the best interests of consumers. Put in the simplest terms, each and every one of us is responsible for maintaining the integrity of the REALTOR® brand.

I’m sure you have some questions as you process these new recommendations, which are available in toto here.

Why was NAR looking at this issue? In 2020, NAR and local and state associations received an unprecedented number of complaints about REALTORS® engaging in discriminatory speech and conduct, especially on social media.

How did the changes come about? From June through October 2020, the Professional Standards Committee met twice and its Interpretations and Procedures Advisory Board met five times to consider how to address the issue. The groups developed the recommendations and worked through enforcement questions. They also discussed unintended consequences and the legal defensibility of these actions. As a result, the committee presented a comprehensive package of recommendations to the Board of Directors at its Nov. 13 meeting.

When do these changes take effect? Standard of Practice 10-5 and the application of the Code to all of a REALTOR®’s activities were effective immediately upon approval by the NAR Board of Directors, thereby sending a clear message that NAR condemns discriminatory speech and conduct.

How do these changes benefit consumers? The REALTOR® brand is built on ethics and integrity. When one REALTOR® posts discriminatory speech online or engages in discriminatory conduct, that person’s actions become reflective of REALTORS® on the whole. Left unchecked, those actions become who we are as an organization and reinforce the barriers to homeownership experienced by so many Americans. These new policies are one very impactful way we can advance equity and fairness in the real estate industry.

Approval of these professional standards recommendations amounts to one of the most significant and historic stands this organization has taken to advance fair housing. Our action calls to mind a quote from the writer Maya Angelou that simply but powerfully captures our resolve: “When you know better, you do better.” I am deeply humbled and honored to have been among the outstanding group of volunteers who considered and debated these monumental changes, grateful for the opportunity to serve as chair of the Professional Standards Committee in 2021, and proud of our organization and all REALTORS® who pledge to know and do better for the consumers and the communities we serve.

©National Association of REALTORS®
Reprinted with permission