Realtor Lawbreakers: Understanding Legal Consequences And Disciplinary Action

When a realtor breaks the law, they can face a range of consequences, from losing their license to criminal charges. Some common illegal practices by realtors include fraudulent misrepresentation, discrimination in property transactions, and the unauthorized practice of law. In the case of a breach of contract, there are several steps that can be taken, including open communication with the realtor and their brokerage, moving on to a different realtor within the same agency, or consulting an attorney and terminating the relationship. It is important for clients to be aware of ethical and legal standards to protect themselves and take appropriate action when faced with unethical or illegal behaviour.

Failure to disclose dual agency

Dual agency, where a single agent represents both the buyer and the seller in a real estate transaction, is not inherently unethical or illegal. However, failure to disclose dual agency is a serious breach of conduct for realtors.

Informed consent from all parties is required for dual agency to be permissible. Without such consent, the realtor may face serious consequences. For example, in California, failure to disclose dual agency may result in the disgorgement of the realtor's compensation and the rescission of the transaction. The realtor may also be barred from collecting any commission or compensation from either party.

In addition to obtaining consent, realtors must also disclose any conflict of interest that may arise due to dual agency. This includes situations where the buyer is an existing client or has expressed interest in a property listed by the realtor. Failure to disclose such conflicts of interest is a breach of the realtor's fiduciary duty.

Realtors who fail to disclose dual agency may be subject to disciplinary action by relevant licensing boards or regulatory authorities. In some cases, this may include the suspension or revocation of their license. It is important for clients to be aware of their rights and take appropriate action if they suspect unethical or illegal behaviour from a realtor.

Misrepresentation of property flaws

Misrepresentation or concealment of property flaws is a serious issue that can have legal and financial repercussions for those involved. This occurs when a real estate agent deliberately hides, downplays, or provides false information about defects or issues related to a property. This could be a selling agent hiding property flaws or a buyer's agent overlooking flaws to progress the real estate transaction.

This behaviour is considered unethical because buyers rely on their real estate agent's expertise when deciding whether to purchase a home. By concealing material facts, the agent breaches trust, which can lead to potential financial consequences for the buyer. Concealing certain defects, like structural issues or mould growth, can pose safety risks to the occupants of the property, which can take years to uncover independently.

For instance, a seller's agent may not disclose a known termite infestation, which can cause significant "invisible" damage to the property. In such cases, both the seller and their agent could be held liable for damages. Similarly, a buyer's agent may overlook suspected flaws, such as cracks in the foundation, to avoid hindering the deal. While not a home inspector, it is the agent's responsibility to voice both known and suspected property flaws.

In many jurisdictions, failure to disclose known defects is illegal and can lead to lawsuits, penalties, and even the revocation of a real estate agent's licence. Buyers can sue sellers, the sellers' agents, or their own buyer's agents if they discover undisclosed defects after purchase. In such cases, sellers or agents may be required to compensate the buyer for repairs or the property's diminished value.

To protect themselves, buyers should review all disclosures and closing documents carefully and seek legal advice if they suspect any unethical or illegal behaviour. It is also important to document all communications and take screenshots of online listings, as these can be used as evidence in the event of a dispute.

Manipulating property photos

Property descriptions should also be accurate and not misleading. While it is acceptable to describe a small living room as "cozy," providing incorrect room measurements, even if only slightly inaccurate, is unethical. Photos and descriptions should reflect the property's true condition and be honest, even if presented in the best light. Any enhancements made to photos, such as digital staging, should be disclosed.

Sellers should carefully review the listing prepared by their agent to ensure their property is represented honestly. On the other hand, buyers must remember that photos and descriptions are preliminary and meant to attract interest, rather than provide a complete portrayal of the home.

Unethical manipulation of property photos and descriptions can lead to a breach of trust and have negative consequences for buyers, who rely on the agent's expertise. By concealing defects or misrepresenting the property, agents can put buyers at risk of potential safety hazards and financial losses. For example, structural issues or mould growth may go unnoticed and lead to costly repairs.

In some jurisdictions, failure to disclose known defects is illegal and can result in lawsuits, penalties, and revocation of the agent's license. Buyers can take legal action and sue sellers, agents, or their own agents if they discover undisclosed defects after purchasing a property. As such, it is essential for agents to act ethically and provide accurate information to protect their clients' interests and maintain trust in the real estate industry.

High-pressure sales tactics

• Putting a time limit on a seller to make a decision. While a buyer can put an expiration on an offer, which the seller’s agent must communicate to their client, the seller’s agent cannot apply their time restriction.
• Statements like, “This is a one-time offer,” or “This is the highest offer you will get.”
• Emotional manipulation, such as guilt-tripping or using personal stories to sway the client's decision.
• Refusing to take no for an answer. A buyer and seller always have the right to say no (unless locked into a contract). If, during the negotiation process, you feel like your agent is pushing you into a decision you’re uncomfortable with, they are engaging in unethical behaviour.
• Bait-and-switch. This tactic is more common in the rental and new home markets. An unethical agent may market their least expensive unit with specific features, then when customers show interest, they claim it is no longer available and point them toward a more expensive option.

While real estate agents are salespeople, they must prioritise ethics and the best interests of their clients over their own interests. Pushing for a quick sale or decision can result in contractual disputes or financial loss for the client. An ethical agent will advise their client honestly and provide the necessary information for the client to make an informed decision.

To avoid high-pressure sales tactics when selling or buying a home, it is important to do your research, know what you want, and stick to your game plan. Look for realtors who specialise in what you need help with and check their online presence, testimonials, and industry credibility. Remember that you don't have to sign anything right away and that it's normal to speak to multiple agents before deciding on one.

Failing to present all offers

A realtor may not present an offer out of concern for their client's stress or aggravation, particularly if they believe the offer will be rejected. However, it is still their ethical responsibility to present it. In addition, a realtor cannot refuse to present an offer because a particular contract software is not being used.

If a seller has instructed their agent in writing to withhold certain kinds of offers, then the agent is not obligated to present those offers. However, if a realtor withholds an offer in favour of a higher offer that benefits them financially, this is a big procedural breach and can put the agent at risk of losing their licence.

If you suspect your offer is being withheld, you can talk to your real estate agent, ask for a rejection in writing, contact the seller directly, or report the agent to their brokerage or the licensing agency in your state.

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