Does the Realtor’s Code of Ethics and the Texas Real Estate Commission’s Canons of Professional Ethics and Conduct Conflict with a Realtor’s Fiduciary Duties to their Buyer Clients? This discussion focuses on an agent’s participation in a buyer client’s potentially discriminatory request, and how strictly observing the Code of Ethics and TREC Canons may conflict with an agent’s fiduciary duties to that buyer client. None of this discussion pertains to the selling client, which I consider to be a different situation entirely.
The particular rules being discussed are the Texas Real Estate Commission’s Canons of Professional Ethics and Conduct Rule §531.19 Discriminatory Practices and the National Association of Realtors 2010 Code of Ethics Standard of Practice 10-1 and 10-2. They are defined as follows:
Texas Real Estate Commission Canons of Professional Ethics and Conduct – Rule §531.19 Discriminatory Practices
“No real estate licensee shall inquire about, respond to or facilitate inquiries about, or make a disclosure which indicates or is intended to indicate any preference, limitation, or discrimination based on the following: race, color, religion, sex, national origin, ancestry, familial status, or handicap of an owner, previous or current occupant, potential purchaser, lessor, or potential lessee of real property.”
“A fiduciary duty is the highest standard of care at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty: he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents.”
National Association of Realtors 2010 Code of Ethics – Article 10
Standard of Practice 10-1
“When involved in the sale or lease of a residence, REALTORS® shall not volunteer information regarding the racial, religious or ethnic composition of any neighborhood nor shall they engage in any activity which may result in panic selling, however, REALTORS® may provide other demographic information. (Adopted 1/94, Amended 1/06)”
Standard of Practice 10-2
“When not involved in the sale or lease of a residence, REALTORS®® to be needed to assist with or complete, in a manner consistent with Article 10, a real estate transaction or professional assignment and (b) is obtained or derived from a recognized, reliable, independent, and impartial source. The source of such information and any additions, deletions, modifications, interpretations, or other changes shall be disclosed in reasonable detail. (Adopted 1/05, Renumbered 1/06) may provide demographic information related to a property, transaction or professional assignment to a party if such demographic information is (a) deemed by the REALTOR.”
The Definition of Fiduciary Duty
A fiduciary duty is the highest standard of care at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty: he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents.
What Do These Laws Mean?
These laws, canons and codes state that we must not discriminate or participate in any activities of discrimination regarding race, color, religion, sex, national origin, ancestry, familial status, or handicap, all of which are referred to as protected classes.
Fiduciary Duties -vs.- The Law
So, you ask, “What’s the problem with the current law?” In most cases, there is no conflict, but in a few instances the law might actually prevent agents from serving their buyer clients. These laws, in a few situations, could force real estate agents to put their personal interests before the duty of serving their buyer clients to avoid being sued or losing their real estate license. This may create a no-win situation for the agent that wants to fulfill their fiduciary duties to their buyer client. Both The Texas Real Estate Commission and the National Association of Realtors state that we have a fiduciary duty to our clients while at the same time they put forth laws, rules and codes that seem to prevent agents from fulfilling that duty to their buyer clients.
Types of Discrimination – Inclusive & Exclusive
The immediate gut reaction is that all forms of discrimination are negative, however that’s not always true. Remember the expression “having discriminating tastes?” Preventing a protected class from buying a home is clearly wrong. However if a discriminating buyer wants to buy a house in or not in an area largely populated by a particular protected class, is it wrong for an agent to only show that client houses in an area he/she requests? According to the law the answer is yes. And agents that service that request could be sued and lose their real estate license because of fulfilling that one request. Inclusive forms of discrimination are practiced when someone is attracted to that protected class and want to associate with or promote that class. Exclusive forms of discrimination are practiced when someone is repelled from a protected class and wants to avoid or denigrate that class. Both forms are equally considered illegal in any form regarding the practice of real estate.
Inclusive Discrimination Regarding A Protected Class
If a non-English speaking client tells an agent that he/she wants to live in an area heavily populated by homeowners that speak that client’s same language, the agent can’t fulfill that request without discriminating based on national origin. If a family wants to live in a neighborhood with lots of children for their kids to play with, that’s familial status discrimination if the agent complies. According to Jewish law, driving a motorized vehicle is prohibited on Shabbat, which is observed from sundown Friday until Saturday night (source – Wikipedia). If a Jew, observing Jewish law, wants an agent to find a house within walking distance of their Synagogue then an agent would be in danger of performing religious discrimination to fulfill that client’s religious requests. The anti-discrimination laws are broad and encompassing and in these specific situations, they prevent an agent from truly serving their home-buying client’s legitimate and reasonable request. By complying with the law, and not fulfilling the buyer client’s conflicting requests, an agent cannot truly perform their fiduciary duties to that client. To serve their client’s interests, agents must skirt the law and find a workaround in situations like these.
Exclusive Discrimination Regarding A Protected Class
Exclusive forms of discrimination against a protected class are wrong if they limit the buyer’s ability to buy a house. But how wrong is it if an agent fulfills a buyer’s request to either associate with or not associate with a protected class? According to the law there is no difference between the two types of discrimination. So what if a young single professional or an elderly person wants to live in an area that doesn’t have children isn’t that their right? Should an agent suffer losing their license servicing that request? A buyer will only buy a house that meets all or most of their top criteria, regardless of what the criteria may be. If a real estate agent shows an exclusively discriminative client homes in an area heavily populated by a protected class that the client is trying to avoid, is that agent really servicing that client or just wasting both of their time. To be “ethical” an agent must show the buyer client a variety of houses that meets the rest of the buyer’s criteria, whether the buyer’s discriminatory criteria conflicts or not. That means there will be many houses on the list that the agent already knows the client will hate, but to obey the law and avoid charges of discrimination the agent has to show them to the buyer. If you wonder why your agent is showing you houses you don’t want to see, it could be because he/she is required to by law to protect you from all forms of unlawful discrimination involving a protected class, whether you want it or not.