Signs Your Real Estate Agent Is Acting Unethically (And What You Can Do)

Now that you’re familiar with some of the rules, let’s dive into specific areas of ethical concern.

Deceptive marketing tactics

Listing agents are required to market homes accurately. This means, for example, that they generally shouldn’t edit listing photos or significantly round up the square footage of a house. Of course, sellers and agents want to present properties in the best light — but they still have to be accurate.

Inaccurate disclosures

Typically, sellers are required to disclose known material defects with their properties — particularly issues that may not show up on a pre-purchase inspection. The process and the specifics vary by state, but common examples of issues that must be disclosed about a home are the presence of lead, asbestos, or radon, a history of flooding or leaks, and structural or mechanical problems.

If an agent advises you against disclosing an issue, they might be prioritizing earning a larger or faster commission, even though this puts both of you at significant legal risk — as you could both be sued by a buyer who later discovers an undisclosed problem. While it may be nerve-wracking to tell all, it’s also essential to protect all parties involved.

But let’s say we’re talking about a one-time issue that is now resolved — like water damage to a basement three years ago that has since been restored. According to Stachel, “It’s still a defect that’s happened at some point in time. Because after the repairs were made, that water damage is not something that would be found . . . but it was damage to the property, so it should absolutely be disclosed.”

An ethical agent will advise you to disclose everything, so you are both more protected from potential legal risk.

Taking liberties with legal documents — aka tax fraud

Beware if a real estate agent suggests what may seem like a “white lie” on legal paperwork as a way to save money on taxes.

Stachel says some of the most common unethical behaviors she witnesses during the closing process involve agents tweaking contracts in ways that essentially amount to tax fraud.

Some Realtors®, for example, “will try to decrease the purchase price by allocating a portion of the purchase price to personal property” — only there’s no “personal property” changing hands, nor is any sales tax being paid on that imaginary “personal property.” While the total money exchanged is the same, on paper it appears homes cost less than they did, reducing transfer taxes and future property taxes for buyers.

In Florida, where people from all over the world frequently buy and sell, agents also may fudge on the paperwork to save foreign sellers money in taxes, says Stachel. All they have to do is “write into the contract a requirement for the buyer to sign an affidavit stating that they intend to either make the property a primary residence or that they intend to live in the property a certain number of days, even if they don’t.”

If caught, that buyer could ultimately be liable for any capital gains the IRS lost when the seller didn’t pay taxes.

While doctoring the documents might initially seem harmless, “there’s actually huge implications on a state and federal level if they get caught,” Stachel warns.

Failure to exercise fiduciary duty

As your representative, a real estate agent has a fiduciary duty — meaning they must keep your information confidential, disclose relevant facts to you and other parties to the transaction, and act in your best interests.

However, an agent acting unethically may put their own interests first. So, for example, an unscrupulous agent might encourage you to accept a low offer or prematurely lower your listing price, because ultimately they could make more money from a higher number of closed sales than from helping you garner, say, $30,000 more in the sale.

When it comes to buying a home, an agent who acts unethically may steer you towards purchasing a property for which they also serve as the listing agent. This way, they can collect both the listing and buyer’s agent commissions for themselves.

An ethical real estate agent, on the other hand, will help you negotiate the best deal for you without any sense of haste or pressure.

Referral kickbacks

RESPA prohibits agents and lenders from giving or receiving certain “kickbacks, referral fees, and unearned fees” in connection with the closing of a real estate transaction. Prior to closing, however, RESPA does not prevent an agent from taking a kickback from a home inspector, for example, for recommending their services.

Ethical Realtors frequently recommend other professionals like inspectors, contractors, roofers, title companies, and more — but they do so because they want their clients to receive excellent service. Taking kickbacks in return may not only violate RESPA and the NAR Code of Ethics, but also undermine the agent’s credibility, potentially relieving others of the pressure to earn recommendations solely based on their merit.

Fair housing violations

By federal law, all real estate agents are prohibited from steering buyers to certain areas based on the factors outlined in the Fair Housing Act mentioned above. It’s also illegal for agents to restrict buyer access to homes based on those same factors.

Ethical Realtors will provide the same services to all clients and let their clients determine the neighborhoods and homes to consider based on their own research and preferences. We should note that this could mean there are questions you’d like to ask your agent that they can’t answer.

Signs of unethical real estate agent behavior

Now that we’ve covered some of the categories of unethical behavior, let’s identify red flags to listen to or watch for if you’re working with an agent and want to make sure you can trust them.

Red flags for buyers

• If your agent discourages you from looking for homes in certain areas, this could be a sign of steering.
• If a buyer’s agent seems to be pushing you to put an offer on one particular listing, that could be a sign of shirking fiduciary duty.
• If a real estate agent makes judgments about a neighborhood being “good,” “bad,” or high-crime, they may be violating the Fair Housing Act.

Red flags for sellers

• If your agent says you shouldn’t disclose the termite damage that was repaired 5 years ago, so you can set a higher list price, this would be in violation of Article 2 of the Realtor Code of Ethics and may go against your state’s seller disclosure requirements.
• If an agent you’re considering signing a listing agreement with tells you, “Buyers are lined up for your property,” that may be true, or it may be a misleading tactic.
• If your listing agent asks for money before your home is sold, that could be a sign of financial mismanagement. The listing agent’s pay will almost always be deducted from the sale proceeds at closing.
• If an agent is initially very positive about your home’s features and price point but repeatedly negative after showings and then encourages rapid price reduction, they may be undervaluing your home and manipulating you to sell faster. However, if you choose to set a higher asking price than what your agent advised, and subsequently find it necessary to reduce the price, it is not necessarily indicative of an unethical agent; it likely indicates that you initially overpriced the property.

Red flags for all

• If your real estate agent is giving you legal or financial advice (other than the value of your home and timing of selling in light of the market), they’re acting outside the scope of their own expertise, violating Article 11 of the NAR Code of Ethics.
• If an agent shares your bottom line or highest price with someone else, they’re violating your confidentiality.
• If you find out your real estate agent is also representing the other party in a transaction (“dual agency”) without your knowledge or consent, that’s a probable conflict of interest.
• If your agent suggests an easy way to save lots of money on taxes, that may be a sign of potential tax fraud, for which you could be held liable.

In the majority of home sales, one real estate agent represents the buyer, and a different agent represents the seller. In some sales, however, the buyer and seller work with the same agent — a practice called dual agency. While this is legal in most states as long as both parties give consent, it is either illegal or heavily regulated in eight states, according to Forbes.

In Stachel’s experience, “Most agents I have dealt with where they are representing both parties end up regretting it as much as the parties do.”

Dual agency puts everyone in a precarious position. It can be very difficult for a real estate agent to pursue the best interests of two parties with opposing interests. As Stachel puts it, “It’s very hard to negotiate with yourself.” In fact, some states don’t allow the dual agent to even participate in negotiations because of conflicts of interest.

While it may be possible for a dual agent to represent both sides ethically, an agent in this position is limited in how they can serve the clients — which will likely result in more work for each client as they navigate negotiations without an agent fully in their corner. To avoid possible extra work and a potentially ethically dubious situation, you may be better off avoiding dual agency.

How do you deal with an unethical real estate agent?

So, we’ve reviewed many of the major ethical considerations for real estate agents — and still you suspect your agent has managed your affairs unethically. What are your options?

Hire a licensed real estate attorney

In this situation, your first step should be to hire a licensed real estate attorney. An attorney can assist with reviewing any pertinent contracts such as your listing agreement and advise you on your options.

File a complaint with your state’s real estate commission

If you believe an agent has done something illegal or violated state regulations, you can report this to your state’s real estate commission. To find out how, try a web search with your state name and “real estate commission complaint” — for example, “Oklahoma real estate commission complaint,” and you will likely find an online system for submission.

Contact or file a complaint with the local Association of Realtors

If you’re working with a real estate agent whom you believe has violated the NAR Code of Ethics, you can contact or file a complaint with your local chapter of NAR. Chapters can investigate complaints made against members and may levy fines, require additional ethics education, or revoke membership. Some also offer alternate methods of resolving conflict — such as mediation — before filing an official complaint.

You can find your local chapter’s website via the NAR directory. Since information about disputes and complaints isn’t likely to be front and center on a chapter’s website, you may have to hunt under subsections, such as Professional Standards, Ethics, or Dispute Resolution.

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Finding a real estate agent you can trust

Work with an agent practicing unethically, and you endanger your home sale or purchase and may be at significant legal and financial risk. To prevent this, keep an eye out for red flags like deceptive marketing, inaccurate disclosures, finagling documents, steering, pushiness, or kickbacks.

Work with an agent practicing with integrity, and you’ve got a hard-working professional in your corner whom you can trust to do things right.

Most agents are eager to guide and advocate. As Stachel reflects, “I am really impressed with most agents that we work with. I’ve seen them scrubbing floors of their clients’ houses, helping them move furniture out of houses — doing much, much more than they’re paid to, to try to help their clients and make sure everybody leaves the closing table happy.”

If you need help finding a trustworthy agent with such an impressive work ethic, consider starting with HomeLight. Our service is 100% free, with no catch. In two minutes, you’ll get recommendations for the best agents near you with a history of satisfied clients.

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