Ethics Case 8-1
You decide!
Case #8-1: Failure to Put Deposit in Separate Account
NAR Code of Ethics Article #8
https://www.nar.realtor/about-nar/governing-documents/the-code-of-ethics
REALTOR® A, a listing broker, obtained a signed offer to purchase, together with Buyer C’s check for $10,000 as an earnest money deposit. Buyer C’s offer was subject to the sale of his current residence. REALTOR® A presented the offer to Seller B who accepted it. REALTOR® A then inadvertently deposited the earnest money check in his personal checking account. Since Buyer C’s offer was contingent on the sale of his current home, Seller B’s house remained on the market. A week later, REALTOR® A received another offer to purchase Seller B’s house from another broker and presented it to the seller as a back-up offer. Buyer C was informed about this new offer and reluctantly concluded that he would be unable to waive the sale contingency in order to proceed with the purchase of Seller B’s house. He then asked REALTOR® A for his $10,000 check back. REALTOR® A explained that he had mistakenly deposited Buyer C’s check in his personal bank account which had been attached since he received Buyer C’s offer, and he was temporarily unable to refund the deposit to Buyer C.
Buyer C filed a complaint with the Association of REALTORS®, which was received by the Grievance Committee. The Grievance Committee concluded that the complaint warranted a hearing and referred it to the Professional Standards Committee. At the hearing, REALTOR® A explained that his bank account had been unexpectedly attached following the loss of a civil suit which he was appealing; that his deposit of Buyer C’s check in his personal account was a simple error; that he was arranging for the prompt release of his account; and that everything would be straightened out in three or four days, which should not be of great inconvenience to Buyer C.
How would you decide on REALTOR® A?
Ethics Violation of Article 8 in the NAR Code of Ethics? or No Violation?
See below for how this hearing panel ruled…if you think a violation, how much discipline would you impose? Fine of $________ and ____ hours of education.
If you were the respondent (aka defendant) REALTOR® in this complaint would you have considered taking an offered citation (small fine and education) in lieu of a full formal ethics hearing or waiving your right to a full formal hearing and accepting the fine and education imposed by the ethics committee who takes into account your admission of unprofessional behavior (aka take a plea deal)?
SCR is receiving numerous reports of unprofessional behavior. Across the country, unprofessional behavior is the number #1 complaint by REALTORS® about their colleagues in the market.
There are several ways of addressing and trying to correct unprofessional behavior. Lead by example. If you see unprofessional behavior, say something. Discuss with the other REALTOR®. Discuss with the REALTOR®’s Broker-in-Charge (BIC). Consider filing ethics complaints at the appropriate association and filing license law complaints at LLR.
It was the conclusion of the Hearing Panel that REALTOR® A was in violation of Article 8 of the Code of Ethics for having failed to put Buyer C’s earnest money deposit in a special account separate from his personal funds.
Posted by: Byron King on 09/07/22 (This information is only accurate as of 09/07/22. You must contact SCR for updates and changes to this information after 09/07/22 as laws and regulations may change over time. SCR 803-772-5206 or email info at screaltors.org or email byron at screaltors.org)
This information is not legal advice. This information is intended only to provide general information and may not be relied upon as specific legal guidance. Legal counsel should always be consulted before acting in reliance on this information.