10.20 Misrepresenting Market Value

**Company policy is to never misrepresent market value to anyone. (**REALTOR® Code Standard of Practice 1-3)

A licensee is not permitted to knowingly make a false representation as to the value of a seller’s property in an attempt to secure a listing. Unfortunately, licensees frequently violate this ethical standard. Agents face fierce competition to obtain listings. Consequently, many licensees knowingly represent to a seller that the listing price of their property should be higher than reasonable facts can justify. This practice is referred to as "buying the listing". The seller, not understanding that a willing buyer will have to pay an inflated listing price, is led to believe that the listing agent suggesting the highest price can actually "get me more for my property" than those agents who may have been fair and honest about the price of the property. The licensee that listed the property at the inflated price knows that the property will not sell at that price. The licensee then beats the seller down in price during the term of the listing in order to bring the price in line with reality - the reality originally presented to the seller by competing listing agents. This method of buying listings is a serious ethical violation and should not be practiced by any licensee.

Another example of prohibited activity would be a licensee listing a property having the fair market value of $150,000 for only $125,000. The licensee (either directly or indirectly through a friend, spouse or other person) makes an offer to purchase the property at the listed price and then immediately resells the property at full market value. Sometimes, this situation is accomplished using a "double escrow" in which the seller transfers the property to the "straw buyer" who then immediately transfers the property to the final buyer. Clearly, any licensee participating in this scheme is participating in unethical and illegal conduct.

Likewise, a licensee representing a buyer cannot misrepresent the value of the property as an attempt to induce that buyer to make an offer to purchase. An example would be a licensee only selecting comparables for a buyer’s potential property in order to justify a higher price than could be justified by a complete market statistics analysis. This attempt to misrepresent facts relating to value would result in a buyer paying more for a property than it is worth.

In short, undervaluing a property prevents the seller from realizing the full economic potential of that property. Overvaluing the property deprives the seller of the opportunity to have buyers consider the property for purchase. Manipulating market data in any way, whether for seller or buyer, constitutes misrepresentation.

A licensee is not permitted to knowingly make a false representation of the value of a property in an attempt to secure a listing or entice a buyer to pay more for a property than is justified by market data.