The Golden Thread

“To educate a man in mind and not morals is to educate a menace to society.” —Theodore Roosevelt

May 1, 2008

Winning passage of state license laws was an early priority for association leaders, who believed a baseline standard would afford some protection against unscrupulous sorts.

By 1922, 14 states had real estate license laws on the books.

At the same time, association leaders held REALTORS® out as the crème de la crème of the profession, and that meant creating a higher standard for their members. Almost immediately, they began work on the REALTORS® Code of Ethics.

Pearl Janet Davies, in her book Real Estate in American History (Public Affairs Press, Washington, D.C., 1958), recalled: A code of ethics for the real estate business had been the national real estate organization’s primary objective. Its constitution had a mandatory provision for a committee on code of ethics. Its founders realized that one principal task must be to formulate in clear words the essentials of proper real estate business conduct. Those rules of conduct must be such that men in the business could agree upon them. They must be an expression of the group consciousness.

Frank Craven, 1911 chair of the Committee on Ethics, stated: “We cannot suggest a better starting point than the Golden Rule, ‘Do unto others as ye would that others should do unto you.’” Craven also pointed out: “The real estate broker is depended upon by his client possibly more than any other profession or trade. The average individual buys possibly one or two properties in a lifetime. He comes to you for information and advice.”

At the 1913 convention in Winnipeg, Manitoba, President Edward Sanderson Judd made the motion for adoption of the first Code of Ethics: “The motion is for the adoption of the rules for conduct . . . and that they be taken as the Code of Ethics of the National Association.” Davies recalled: “A delegate rose to say, ‘We have heard many important things here but nothing so important as the adoption of this resolution.’”

Perhaps one of the most extraordinary aspects of the Code of Ethics is that it was developed and adopted by real estate brokers voluntarily, not driven by government forces or marketplace demands. As former executive vice president of NAR William D. North noted in the August 1978 article “The REALTORS® Code of Ethics — A Gift of Vision,” published in The Executive Officer:

With the exception of a now defunct group of printers, the REALTORS® were the first business group outside the “learned professions of medicine, engineering, and law” to adopt a code of ethics. It was an uncommon event with uncommon men and women making an uncommon commitment to business integrity and fair dealing. It was not a commitment coerced by threat of government sanction but a commitment predicated on a need perceived by REALTORS® themselves. It was not a commitment mandated by the marketplace because it involved the voluntary acceptance of liabilities and responsibilities, duties and costs, limitations and obligations, which the public did not even perceive as their due. It was, in sum, a commitment to the concept of service to the public as an article of faith in professionalism.

The 1913 Code of Ethics consisted of 23 articles categorized as “Duties to Clients” and “Duties to Other Brokers.” It obligated members (who wouldn’t be known as REALTORS® until 1916) to “be absolutely honest, truthful, faithful and efficient”; to “obtain sole agency, in writing”; to “respect the listings of his brother agent, and to co-operate with him to sell”; to “advise an owner to renew a selling contract with some other agent, rather than solicit the agency”; to “always speak kindly of competitors”; to “always be loyal, square, frank and earnest in matters that require the co-operation of other brokers”; to “advertise nothing but facts”; and to “give an honest opinion concerning a competitor’s proposition when asked to do so by a prospective purchaser, even though such opinion will result in a sale by the competitor.”

By the following year, the ongoing task of reviewing and refining the Code was already underway. Two categories of ethical duties became three, with a new category, “Duties of the Broker to the Prospective Buyer,” being added. The third edition, adopted in 1915, made “Suggestions to Owners and Investors” and added a “Duty to Organize.”

The fourth edition of the Code, adopted in 1924, added a preamble that included the Golden Rule. The 1924 Code also added “Suggestions to the Public” that defined the terms “client” and “customer” and incorporated Article IV from the national association’s bylaws requiring every member board to adopt the Code. The 1924 revision, however, also introduced an article about the impact of race and ethnicity on property values; that provision was part of the Code for more than 25 years and served as tinder in the early years of the civil rights movement.

All told, the code has been amended 31 times. REALTORS® serving on the Professional Standards Committee have labored to ensure that the Code is a living document that protects the sellers, buyers, landlords, tenants, and others who place their trust in REALTORS®; that the Code’s obligations are phrased in clear, objective, and unambiguous terms, and that the Code remains relevant and meaningful in the constantly changing real estate environment.

The goal today, as in 1913, is to ensure consumers a square deal when working with a REALTOR®.

Cliff Niersbach is vice president of board policy and programs for the NATIONAL ASSOCIATION OF REALTORS®.