LEGAL HOTLINE - You’re Better Than That
Is this introductory phrase necessary to distinguish this statement from a pattern of lying? To make lying a little easier, we’ve adopted the cultural reference “little white lie”. Whatever that means, it is supposed to make it okay to say something that is not quite true.
When you are selling real estate, it is not okay to tell a lie, regardless of the reason or justification. Knowingly communicating information that is not true violates numerous laws that regulate the real estate industry.
The Agency Law requires brokers to provide Real Estate Brokerage Services with “honesty and good faith.” RCW 18.86.030. The License Law obligates brokers to avoid false statements. RCW 18.85.361. The Uniform Business Practices Act authorizes disciplinary proceedings against a broker who includes exaggeration or deception in advertising. RCW 18.235.130. Lending law authorizes prosecution of a real estate broker for a class B felony if the broker participates in misrepresentations to the buyer’s lender. RCW 19.144.080.
The movie series “Pirates of the Caribbean” created the “pirate code” that enables a casual dismissal of rules by referring to them as “guidelines”. Alas, you are not pirates and the law is not just a set of guidelines. Honesty is not only the law, it is also your code. The Code of Ethics requires honesty from REALTORS® to all parties. It is never okay to engage in falsehoods when you are serving as a REALTOR®.
Consider some of the following examples of dishonesty, which may seem insignificant. Each example represents a violation of law and/or the Code of Ethics that could result in discipline by the Department of Licensing or your REALTOR® Association. Depending on the circumstances, the acts of dishonesty could also result in civil liability. In most cases, it is unlikely that a broker intentionally sets out to act dishonestly. Rather, broker is moving too quickly or doing what everyone else is doing or simply fails to think through the ramifications of their actions. You are licensed and acting within a heavily regulated industry that assists consumers, in many cases, with the largest financial transaction of their lives. You... and they... cannot afford for you to approach questions of honesty with recklessness or indifference. Within our industry, honesty matters. Your reputation matters. Deceptive practices, even if unintentional, cannot be tolerated.
Failing to identify your firm’s name, as licensed, in a clear and conspicuous manner.
In all advertising, every broker is required to display the broker’s firm’s name, as licensed, in a clear and conspicuous manner. If the firm has obtained an assumed name license, broker may use that assumed firm name in advertising. Brokers violate this rule every day in a variety of ways.
Some brokers ignore this law altogether and advertise an unlicensed team name, without including their firm’s name. Yard signs, business cards and social media websites create the impression that the broker’s team is the broker’s firm. This is a violation of Washington law and if the broker is discovered by the Department of Licensing, the broker will likely be disciplined. This problem is easily solved if the broker’s firm obtains an assumed name license in the name of the team. With that, the team may advertise in the team name exclusively. Without an assumed name license, the team and all of its members must include the firm’s name, as licensed, in a clear and conspicuous manner, in all advertising.
Other brokers violate this law by including the firm’s name but reducing it in size and scope so that there is no way any reasonable person could identify the name of the firm as “clear and conspicuous” in the broker’s advertising. Other brokers include the firm’s name, but not the licensed firm’s name. For example, including only a franchise logo or an abbreviated reference to the firm’s name will not suffice. When considering whether your firm’s name is properly displayed, you need to recognize that advertising takes many forms from the signage that appears on your office building all the way down to the directional arrows you use to point consumers to your property. ALL advertising must feature your firm’s name, as licensed, in a clear and conspicuous manner.
When a broker fails to include the firm’s licensed name in advertising, broker is effectively advertising that broker is not affiliated with the firm or that broker is affiliated with some other entity that is not a licensed real estate firm. This representation is untrue, dishonest and deceptive.
Exaggerated Statements in Advertising are Falsehoods
An advertisement that is literally correct may still be false, deceptive or misleading if the general impression it creates is untrue. Truth in advertising goes beyond simple truthfulness; advertising must not mislead or be capable of misleading a reasonable consumer.
Consider this example. Listing broker advertises that the 1970’s era home is “turnkey” and “ready for occupancy” and that the home is “fully remodeled from floor, to studs, to roof”. Buyer purchases and discovers that the roof is in the second half of its expected life. Upon further questioning, listing broker admits “the home has been remodeled since it was first built”. While the broker’s advertised statement that the home was “fully remodeled” may be technically true, the implication it creates is false. The implication of the statement is that the home is recently remodeled so that the roof and other features are new. In truth, the remodel, and the roof, were more than ten years old. Broker’s advertising is deceptive.
Brokers must also be mindful of how they portray themselves. Is the description given on your business card accurate? For example, if you advertise yourself as a “construction expert” or a “VA Specialist” is that true? Do you have training and experience sufficient to justify “expert” or “specialist”? If you advertise accomplishments, are they current? For example, “Pierce County’s Highest Producer” may accurately describe a broker one year but not the next. When you include designations or logos, be certain that you’ve earned the right to include them and, if necessary, that you have permission to use them.
A problem for some team leaders and team members is claiming credit for transactions not actually handled by the broker. It is dishonest for a team leader, for example, to advertise that he “represented 100 sellers last year” if, in fact, he was the listing broker for 30 sellers and other members of his team listed another 70 homes. Some team leaders claim credit in the MLS for all transactions handled by any team member so as to skew the statistics that would support a false claim by the team leader regarding productivity. That is a deceptive practice.
Misrepresenting a Buyer’s Ability or Transaction Terms
When buyer and seller negotiate buyer’s request for inspection contingency concessions on Form 35R and reach agreement on Form 35R, broker engages in loan fraud when she then participates in removing Form 35R from the purchase agreement so as to shield buyer’s lender from knowledge of the negotiations. Even if the mortgage broker recommends the practice, the practice is intended to deceive the lender who will be asked to fund the buyer’s loan and the practice constitutes loan fraud.
Buyers who rely on contingent funds to close a transaction but fail to disclose that to seller, commit a fraud or misrepresentation on the seller. If buyer’s broker knew that buyer relied on contingent funds or could have learned that buyer relied on contingent funds but failed to ask, then buyer’s broker assists in the deception. Buyer’s broker must avoid the dishonesty of inviting seller to believe that buyer has cash resources that buyer does not possess.
Dishonesty Regarding Multiple Offers
If seller receives only a single offer, it is never okay for listing broker to tell buyer/buyer’s broker that seller received more than one offer, thus encouraging an enhancement to buyer’s offer. Justifying this lie because it results in improved price and terms for seller is wrong. The practice is deceptive and violates Washington law even if seller benefits. Equally deceptive is the practice of misrepresenting the price and terms of an offer to a competing buyer so as to increase an escalation provision or provoke an increased offer price.
This article highlights only a few of the many ways that a broker can practice deception. Again, in most cases, the deception is unintended. You need to review your advertising, your business practices, the representations you make on behalf of yourself and your clients and ensure that in all aspects of your real estate practice, you exercise honesty and avoid exaggeration, deception and out right lies. Your success within the industry and the integrity of the industry depend upon it. Dishonesty, even when unintended, does not become you. You are better than that. You are a REALTOR®.
Annie Fitzsimmons
Annie is the Washington REALTORS® Legal Hotline Lawyer. Email the Legal Hotline Lawyer directly at legalhotline@warealtor.org or leave a message for the Hotline Lawyer at (800) 562-6027.