BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Truth in Advertising – Be Careful with All Details
Q: I am a listing agent and recently closed two transactions. In the first transaction, the contract was ratified for the full list price but during escrow there was an addendum that reduced the price by $20,000 because of a foundation issue. I reported the correct price to the MLS.
On the second transaction, once again I was the listing agent and the property sold for more than the list price.
In a mailer to my farm I advertised the first property as having “Sold at full list price.” And in the second sale I advertised that it “Sold for 14% over list price.” It turns out that it actually only sold 12.4% over list price because I made a calculation error.
A competitor in my farm area has filed an Ethics complaint with the local Association of REALTORS® alleging that I “failed to present a true picture in advertising.” He also filed a complaint with the CalBRE and I am now facing a license violation that I and my broker have to defend.
How can this be so serious when I just made minor mistakes?
A: Such seemingly harmless and minor misstatements can have harsh consequences.
1. Code of Ethics: Article 12 of the Code states: “REALTORS® shall be careful at all times to present a true picture in their advertising and representations to the public.”
It is within the jurisdiction of the Professional Standards Panel of the Association of REALTORS® to consider whether such statements are a violation of the Code. You could very well have to face an Ethics hearing on this matter. It is up to the Panel to decide if this rises to the level of a violation. Sanctions can be as simple as a letter in your file, to a fine, or a requirement to attend an Ethics class. While the Panel has the authority to suspend an agent’s membership or even expel a member from the AOR, those sanctions are reserved for the most severe violations.
2. CalBRE: Business and Professions Code Section 10176(a) provides that the CalBRE can discipline a licensee for “Making any substantial misrepresentation.”
CalBRE views all allegations of misrepresentations seriously. Recently they have been utilizing their new statutory tool to issue a “Cite and Fine” violation, meaning that the agent/broker can just pay the fine of up to $2,500 if they choose not to fight the charge. If they want to challenge the charge, the agent/broker can request a full hearing. This is much like a traffic violation, but nothing appears on the agent/broker’s public file if they just pay the fine. A full hearing can be very expensive and take up lot of your precious time.
PRACTICE TIPS
1. In all of your advertising, be very careful that all of your remarks are true and accurate down to the details.
2. It is your competitors that will turn you in.
3. It is expensive and time-consuming to defend these matters..
4. Be especially careful with anything entered into the MLS because Civil Code Section 1088 provides that if an agent places a listing or other information in an MLS, that agent:
“shall be responsible for the truth of all representations and statements made by the agent or appraiser of which that agent or appraiser had knowledge or reasonably should have had knowledge to anyone injured by their falseness or inaccuracy.”
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2013 11/29/13