codeofethicsThe National Association of Realtors® has a Code of Ethics that all members pledge themselves to in order to practice as a Realtor®.  Since not all real estate agents are Realtors®, it is important to understand how we as Realtors® can use the code of ethics to our advantage, in the marketplace to give ourselves an advantage over our competitors, and an element of safety to our customers.

Duties to Clients and Customers

In the Code of Ethics, it refers to this concept of Clients and Customers.  It is important to note for NON agents that there IS a difference between Clients and Customers.  While in a traditional sense, the typical non agent may not see any noticeable difference in how they are treated, it is very critical in how the AGENT relates to the client/customer relationship.  For example, a client has fiduciary rights to expect, while a customer would not.  For example, on a sign call, a customer would not expect you to expose the Seller’s bottom line, a Client however would expect you to try to find out.

What creates this environment of action between the two parties?  The Agent, and the (Insert Party here, Seller, Buyer, Etc), any Agency created.  Any Agency type relationship created by the Seller or Buyer and the Wholesaling Agent will put the Wholesaling agent at tremendous risk.  Therefore, it is advisable to avoid taking any commission on a wholesale deal.  (Article 7)

Article 1
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. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly. (Amended 1/01)

While Article 1 is very clear about your requirement to the client is “primary, but does not relieve Realtors® of their obligation to treat all parties honestly…”  It does not specify whom your client must be.  If you are acting on your own behalf, as your own client, then you are legally required to treat yourself as the primary principal with honesty and fair dealing to the other parties.  As you think about this requirement, it isn’t that different than what you would want for yourself as a wholesaler.

Article 2
REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non-agency relationships as defined by state law. (Amended 1/00)

Article 2 is primarily about three things. Exaggeration, Misrepresentation, or Concealment of pertinent facts relating to the property or the transaction.  I take this to mean several things.  First, I have an obligation to let the Seller know what is going on… i.e. Assignment of Contract.  OR possibly Leasing it, OR possibly fix and repair for sale, OR ANY other possibility that would include me making a profit.  As you examine the requirements, you quickly discover that the State and Federal requirements for disclosure usually revolve around the issues of profit.  Since everyone knows you are in it to make a profit, why not stop fooling around and DISCLOSE it.  In this case, I use the phrase “Buyer shall not live in the premises, but will lease, rent, repair, assign or sell for profit.”

Article 4
REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative. (Amended 1/00)

Of all the articles in the Code of Ethics, Article 4 is the clearest of what must happen in order for YOU as an Agent who Invests or a Realtor® who wholesales, is that they “shall not acquire an INTEREST IN or buy or present offers from themselves… without making their true position known to the owners agent or broker…”

In order for you to make an offer, to get INTEREST (Including Equitable Interest), buy, or present offers, you have to let them know exactly what your position is.   To do anything else, is to risk becoming yet another statistic that loses their license . 

Curiously enough, the universal thing that causes these all of these Code of Ethics Violations?  Agency.  Creating that fiduciary relationship, whether implied or real creates that potential barrier for you.  In The Red Pill Sales System, we discuss the ethics, as well as the language you need as a Realtor® to comply with the Code of Ethics and build a repeatable business!  For more information, feel free to contact me below!

6 thoughts on “Real Estate Agency for Realtors® Who Wholesale

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