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Code of Ethics Case Studies

Case #4-1: Disclosure when Buying on Own Account

Client A consulted REALTOR® B about the value of a lot zoned for commercial use, saying that he would soon be leaving town and would probably want to sell it. REALTOR® B suggested an independent appraisal, which was arranged, and which resulted in a valuation of $130,000. The property was listed with REALTOR® B at that price. Shortly thereafter, REALTOR® B received an offer of $122,000 which he submitted to Client A, who rejected it. After the passage of four months, during which no further offers were received, Client A asked REALTOR® B if he would be willing to buy the lot himself. REALTOR® B on his own behalf, made an offer of $118,000, which the client accepted. Months later Client A, on a return visit to the city, discovered that REALTOR® B had sold the lot for $125,000 only three weeks after he had purchased it for $118,000.

Client A complained to the Board of REALTORS® charging that REALTOR® B had taken advantage of him; that he had sought REALTOR® B's professional guidance and had depended on it; that he could not understand REALTOR® B's inability to obtain an offer of more than $122,000 during a period of four months, in view of his obvious ability to obtain one at $125,000 only three weeks after he became the owner of the lot; that possibly REALTOR® B had the $125,000 offer at the time he bought the lot himself at $118,000.

At the hearing, REALTOR® B introduced several letters from prospects that had been written while the property was listed with him, all expressing the opinion that the lot was overpriced. The buyer who purchased the lot for $125,000 appeared at the hearing as a witness and affirmed that he never met REALTOR® B or discussed the lot with him prior to the date of REALTOR® B's purchase of the lot from Client A. Questioning by members of the Hearing Panel established that REALTOR® B had made it clear that his offer of $118,000 in response to his client's proposal, was entirely on his own account.

Based on your understanding of the Code of Ethics Article 4, what do you think the hearing panel concluded? Show Answer