Is it ethical for Realtors to call bottom to solicit clients

[jillayne]

A question was asked by seattle renter on this post
http://seattlebubble.com/blog/2009/04/0 ... l-edition/
about a piece of advertising sent out by a real estate agent. See comment 19:

"Hi &*%$,

Youve been patient. Youve waited for the perfect time to buy a home. Well this is it.

Home prices have bottomed out. Many experts see prices rebounding from current lows. The $8000 Federal Tax Credit is available for a limited time. The ZIP Buyers Rebate is yours when you use me as your Buyers Agent. And now Mortgages are at their lowest since 1971 (see article below).

Your patience has paid off!"

Seattlerenter asks if this is legal and ethical, specifically, using the phrase "home prices have bottomed out." Since I do not practice law, I cannot answer the legal side but constant blogger KLK answered for us: "yes." I would like to analyze the ethical question.

First we need to differentiate between real estate agents and Realtors. Everyone is an agent but only some are Realtors.

For all real estate agents, first they would look to state agency law. Finding nothing there, they would then look to other state laws that may answer the question such as consumer protection laws. After that, there may be a federal law that addresses the question. If they still have no answer, they would look to their MLS rules. After that, they would check with their own company for policies and procedures and company ethical codes that would address honesty and advertising. Perhaps they belong to a professional association. Then they would consult the ethics code of that association for guidance.

For agents who belong to the Realtor association, they consult their Code. Here is the link to the NAR Code of Ethics:
http://www.realtor.org/MemPolWeb.nsf/pages/COde

As we see in Article 1, a duty of honesty is paramount when working with a client. But at this point, we are soliciting to obtain a client. We don't have a client yet.

Standard of Practice 1-3 says, "REALTORS®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value."

In order for the marketing piece to be deceptive, the real estate agent must have known about the falling market in advance and deliberately chose to mislead potential home sellers. Since we can't know the future, this article may not fit our situation.

Article 2 says "REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property"

If Realtors have facts that lead them to believe that now is NOT the bottom, then they might be in trouble here. For home sellers, that's not going to be a problem (since selling NOW in a down market is better than waiting.) This would only be problematic for a buyer who was lead to believe through exaggeration, that we are at the bottom.

Here is what I've been waiting for: 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."

How would a Realtor put up a defense against an Article 12 ethics violation for sending out the letter to seattlerenter?

Well, I suppose what he/she might do is to provide some sort of analytical proof with numbers, statistics, and graphs as to how he/she arrived at an affirmative realization that "now" is the bottom of the market. This Realtor may be able to defend against an ethics complaint by saying that he/she WAS being honest, based on the facts known at the time, and based on his/her analysis.

This leaves homebuyers to make their own decision as to if this particular Realtor's statistics and analysis can be verified by other third parties.

The most prudent thing for a Realtor (who is going to embark on a bottom calling ad campaign) to do is to take his/her bottom calling statistics and analysis and have it reviewed by a neutral third party for accuracy. Similar to how we had our thesis papers reviewed by professors and then winced when they tore up our paper with obvious errors and made us do more research. We were better students because of those professors, even though we didn't like doing the extra work, but I digress.

The most prudent move would be for a Realtor to have due diligence performed prior to going on a bottom calling marketing campaign. Without that, the bottom-call is just one person's opinion.

If ever hauled in for an professional standards committee hearing, there would be ample, AMPLE documentation from a wide variety of local, regional, state, national, and international economists and other experts who could provide solid opinions based on present facts as to if we were at the bottom on the day that marketing piece was mailed.

Because of this, if asked, I would recommend the Realtor NOT bottom-call in any marketing material unless that Realtor prefers to live in the grey area of ethical uncertainty.

Some Realtors are clearly fine living there. Others are not.

The third to the last step in any professional ethical dilemma is to consult one's own set of values. What kind of a real estate agent/Realtor do I want to be? What behavior do I value in this world? For example, if I value honesty then I need to also be honest with other people, too. Careful reflection is important when considering all the possible consequences.

The second to the last step is to make the decision.

The last step is to look back and reflect on what you did, how it turned out, and if you'd do anything different next time.

The person making the "bottom call" in the letter claims to have experts who agree with him/her. Who are these experts and where can the letter reader go to get more information? Perhaps the real estate agent who wrote the letter could provide that information in the letter.

At best, the letter makes the person who wrote it no better than the viagra, porn, and loan mod spam in my spam bin.

If Realtors care about their ethics as much as they claim to, then Realtors should talk with each other about the possible consequences of calling bottom in marketing material and provide guidelines as to what research to use.

Using the NAR's economist as the only source would be a very, very sad answer.

[SeattleMoose]

Anyone who lies to make $$$ is unethical. Period.

Ultimately, the liars are only digging their own grave (reputation shot)as well as casting the whole RE industry in a very bad light. The NAR is a laughing stock....or worse.

Besides, paying 6% to someone who may end up doing very little work to "earn it" is a high price to pay when cheaper alternatives exist if one is willing to invest a little of their own time.

The RE industry has a stink about it now that is so strong that it may be permanent, which is a shame because there are some ethical folks in the industry.

But public opinion paints in broad strokes and there is no mercy for the "good ones" caught up in it all.

[rose-colored-coolaid]

[Hector]

[rose-colored-coolaid]