Because of growing competition and decreasing amount of land for development in real estate market nowadays, some agents may intentionally mislead their customers by withholding or distorting information in order to extend their own gain. Houses or other buildings have great value, buyers often need to spend most of their savings, these acts in the real estate business are undoubtedly greatly against the interests of the buyers, real estate marketing ethics became a serious problem facing by the public and professionals in this industry.
The products or services are the backbone of an enterprise; its level of quality dominates the life and death of a real estate business. In the past, it is easy for real estate development companies, as well as other regulatory departments to make quality problems that seriously damage or affect clients’ interest, due to the lack of expertise and coordination in the work, and motivations to obtain abnormal profits. It was common that the develop companies use less qualified but lower priced production factors to minimize costs. This consequently led to reducing quality of the building itself after some time. These acts against professional ethics damaged clients’ and social interests to a great extent.
Real estate agency is the bridge between buyers and sellers, providing all the information needed during the exchange. The true information of propertied can be stretched and twisted by the agents in order to maximize revenues. An example can be that one agent may show his own listed properties first to clients, and the agency listed next, regardless of the actual need of clients, because he is able to get a higher percentage of income from his own listing contracts. Or one can deliberately withhold the precise data of the property’s quality, supporting facilities and other factors to mislead customers and to overprice this property, say altering photos of that property. When a listing contract is signed between a real estate broker and the seller of that property, there will be a termination date for that contract also known as expire date. If the broker fails to sell that property before expire date, he automatically loses this case and the potential earnings.
1 Ethics in Real Estate, http://www.jenman.com.au/Ethics-RE.php,
The work of Geltner at al (1991)2 shows that the level of efforts agents put on listed contracts increasing over time as the expire dates approaches by using a dynamic optimizing model. It means that an agent would be aggressively introducing and marketing those properties that will expire in short time, focusing more on nearly expire listed properties than newly ones and highly recommending sellers to accept lower reservation prices in order not to miss the contract termination date.
The reasons causing unethical behaviors by real estate companies can be generally classified to two sections: internal reasons and external reasons. External causes including government factors, legal factors, and consumer factors; internal reason mainly refers to the factors of the enterprises themselves. Only by proper analyzing of how these ethical issues are generated, can we resolve and prevent them from happening again in the future.
An outstanding real estate agent builds up his career upon the trust, satisfaction and confidence of his clients. It is important to achieve this customer satisfaction in order to win further customer loyalty. A good and highly praised reputation is essential for any business to survive and grow.
By introducing code of ethics by NAR3 and professional and ethical standard by RICS, it effectively monitors and regulates the professional and personal behaviors to meet the higher standards expected in real estate industry. The role of RICS in setting, monitoring and regulating standard was seen as important. However, there was an understanding that different degrees of monitoring may be needed for different types of professionals. It was commonly recognized that these regulation codes have to be provided with more power in order to be able to regulate this area more effectively.
2 Geltner, D., Kluger, B.D., Miller, N.G. (1991) ‘Optimal Price and Selling Effort from the Perspectives of the Broker and the Seller’. Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(1), pp. 1-24. 3 See exhibit 1. Ningxin Tan 3
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