Professional practice and ethics real estate - Essay Example

Professional Practice and Ethics - Real E Affiliation: Table of Contents Table of Contents 2 3 Introduction 4 of Ethics in the profession of Real Estate 5 Case Study Analysis: 6 Duties to Clients 7 Conclusions: 9 Definition of Key Terms 10 Cited Work 11 Example of Case Study 11 Abstract As the real estate industry adopts a global perspective for local market activity, real estate academics and practitioners across geography are making deliberate efforts to understand the views of their international colleagues on important real estate topics including basic professional practice and ethics associated with the profession. This study focuses attention on real estate academics and practitioners, process to identify important real estate topics. First, while we explore the natural descriptions and definitions of various terms, we aim to interpret and describe a specific case study raising concerns on professional ethics. Then, in the second phase, the full list of potential solution, responses are collated from different perspectives and for the benefit of various stakeholders - clients, public and the real estate associate. Introduction The primary focus here is to be reflective about values, ethics and professionalism in daily practice of real estate. This article not only considers the development of national and international standards for valuers, it also examines briefly the variations and differences in market practice arising from variations in law, culture and custom while acknowledging the general acceptance internationally of the prevalent meaning of market value and ethics by global standards. While urban development is always political and about values, power is present in all decisions, which might be productive or otherwise and the general assumption in terms of democracy that a public good can be achieved. There is a conscious effort to conceptualise the meaning of ethics and values in real estate, and debate what would constitute ethical practice in a variety of ethical dilemmas; appreciate the meaning of professionalism and ethics to deeply understand the implicit and explicit expectations and responsibilities placed upon professionals in real estate and finally to acknowledge the specific duties owed by professionals to clients, customers and the wider community and understand the concept of professional liability in the context of all the related and relevant laws. The attempt ideally should be to acknowledge and respect social diversity, and critically understand how planning and real estate practice impacts upon different groups in society. Primarily, seeking other counsel; working through informal networks; exposing assumptions; bargain for information; being doubly sure, and negotiate for more clarity should be defined purpose of every ethical attempt in a profession. Code of Ethics in the profession of Real Estate It is very important to recognize that the interests of the nation and its citizens require the highest and best use of the land and the widest distribution of land ownership, upon which depend the survival and growth of free institutions. They require the creation of adequate housing, the building of functioning cities, the development of productive industries and farms, and the preservation of a healthful environment. Such varied interests impose obligations beyond those of ordinary commerce and deals. They evoke serious social responsibility and a duty to which real estate associates should dedicate themselves, appropriately well prepared. In recognition and appreciation of their obligations to clients, customers, the public, the real estate associates continuously strive and aim to remain informed on issues affecting real estate. They should identify and take steps, through enforcement of Code of Ethics and by assisting appropriate regulatory bodies, to eliminate practices which may damage the public or which might discredit or bring dishonor to the real estate profession. Realizing that cooperation with other real estate professionals promotes the best interests of those who utilize their services. In instances where their opinion is sought, it is offered in an objective, professional manner, uninfluenced by any personal motivation or potential advantage or gain. A sense of fairness has developed, and high integrity resulting from adherence to a lofty and yet important ideal of moral conduct in business relations. Professional Practice and Ethics "The act of proposing the most appropriate allocation [or development] of land uses within a particular socio-economic setting is a matter involving judgement and ethical choice"1 The basic questions that arise are how do we 'learn' judgement and how do we know it is ethical. In this very exercise, ethics need to stand out prominently. While representing a buyer, seller, landlord or other client as an agent, surveyor, counsellor, a real estate professional pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve them of their obligation to treat all parties honestly and impartially. Case Study Analysis: The duties imposed by the set of Ethics should encompass all real estate-related activities, deals and transactions whether conducted in person, electronically, or through any other medium and means. In a live case study, not every situation is perfect and the results would be skewed to consider ideal environment while analyzing pros and cons of a case. We know Surveyor shall not mislead the buyer, full disclosure is mandatory with informed consent of relevant parties. The obligation of to preserve confidential information provided by their clients in the course of any agency relationship or real estate professional continues after termination of agency relationships or any non-agency relationships recognized by law. Duties to Clients The primary duties of any professional surveyor or real estate counsellor and agent towards clients would include not to deliberately mislead the owner regarding market value, represent the seller with informed consent of both parties. Real Estate firm shall not be obligated to continue to market the property after an offer has been accepted by the seller/landlord. The obligation would be to preserve confidential information provided by their clients in the course of any relationship or non-formal interaction. The surveyor or counsellor should not knowingly, during or following the termination of professional and personal relationships with their clients, reveal confidential information of clients or use confidential information of clients to the disadvantage of clients or use confidential information of clients for the real estate's advantage or the advantage of third parties. Being consistent with the terms and conditions of real estate norms and property management agreement, competently manage the property of clients with due regard for the rights, safety and health of tenants and others lawfully on the premises. Realtors and surveyors who are employed to maintain, evaluate or manage a client's property shall exercise due diligence and make reasonable efforts to protect it against reasonably foreseeable contingencies and losses. If knowledge and expertise is used of a surveyor or counsellor or any real estate firm to evaluate a specific property exploiting personal rapport and relationship with half baked information, there could be several complications not just in terms of compensation and charges to be levied but also the depth of understanding and assessment required of property might be compromised. The case study below reflects similar situation where no agreement exists and verbal communication with a certain amount of trust was abused for several years. All information and intent to develop was not disclosed. The experience pertaining to commercial property is also a significant requirement. The possibility that sellers or sellers' representatives may not treat the existence, terms, or conditions of offers as confidential unless confidentiality is required by law, regulation, or by any confidentiality agreement between the parties and fees for preparing appraisals or other valuations shall not be contingent upon the amount of the appraisal or valuation are important points to be considered. In order to avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property, it is important to conduct thorough research. Real Estate Firms shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license. Entities acting as exclusive agents or surveyors, establish the terms and conditions of offers to cooperate. Unless expressly indicated in offers to cooperate, cooperating brokers may not assume that the offer of cooperation includes an offer of compensation. Terms of compensation, if any, shall be ascertained by cooperating brokers before beginning efforts to accept the offer of cooperation. Ideally surveyors and Real Estate experts should not undertake to provide professional services concerning a property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties. There should not be acceptance of any commission, rebate, or profit on expenditures made for their client, without the client's knowledge and consent. Duties to the Public Surveyors, experts in real estate firm, in their real estate employment practices, shall not discriminate against any person or persons on the basis of race, color, religion, sex, handicap, familial status, or national origin. When surveyors or real estate professionals prepare opinions of real property value or price, other than in pursuit of a listing or to assist a potential buyer, such opinions shall include the following unless the party requesting the opinion requires a specific type of report or different data set: 1. identification of the subject property 2. date prepared 3. defined value or price 4. limiting conditions, including statements of purpose(s) and intended user(s) 5. any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants 6. basis for the opinion, including applicable market data, with all details disclosed by the concerned parties which is not governed by confidentiality principe 7. if the opinion is not an appraisal, there has to be a statement to that effect Different case studies and scenarios in real estate are governed by prevailing bodies. The obligations in respect of real estate disciplines other than appraisal shall be interpreted and applied in accordance with the standards of competence and practice which clients and the public reasonably require to protect their rights and interests considering the complexity of the transaction, the availability of expert assistance The Standards of Practice serve to clarify the ethical obligations imposed by the various Articles and supplement, and do not substitute for, the Case Interpretations in Interpretations of the Code of Ethics. Modifications to existing Standards of Practice and additional new Standards of Practice are approved from time to time. Conclusions: Code of Ethics exist in all professions and are specifically designed to suit the interest of all stake holders involved. There could always be cases and scenarios where there could be several compromises in terms of rules and policies which is not only a violation; it even leads to unforeseen losses. Every real estate professional, in their field of expertise, regardless of the fact, if they are surveyor or counsellor need to be aware of key concepts for thinking about what ethics means for professional practice, what kinds of practical responses are required and possible and the relationship between power, ethics and values for real estate profession. Definition of Key Terms Client and Customer "Client" means the person(s) or entity(ies) with whom a Real Estate firm has an agency or legally recognized non-agency relationship; "customer" means a party to a real estate transaction who receives information, services, or benefits but has no contractual relationship with the Real Estate Firm Prospect "Prospect" means a purchaser, seller, tenant, or landlord who is not subject to a representation relationship with the Real Estate firm Agent and Broker "Agent" means a real estate licensee which includes brokers and sales representatives acting in an agency relationship as defined by state law or regulation while "Broker" means a real estate licensee including brokers and sales associates acting as an agent or in a legally recognized non-agency capacity. Cited Work http://www.realtor.org/mempolweb.nsf/pages/code Official Website of RICS Official Website of RTPI Example of Case Study Let us assume that Charles Smith runs a small car hire business in a small town and is friendly with Angus Dewar who is a partner in a small two partner firm of surveyors and valuers in the same town. They both go to the same golf club. Over the years Charles decides that he would like to "get in to property". He begins to buy up small flats to rent out and he always asks Angus to "give them the once over" before he buys just to be sure that there are "no disasters". After about 10 years Charles has quite a large property empire but it is all residential and it is difficult to put up the rents. He decides therefore to move into commercial property. He picks up a glossy catalogue showing a number of properties which are being auctioned off by Network Rail. The catalogue is prepared by a UK based firm of chartered surveyors and property agents. In the usual way punters who are interested in buying have to make their own enquiries in relation to particular lots before the auction. Charles sends Angus a copy of the catalogue and says he is interested in buying lot 56. The catalogue contains properties the length and breadth of Scotland and lot 56 is on the outskirts of a town some 100 miles away from the town in which Charles and Angus live and work. Charles asks Angus if he would mind going to look at the property. Charles advises Angus that although the property was a semi-derelict old railway building it had development potential. Charles tells Angus that he has heard that the property was "up for planning" a few years ago for conversion into a block of flats. As the auction is the next day, Angus drops everything jumps into his 4 year old Rover 75 and heads off in the direction of the property. He gets there about 4o'clock and someone at the nearby railway station gives him a key to unlock the padlock of the semi-derelict building. He spends two hours looking at the property and asks the railway employee if he knows anything about its history. The employee says that he has heard it could go for flats one day. Angus tears back snatching a sandwich and a sparkling water at the local pub. He makes notes on the property which the barmaid notices. She casually remarks that she hopes something will be done with that derelict shed beside the station. Angus telephones Charles at home and gives him a general report on the condition of the property. He says that it looks structurally sound but obviously needs complete renovation and probably a new roof but that the site would be good for flats especially since it is close to the railway station and therefore good for transport links. Charles thanks Angus profusely ending the conversation with the phrase:- "I take it it will be the usual 250.00 fixed fee" Angus pauses and says yes I suppose so. At the auction bidding is fierce. A local charity known as "Preserve Our Railway Heritage" are anxious to buy the property for a railway museum and there have been hints that they might get lottery funding. Charles gets carried away and although the upset price is 75,000 he eventually buys it at 150,000. Charles then instructs planning consultants and architects to prepare an application for change of use and conversion into flats. It does not take a week for the planning consultants and architects to tell Charles that a planning application for just such a development was refused two years ago on the grounds that such a development would contravene the existing zoning for light industrial. The planners also point out to the planning consultants that the building itself is quite close to old mineral workings and that one of the reasons that the roof needs replaced is because there has been subsidence. Charles is left having to pay out 175,000 for a derelict property which he cannot develop. Charles talks informally to a solicitor who is a partner in a large Edinburgh firm and who happens to be a member of the same golf club as Charles and Angus. The solicitor suggests that there may be a claim against Angus. Now the questions here of course are:- (a) What was the nature of the instruction (b) Is it relevant that Angus' expertise lay wholly or mainly in valuing domestic property and that Charles knew that (c) Is it relevant that Angus knew of Charles' intention to develop the property for flats = Read More