Penalty for False Advertising in Real Estate: Laws, NAR & Penalties


Advertisement has always been vital for businesses, and more so in our modern times. They inform consumers about the benefits of products and services to convince the consumer to buy from them.

When it comes to the real estate world, it is no different. Many realtors and brokers use ads as a way to attract clients and close deals. However, there are laws both at the state and federal levels to prevent any type of deceptive advertisements.

If you are in the real estate industry or are looking for legal advice, then you should read our guide about the penalty for false advertising in real estate. It will let you know everything about it – here is it. If you don’t have time for it, contact your local real estate law attorney to get a free consultation and legal advice.

What Is False Advertising in Real Estate

In real estate, the practice of false advertising refers to any form of advertising that can mislead potential customers. Thus, it may include misrepresentation of a property, as well as failure to disclose specific information about a property.

Common examples of false advertising in real estate include:

  1. When a seller intentionally advertises incorrect information about a property
  2. When a seller engages in “bait and switch” tactics to attract potential buyers
  3. When a seller relies on exaggerations or hyperbole to mislead potential buyers
  4. When a seller uses false claims to advertise a property.

Typically, such deceptive trade practices are related to the property’s price or quality.

NAR Code of Ethics

The National Association of REALTORs® (NAR) provides a strict Code of Ethics to ensure consumer protection and good business practices. It provides the fundamental industry ethics and standards of practice for all parties involved in real estate transactions.

Accordingly, Article 12 of NAR Code of Ethics requires all property advertisements to be accurate and honest. The provisions also emphasize that realtors are required to disclose the name of their firms when advertising by any channel.

Exaggerated statements such as “I am the Nation’s Number One Real Estate Agent” could also violate the NAR Code of Ethics.

Federal and State Laws

Additionally, there are laws to protect consumers against false or misleading advertising in real estate. Nationwide, each state has its laws at the local level to protect all parties involved in real estate transactions.

At the federal level, there are false advertising laws to prevent and punish deceptive trade practices. The Federal Trade Commission (FTC) is responsible for investigating and filing lawsuits against individuals who engage in:

  1. Deceptive business practices
  2. Unfair competition
  3. Fraudulent business practices
  4. False advertising of any product or service

Ultimately, US law has provisions at both federal and local levels concerning misleading or deceiving advertisements. Depending on the case, it may also include the penalty for false advertising in real estate.

How Regulations Affect Online Listings

Online listings are one of the most effective ways to attract potential clients and connect with a target audience. When listing a property online, realtors and brokers must make sure to:

  1. Describe all properties as accurately as possible
  2. Choose the right adjectives to describe a property’s pros and cons
  3. Avoid vague language that may lead to misrepresentation
  4. Follow NAR’s Code of Ethics

In many situations, sellers and brokers tend to “over-highlight” unique features, sometimes exaggerating or “puffering” the characteristics of a property.

Real estate professionals must be careful when listing a property online, as they can unintentionally incur deceptive or misleading advertising. Some examples include the misrepresentation of a property, which typically happens when someone fails to describe:

  1. The property’s square footage (e.g., a building’s square footage)
  2. The property’s lot size and acreage
  3. The property’s structure and history (e.g., age of the home)
  4. The history of improvements made in the property
  5. The property’s realistic condition (e.g., fencing, roofing, plumbing, foundation, etc.)

It is crucial to never use any type of deceptive or misleading information. Instead, the best approach is to rely on expert appraisers and experts in their field to assess the property’s characteristics.

What False Advertising Penalties Exist?

In May of 2019, New York’s Real Estate Board announced new provisions regarding property misrepresentations advertisements. The regulations provide that:

Brokers, agencies, and salespersons are prohibited to advertise another broker’s exclusive listings without authorization

  1. All advertisements must have specific information
  2. All advertisements must state the name of the exclusive broker
  3. If there is third-party advertising, the advertisements must disclose the broker’s name and at least include the word “advertisement”.

Victims of false advertising can file a lawsuit against the party who harmed them (e.g., seller, realtor, agency, broker, etc.). In such cases, the victim must bring a lawsuit to court within three years of the date of the injury.

Ultimately, the penalty varies according to the defendant’s intent and the specific circumstances of the violation. Typically, the victim can recover any damages suffered in the process.

If the court acknowledges that a defendant willfully violated the law, the victim may be entitled to extra monetary damages.

Things can get even more serious if there is evidence that the defendant engaged in real estate fraud. Depending upon the severity of the misconduct, a defendant may be charged as a misdemeanor or a felony.

A misdemeanor is punishable by paying monetary damages or expending up to a year in prison. Meanwhile, a felony is punishable by extending one year or more in prison, plus a payment of a significant fine.

When You Are Claimed for False Advertising

Depending on your situation, the penalty for false advertising in real estate can be serious. If you want a legal mind to protect your legal rights under the law, you can count on our real estate attorneys.