The National Association of REALTORS® (NAR) Code of Ethics imposes obligations on REALTOR® members that go beyond what the law requires. Only licensed practitioners who are members of NAR and a local Association may use the REALTOR® designation. The Code is organized into three sections:
Important enforcement distinction: TREC enforces TRELA and TREC rules. The local NAR Association's professional standards committee enforces the Code of Ethics. A Code of Ethics violation and a TREC violation are separate proceedings with separate authorities.
Article 1 — Duties to Clients and Customers: REALTORS® must protect and promote their clients' interests while also treating all parties honestly. Article 1 does not require subordinating fiduciary duty to the client — clients come first, but all parties get honest treatment.
Article 11 — Competency: REALTORS® must be competent in their practice area. When acting in property types or geographic areas beyond their expertise, they must engage qualified professionals or refer the client. A residential-only agent cannot represent a client in a complex commercial deal without either gaining the required competence or associating with a specialist.
Article 12 — Honest Advertising: All advertising must be honest and not misleading. Agents must make clear they are real estate professionals (not private parties) when advertising. The brokerage firm name must appear in all advertising.
Article 16 — No Soliciting Clients Under Existing Agreements: REALTORS® may not solicit clients who are under an exclusive agency agreement with another REALTOR®. A buyer signed with another agent is off-limits for active solicitation. This does not prevent the second agent from responding to the buyer's unsolicited inquiries — it only prohibits active recruiting designed to induce a breach of the existing agreement.
Article 17 — Arbitration: REALTORS® must arbitrate monetary disputes with other REALTORS® rather than immediately pursuing civil litigation. This typically covers commission split and procuring cause disputes. Arbitration is required between members; preferred but not required with non-members.
Procuring cause: The broker whose actions were the proximate cause of a completed transaction — used to determine who is entitled to a commission when multiple brokers have worked with the same buyer.
Real-world example: An agent from Company A worked with a buyer for six weeks, showed 12 properties, and helped them write an offer that was rejected. The buyer then contacted a different agent from Company B directly, who showed one property and wrote the accepted offer. Both agents claim the commission. This is a procuring cause dispute — Article 17 requires NAR members to arbitrate it rather than litigate.
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Quiz Questions:
Q1. A residential REALTOR® is approached by a client who wants representation on the purchase of a 30-unit apartment complex. Under the NAR Code of Ethics, what should the agent do?
A) Take the assignment and learn commercial real estate on the job — the client trusts them B) Refuse entirely; the Code prohibits representing clients in unfamiliar property types C) Proceed with the transaction while associating with or referring the client to a competent commercial professional per Article 11 D) Disclose inexperience to the client and proceed if the client is willing to accept the risk
Answer: C — Article 11 requires competency. The correct response is not total refusal but rather ensuring the client receives competent representation by engaging a specialist or referring the client. Simply disclosing inexperience and proceeding (D) does not satisfy the Article 11 obligation.
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Q2. Under the NAR Code of Ethics, REALTORS® must arbitrate monetary disputes with other REALTORS® because of:
A) Article 1 B) Article 11 C) Article 16 D) Article 17
Answer: D — Article 17 requires arbitration of monetary disputes with other REALTOR® members rather than immediate civil litigation. This is the dispute-resolution mechanism for commission and procuring cause claims between members.
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Q3. A buyer signed an exclusive buyer representation agreement with REALTOR® Jones six weeks ago. The agreement has not expired. REALTOR® Smith calls the buyer and says "I heard you haven't found a home yet — you should let me work with you, I know better neighborhoods." This conduct by Smith:
A) Is permitted because buyers can always choose their own agent B) Violates Article 16, which prohibits soliciting clients under active exclusive agreements with other REALTORS® C) Is permitted because Smith is providing market information, not soliciting D) Violates Article 1 but not Article 16
Answer: B — Article 16 prohibits REALTORS® from actively soliciting clients who are under exclusive agreements with other REALTORS®. Smith's call is active solicitation designed to induce the buyer to leave Jones — a clear Article 16 violation. If the buyer had called Smith unsolicited, Smith could respond without violating Article 16.
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Q4. Who enforces the NAR Code of Ethics when a REALTOR® is accused of a violation?
A) TREC, through its normal disciplinary process B) The State Office of Administrative Hearings (SOAH) C) The local NAR Association's professional standards committee D) HUD, which has jurisdiction over all real estate professional conduct
Answer: C — Code of Ethics violations are handled by the local Association's grievance committee (preliminary review) and professional standards committee (formal hearing). TREC enforces TRELA and TREC rules — separate proceedings. A TREC violation and a Code of Ethics violation may arise from the same conduct but are handled independently by different bodies.
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Q5. Two REALTORS® both claim the right to a commission on the same transaction. Buyer's agent claims they showed the property first; listing agent claims the buyer contacted them directly. Under the Code of Ethics, how should this dispute be resolved?
A) The listing agent receives the full commission because they have the listing agreement B) The parties should file separate civil lawsuits and let the court decide C) The dispute should be arbitrated under Article 17 — procuring cause will be determined in the arbitration D) TREC will divide the commission equally between the two agents
Answer: C — Commission disputes between REALTOR® members are handled through the NAR arbitration process (Article 17). The arbitration panel determines who was the procuring cause — the broker whose actions proximately resulted in the completed transaction. Neither the civil courts nor TREC is the appropriate first forum for this type of inter-REALTOR® monetary dispute.