Key Takeaways
- The NAR Code of Ethics has 17 Articles organized into duties to clients, duties to the public, and duties to other Realtors.
- Only NAR members are bound by the Code, but its principles influence industry-wide standards.
- Dual agency violations remain among the most common ethics complaints, typically involving inadequate disclosure.
- State regulatory actions operate independently from NAR proceedings and can result in license revocation or criminal penalties.
The National Association of Realtors (NAR) Code of Ethics establishes standards of conduct that go beyond the minimum legal requirements for licensed real estate professionals. Adopted in 1913, it is one of the oldest professional codes of ethics in the United States. Only NAR members are bound by the Code, but its principles influence state regulatory standards and industry best practices nationwide.
Key Stakeholders
Structure of the NAR Code of Ethics
The NAR Code of Ethics contains 17 Articles organized into three sections: duties to clients and customers (Articles 1-9), duties to the public (Articles 10-14), and duties to other Realtors (Articles 15-17). Each Article is accompanied by Standards of Practice that provide detailed guidance on how the Article applies in specific situations. The Standards of Practice are regularly updated to address emerging issues in the industry.
Article 1 is foundational: it establishes that Realtors shall protect and promote the interests of their clients while treating all parties honestly. Article 2 prohibits misrepresentation of pertinent facts. Article 3 requires cooperation with other brokers when it is in the client's best interest. Article 12 requires honesty in advertising and communications. Together, these articles create a comprehensive framework for ethical conduct that addresses virtually every aspect of real estate practice.
| Section | Articles | Focus Area |
|---|---|---|
| Duties to Clients | 1-9 | Fiduciary obligations, competence, confidentiality, conflicts |
| Duties to the Public | 10-14 | Non-discrimination, honest advertising, competence in practice |
| Duties to Realtors | 15-17 | Fair competition, cooperation, arbitration of disputes |
Case Study: Dual Agency Disclosure Failure
In a 2023 NAR ethics hearing, a Realtor listed a property for $425,000. A buyer contacted the Realtor directly after seeing the listing online. Without executing a buyer representation agreement or providing an agency disclosure, the Realtor showed the property, negotiated terms, and drafted a purchase agreement in which she represented both parties. The seller was unaware that the Realtor was also working with the buyer.
The ethics panel found violations of Article 1 (failure to protect client interests), Standard of Practice 1-5 (failure to disclose dual agency), and Article 9 (failure to provide written agency disclosure). The Realtor received a 30-day license suspension, mandatory ethics education, and a $2,500 fine. The case illustrates that dual agency is not inherently unethical — but failing to obtain informed written consent from both parties is a serious violation.
Key Lesson from This Case: Even in states that permit dual agency, the agent must obtain written informed consent from BOTH parties before proceeding. The disclosure must explain how the dual agency relationship will limit the fiduciary duties owed to each party.
How State Ethics Standards Differ from NAR
State real estate commissions establish their own codes of conduct that apply to all licensees, not just NAR members. These state standards typically incorporate the core fiduciary duties but may add state-specific requirements. For example, some states mandate specific disclosure forms that must be signed at first substantive contact, while others require designated agency when in-house transactions occur.
State enforcement mechanisms also differ significantly from NAR's process. NAR ethics complaints are heard by local boards of Realtors and can result in fines, suspension of membership, or expulsion from the association. State regulatory actions are handled by licensing boards and can result in license suspension, revocation, monetary penalties, and, in cases involving fraud or theft, criminal prosecution. An agent can face both NAR and state disciplinary proceedings for the same conduct, as they operate independently.
Key Takeaways
- ✓The NAR Code of Ethics has 17 Articles organized into duties to clients, duties to the public, and duties to other Realtors.
- ✓Only NAR members are bound by the Code, but its principles influence industry-wide standards.
- ✓Dual agency violations remain among the most common ethics complaints, typically involving inadequate disclosure.
- ✓State regulatory actions operate independently from NAR proceedings and can result in license revocation or criminal penalties.
Sources
- NAR Code of Ethics and Standards of Practice (2024 Edition)(2025-03-01)
- NAR Professional Standards Manual(2025-03-01)
Common Mistakes to Avoid
Assuming the NAR Code of Ethics applies to all licensed real estate agents.
Consequence: Non-NAR members may not understand that they are governed by state regulatory codes rather than the NAR Code, potentially missing obligations or protections.
Correction: Understand that only NAR members are bound by the Code of Ethics, while all licensees are subject to state regulatory standards. Both sets of requirements should be known.
Failing to obtain written informed consent from BOTH parties before proceeding with dual agency.
Consequence: Results in ethics violations, potential license suspension, and transaction rescission, as demonstrated in multiple NAR ethics hearings.
Correction: Always obtain separate written informed consent from both buyer and seller before engaging in dual agency, clearly explaining how the arrangement limits fiduciary duties.
Test Your Knowledge
1.How many Articles are in the NAR Code of Ethics?
2.Which article of the NAR Code of Ethics addresses truthful advertising?
3.Can an agent face both NAR and state disciplinary proceedings for the same conduct?