The Ethical Standard Of Suitability In Real Estate

[Bryan Hancock]

Several threads recently have discussed the ethical standard of suitability in real estate. In other words, are the buyers or sellers sophisticated enough to understand the risks of a financial arrangement if it is disclosed or should something be disclosed in the first place.

This topic generally comes up when lease/options and setting unrealistic terms for the tenant/buyer to perform. However, it has also come up with seller financing scenarios where the seller is unaware of how a loan they have personally guaranteed is being used to indemnify sizable deflation risk.

John Reed has some thoughts on this here:

The ethical standard of suitability in real estate

What are your thoughts about how much information needs to be disclosed to buyers or sellers and how much they need to be compensated for assuming non-disclosed risk to keep things ethical? How do you gauge how suitable buyers or sellers are in your business dealings?

[Joel Owens]

Well Brian ethics and what it entails is subjective on an individual basis.

If you are an astute buyer it is not your job to protect the interests of the seller or school them.What constitutes a fair and equitable deal is in the eye of the beholder.

The law and ethics are two very different things.

For instance in Georgia the GREC (Georgia real estate commission) cares NOTHING about ethics.

What they do care about is license laws.If you are a REALTOR for example you subscribe to the CODE OF ETHICS.In my state it is not required to be a REALTOR to have an agents license or a brokers license.

Just because someone is not a REALTOR and has a license does not mean that person is not ethical.

I see nothing wrong with a buyer or seller who has spent considerable time learning knowledge to gain a competitive advantage in a transaction. What I have a problem with is people representing something they are not in the deal and misleading all the parties involved. That would be unethical in my eyes but again ethics is a subjective topic.

You have to remember that just because you reason things a certain way does not make it the only way or the way the rest of the world sees it.

There are many people that have very different views from me.As long as it's not breaking the law I will listen to what they have to say and try to understand but I do not have to change my position.

I can change my position to their position on the topic 100%,change part of my position,or change nothing at all.

Interested to hear others thoughts on this.