10 Things real estate agents cannot do
Real estate agents sit at the heart of the property buying and selling process, undertaking various responsibilities. However, certain practices are either beyond their scope or are legally prohibited. Both buyers and sellers need to be aware of these limitations, which violate their real estate code of ethics and/ or the law. Equally, agents also need to keep these regulations in mind to adhere to legal standards and avoid making mistakes that could lead to lawsuits. No matter where you are in the real estate transaction, these guidelines can be helpful. So, let’s dive in and explore what real estate agents cannot do.
1. Appraise properties
One practice that real estate agents cannot engage in is appraising properties. While they may have a good understanding of market trends, property values, and how much a property is likely to be worth, they are not qualified to provide formal property appraisals. They are not licensed appraisers and as such, cannot do so. Appraisals are a complex process that necessitates formal training, knowledge of valuation techniques, and property law. As a result, buyers and sellers must consult a licensed appraiser if they need an official appraised value, such as during the mortgage application process.
2. Practice law
Another significant limitation is that real estate agents are not trained legal professionals and therefore cannot practice law. They should have a good understanding of the legal requirements related to property transactions, the approximate procedures, and how to signpost to the correct professionals. Yet ultimately, they are not trained in the intricate details of property law and cannot advise on legal matters. Buyers and sellers need to contact a licensed attorney to draw up contracts and for any help filling them out. Although real estate agents can provide guidance throughout transactions, they cannot act as licensed legal professionals.
3. Engage in discriminatory practices
Additionally, real estate agents are legally prohibited from carrying out discriminatory practices. In the US, the Federal Fair Housing Act protects buyers from discrimination based on race, sex, religion, national origin, color, familial status, and disability. As a result, real estate agents cannot refuse to sell or rent a property to someone based on their race, religion, or any other protected characteristic.
Moreover, they are unable to provide information that could be seen as discriminatory when providing demographics about the neighborhood. A few common questions that they are not allowed to answer include:
- What kind of people live in this area?
- What is the district crime rate?
- How old are the neighbors?
- Etc.
Real estate agents must avoid discriminatory practices and adhere to fair housing laws.
4. Misrepresentation
We can define this practice as when a real estate provides false, incorrect, or misleading information about a property. For example, exaggerating the size in meters square, or omitting a known defect. It is part of their duties to provide accurate information to all parties. False information and knowingly misleading clients can have serious legal repercussions, as well as financial consequences. Overall, it is crucial that real estate agents maintain a high level of professionalism and ethical standards to ensure they provide the best possible service to their clients.
5. Lie about existing offers
Legally, real estate agents cannot lie about existing offers on a property. This practice violates the National Association of Realtors Code of Ethics, as it falls under misrepresentation. Often referred to by the term “phantom bidding”, this is illegal and unethical. Real estate agents are expected to uphold levels of honesty, so ethically and legally should not be making up details about an offer that simply does not exist.
6. Withhold offers
Similarly, real estate agents cannot lie through omission by withholding offers. They are obligated to present all offers to a seller promptly, regardless of the offer’s terms and conditions. The real estate agent must still inform you of the offer, even if they are aware that it is below the price you will accept. This means that you have the option of rejecting it.
7. Underquoting
Underquoting is when a property is advertised at a lower price than that which the seller is willing to consider, and is an illegal practice. Real estate agents are not allowed to engage in deceptive tactics to draw in buyers and should act in the best interests of their clients.
8. False or misleading advertising
Real estate agents cannot publish misleading, deceitful, and inaccurate advertising, as it violates their code of ethics. In order to attract buyers or sellers, they are not allowed to use misleading photos or descriptions of a property- such as outdated or digitally altered photos. Moreover. Agents must avoid discriminatory or offensive advertising to stay in the clear when it comes to ethical and legal practices.
9. Dual agency (in states where it is illegal)
This guidance is specific to the US market, but generally, avoiding a conflict of interest is a good ethical practice. Dual agency is when an agent represents both the buyer and seller in a real estate transaction, which is illegal in several US states. These include Alaska, Colorado, Florida, Kansas, Maryland, Texas, Vermont, and Wyoming. In states where dual agency is legal, it remains a controversial practice.
10. Badmouthing other realtors
Finally, real estate agents cannot bad mouth, or make negative comments about other real estate agents and their business, as this is unprofessional and goes against their ethical code. They are expected to treat fellow professionals with respect and courtesy, even if they have different approaches or opinions. Ideally, they should build positive and constructive relationships with other agents.
Conclusion
Overall, real estate agents are able to perform many tasks, but there are certain legal, ethical, and knowledge-based limitations that we need to be aware of. These limitations exist to protect both parties and uphold standards. In summary, real estate agents cannot act significantly beyond their role (eg as attorneys and appraisers), engage in discriminatory practices and deliberately lie about or misconstrue the facts. By keeping these limitations and ethical standards in mind, real estate agents can provide the best possible service to their clients and maintain a positive reputation in the industry.
