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Ethical Dilemmas In Real Estate: Texas
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Ethical Dilemmas In Real Estate: Texas

As an interested individual looking to be a future real estate agent in Texas, you will come across important topics relevant to the current real estate industry scenario in your pre-licensing education.

One of the major and most relevant topics you shall cover while taking up the Texas real estate license course is the “Ethics and Moral Code of Conduct”. The guidelines and pointers of this Code are laid down by the Texas Real Estate Commission, TREC which is the regulating authority of the real estate industry.

The importance of learning this topic naturally arises from the ethical dilemmas and challenges faced by industry stakeholders on an everyday basis.

Learn more about it in the following hypothetical case studies describing various ethical situations that you might face in the real-world industry:

Dual Agency Dilemma

Scenario: a real estate agent represents both the buyer and seller client in a property transaction, without disclosing the dual agency clause.

Ethical Issue: as a real estate agent, you have a fiduciary duty to both parties, but conflicts of interest may arise. This lack of disclosure can undermine the trust and confidence of a client in you as a professional.

Undisclosed Property Issues

Scenario: A real estate agent is aware of significant property defects and issues but does not disclose them to potential buyer clients.

Ethical Issue: If you fail to disclose the known issues with the property, it can lead to legal consequences and violate your moral duty to provide accurate information to your clients. This will cause you to lose out on future potential clients which you would have gotten through good word of mouth from your current clients.

Pressure to Close a Deal

Scenario: A real estate agent feels pressured to close the deal quickly, even though the buyer is not fully informed about potential issues that may come with it.

Ethical Issue: Acting with the motive and at the same time being responsible for keeping the best interest of a client first with the desire of a quick commission for self requires a perfect balance between good intentions and moral duty. So, sometimes not balancing both can lead to ethical challenges.

Misinterpretation of Property Value

Scenario: An agent showcases an inflated and overestimated cost of property value to attract sellers.

Ethical Issue: as an agent if you misrepresent property values. It can mislead clients and potential buyers. This may result in causing financial harm and damage to your reputation as a professional agent. In an industry where a good reputation will get you more business, you will also lessen your chances of getting potential good leads for the future.

Selective Disclosure of Offers

Scenario: an agent shares only certain offers with the seller and with holes, others that may be more favourable to the client.

Ethical issue: if you fail to present and convey all available offers to your clients, this violates your duty of honesty and transparency towards them as a professional real estate agent. This will result in potentially harming your and the seller’s financial interests in the end. Therefore, this must be not practised in real-world scenarios.

Discrimination in Tenant Selection

Scenario: A real estate property manager discriminates against some applicants who are interested in renting a property based on their race, religion, colour and other characteristics.

Ethical Issue: as per the fair housing laws practised in Texas. It strictly prohibits discrimination against race, religion, creed and colour of individuals in any kind of property transaction. Therefore, if you violate these laws, it not only damages your reputation in the market but can also lead to legal consequences if the tenant client decides to take up the matter in court.

Confidentiality Breach

Scenario: Real estate agent shares confidential information about his clients, financial situation, background and deal details with other parties without consent. He shares sensitive data about clients with other stakeholders with ulterior motives in mind.

Ethical issue: professionally speaking as a practising real estate agent. If you breach the confidentiality code, it will not only erode and diamond the trust and confidence. The client has a new but it will also highly violate your duty to protect the client’s private information. In today’s world, information is everything, and if you do not respect your client’s privacy, you can be legally penalised for committing this act.

Undisclosed Short Sale Relationships 

Scenario: a real estate agent fails to disclose personal relationships with parties involved in a short sale transaction.

Ethical issue: it is well understood that in business personal relationships can create conflicts of interest. As a professional, if you fail to disclose such close and personal relationships that you may share with a certain client, then it may violate ethical standards and legal requirements of the real estate industry or any industry for that matter.

In the end, it is understood that the above-discussed case studies highlight how important it is to have a good ethical standard and behaviour to carry out in the real estate industry.

Now you are aware of the potential consequences of ethical lapses that may arise from such situations if you fail to follow the Ethical Code of Conduct. Therefore, you must as professionals navigate these dilemmas with transparency, honesty, integrity and commitment to put your client’s best interests first.