This is 6th in a series of posts breaking down the Realtor® Code of Ethics are -what they mean to you – the buyer or seller or landlord.
What IS a Realtor®? A Realtor® is a member of the National Association of Realtors® (NAR) – the world’s largest professional association, and who is bound by a strict Code of Ethics.
Alright, let’s take a look at one of the most violated (usually benignly…) articles of the Code:
REALTORS® shall keep in a special account in an appropriate financial institution, separated from their own funds, monies coming into their possession in trust for other persons, such as escrows, trust funds, clients’ monies, and other like items.
Let’s just sum the main point up in 3 words, shall we? DO NOT CO-MINGLE
Other people’s money, like escrow funds, trust funds, rental deposits, rents, client money, etc. must NEVER enter a Realtors® personal account. Never. No exception. Ever. A separate account MUST exist for the deposit of Other People’s Money. In many cases, a Realtor® would turn over Other People’s Money to their employing broker or title company, where accounts already exist for Other People’s Money. Harsh penalties and fines are in place for any violations of this article.
What if it is 5:30pm on a Friday, and the tenant of a property that a Realtor® manages for an owner (client) walks into the office and hands the Realtor® 2 months worth of back rent – in small cash? This Realtor® must remain responsible for this cash until it can be deposited into the correct Other People’s Money account. It is NOT OK to put it in a personal account- even for a short amount of time.
The second part of this article requires Realtors® to “use reasonable care to ensure that documents pertaining to the purchase, sale, or lease of real estate are kept current through the use of written extensions or amendments.” Meaning, any changes or additions to an contractual agreement MUST be in the written form of an extension or amendment. It just keeps everyone on the same page and aware of what is going on during a contract.
The final part of this article protects the client by mandating Realtors® to “make reasonable efforts to explain the nature and disclose the specific terms of the contractual relationship being established prior to it being agreed to by a contracting party.” What does it really mean to be represented by a Realtor®? This must be laid out before any agency agreement is signed.
In case you missed them, please take a moment to check out my previous posts about the Code:
Understanding the Realtor® Code of Ethics … Article 1
Understanding the Code of Ethics -Article 2: Disclosure
Understanding the Realtor® Code of Ethics – Article 3: Cooperating & Compensation
Understanding the Realtor® Code of Ethics: Articles 4 and 5- Disclosure of Ownership Interest
Understanding the Realtor® Code of Ethics: Articles 6 & 7 -Disclosing Compensation Posted By: Springs Realty Scoop – Colorado Springs Real Estate