Unit 6: Ethics of Practice as a License Holder Flashcards
What organization in Texas provides guidance on ethical behavior for real estate license holders?
What do they use to guide license holders in ethical business practices?
- The Texas Real Estate Commission (TREC).
- The Canons of Professional Ethics and Conduct.
Can conduct be legal but still unethical in real estate?
Yes, some conduct can be legal and still be considered unethical.
What is the purpose of the Canons of Professional Ethics and Conduct? Are the Canons of Professional Ethics and Conduct legally enforceable?
- To guide license holders on sound and ethical business practices.
- Yes, they have the force of law.
What can happen if a license holder violates the Canons of Professional Ethics and Conduct?
They can face penalties or disciplinary action from TREC.
What does the Texas Real Estate License Act (TRELA) establish?
TRELA establishes activities that are illegal and therefore prohibited in real estate.
Is following the law enough to be considered ethical in real estate?
No, legal behavior is not always ethical; ethics go beyond just following the law.
What are ethics in the context of real estate?
Ethics are a system of moral principles, rules, and standards of conduct.
What are the Two Sides of Ethics in Real Estate?
- Dealing with Clients/Consumers: Ethics establish standards for integrity and competence when dealing with clients.
- Interacting with Other Professionals: Ethics define a code of conduct for how professionals should treat each other.
What’s the difference between law and ethics in real estate?
Law defines what is illegal; ethics guide what is morally right and professional.
Why is ethical behavior important in real estate?
It builds trust, ensures professionalism, and promotes a positive industry reputation.
What are canons? List them.
TREC’s Canons of Professional Ethics and Conduct are official rules that all licensed real estate brokers and sales agents in Texas must follow. They cover how to act professionally, ethically, and legally.
1. Fidelity: The agent’s primary duty is to represent the interests of the client.
2. Integrity: The agent must be honest and morally sound.
3. Competency: The agent must be knowledgeable about national, state, and local issues and conditions.
4. Consumer Information Form 1-2: The broker must display a notice concerning the real estate recovery trust account.
5. Discriminatory practices: The agent may not discriminate based on legally protected classes.
6. Information About Brokerage The agent must provide the notice explaining brokerage services in Texas.
What does the Canon of Fidelity require?
That agents always represent and prioritize the client’s interests.
Agents must be fair to everyone involved in a transaction — even while putting their client first.
Agents must not put their personal interests above their client’s.
What does the Canon of Integrity require?
That agents be honest and morally sound.
-This includes being careful and cautious to avoid any kind of misrepresentation, whether intentional or accidental (acts of commission or omission).
What does the Canon of Competency require?
That agents have knowledge of national, state, and local real estate issues and practices.
This includes:
- Staying up to date on market conditions.
- Being informed about national, state, and local developments in real estate.
- Using good judgment and skill in their work.
What is Consumer Information Form 1-2?
A required notice brokers must display about the Real Estate Recovery Trust Account.
Brokers and sales agents must:
- Display it clearly at their office.
- Post a link to it in a visible spot on their website and label it clearly (in at least 10–12 pt font).
- On social media, it can be in the profile or a direct link from the profile.
What does the Canon on Discriminatory Practices prohibit?
Discrimination based on protected classes (race, religion, gender, etc.).
License holders may not discriminate or even suggest a preference based on:
- Race, color, religion, sex, national origin, ancestry, familial status, disability (including HIV/AIDS status).
- This applies to owners, buyers, tenants, or anyone involved in a transaction.
What does the Canon on Information About Brokerage Services (IABS) require?
A form agents must give to clients explaining brokerage roles and duties.
-Must be given at the first substantial conversation about real estate services.
Can be delivered:
In person
By mail
In an email (not in the signature or footnote)
As an attachment or link (must clearly reference it)
Brokers must also display the IABS link on their websites and social media (profile or direct page).
What can TREC do if a license holder violates the License Act or TREC rules?
Suspend, revoke, place on probation, or reprimand the license holder.
What did the court say in the case where a broker didn’t disclose foreclosure on their clients listed property?
The broker tried to argue that they didn’t have to, because it wasn’t in the listing agreement.
The court disagreed, saying TREC’s rules have the force of law, meaning agents can’t just go by contracts — they have to follow all ethical and legal obligations too.
What does fiduciary mean?
A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person.
In real estate, a “fiduciary” refers to a person (like a real estate agent or broker) who has a legal and ethical obligation to act in the best interest of their client (the principal), placing that client’s interests above their own.
Real estate agents are fiduciaries, meaning they owe a special duty of loyalty and trust to their clients
Who must follow the NAR Code of Ethics?
Only REALTORS® who are members of the National Association of REALTORS® and its affiliates.
What is the “Code of Ethics”?
The National Association of REALTORS® (NAR) has its own Code of Ethics — a strict set of professional and moral rules that its members must follow. These rules go beyond basic legal requirements.
What are the Standards of Practice in the NAR Code of Ethics?
Interpretations of the Code that guide how it’s applied in real-world situations.
real-life explanations or examples of how to apply the rules in the NAR Code of Ethics.
The Standards of Practice guide REALTORS® on how to stay ethical in specific scenarios, so there’s no guesswork.
They also help local associations decide if someone really broke the Code during a hearing.
Code of Ethics - The main rules REALTORS® must follow
Standards of Practice - Real-life explanations of how to follow those rules correctly
What penalties can a REALTOR® face for violating the NAR Code?
Reprimand, fines up to $5,000, required ethics courses, and/or loss of membership.
What happens if a Code of Ethics violation also breaks the Texas Real Estate License Act?
TREC may take disciplinary action in addition to NAR’s penalties.
Why is ethical behavior important in real estate?
Because the industry depends on trust, reputation, and fair business practices.
What are examples of ethical behavior expected from license holders?
Telling the truth, being upfront, keeping promises, and exceeding minimum requirements.
A real estate business is
only as good as its?
Reputation
