At least one similarity exists between real estate agents and doctors. In both cases, practitioners are showered with gifts -- ranging from small monetary value to substantial -- from those whose business it is to sell products and services to their clients or patients. In the medical arena those are pharmaceutical companies and the makers of medical devices. In the world of real estate it is title companies, mortgage companies, escrow firms, termite companies, home inspectors, and others. In each case, the givers of gifts are hoping that the practitioner will direct or advise a third party (client, patient) to purchase their product or service.

In both cases, the gift-givers have found that it is more economically beneficial to market their wares to practitioners than it is to advertise to consumers directly. I don't know that anyone has ever attempted to estimate the amount of marketing dollars directed toward real estate agents, but it has to be substantial.

In the medical field, a 2006 article in the Journal of the American Medical Association (JAMA) notes that, even though there has been a dramatic increase in direct-to-consumer advertising, "Approximately 90 percent of the $21 billion marketing budget of the pharmaceutical industry continues to be directed at physicians … ."

There is no body of law that prohibits pharmaceutical and other medical companies from using gifts, subsidies, entertainment, and other enticements to try to influence physicians to recommend and prescribe their products. Policies in that regard must come from the codes of ethics adopted by the various medical association governing bodies. On the other hand, there are a variety of federal and state laws -- most notably RESPA (Real Estate Settlement and Procedures Act) -- covering such activities with respect to real estate. But these regulations are often held to be unclear and hard to understand, and they are, except for the most egregious cases, generally ineffective. The ethical code(s) governing real estate agents only deal with the issues in a cursory way.

For some years the medical community has been concerned with the ethical problems surrounding gifting practices. Can doctors truly fulfill their fiduciary duties to patients if their advice and/or treatments may be influenced by the relationship created through various gifts and subsidies?

In 1990 the American Medical Association House of Delegates voted to adopt a set of ethical guidelines to prevent inappropriate gift-giving practices. While these guidelines clarified a number of matters, one notable area of ambiguity remained: "Individual gifts of minimal value are permissible as long as the gifts are related to the physician's work (e.g. pens and notepads)."

Since the adoption of those guidelines, however, research has showed that a number of problems still existed. In January of 2006, a JAMA article with a prestigious list of co-authors proposed much more stringent measures.

What about the real estate industry? The customs and practice of gift-giving are every bit as much a way of life as they have been in the medical profession. Only more so. For some agents and firms, the largesse bestowed by affiliated service providers is not just a nice benefit, it is a vital contributor to the bottom line, one that is consciously counted on.

Regrettably, the real estate industry has not shown the same degree of concern about such practices as has the medical profession. But, the problem, of course, is the same. How can real estate agents fulfill their fiduciary duties to their clients if their advice and/or choices may be influenced by the relationship created through various gifts and subsidies?

The traditional response to a conflict of interest problem has been to advocate disclosure. Thus, Article 6 of the Realtor® Code of Ethics says, "When recommending real estate products or services (e.g. homeowner's insurance, warranty programs, mortgage financing, title insurance, etc.), Realtors® shall disclose to the client or customer to whom the recommendation is made any financial benefit or fees, other than real estate referral fees, the Realtor® or Realtor® firm may receive as a direct result of such recommendation."

This admonition is laudable so far as it goes, but it is woefully incomplete with respect to the problem. In particular, it is to be noted that the disclosure requirement only applies to the Realtor®'s receipt of future benefits, as if there were a specific tit-for-tat arrangement in play. But there is no disclosure requirement regarding already-received benefits that well may have served as an inducement to give the referral in the first place.

Secondly, and more telling, is the more general finding that conflict-of-interest disclosures have little effect anyway. George Lowenstein, an economics professor at Carnegie Mellon who has done research on this topic, puts it this way: "If you disclose a conflict of interest, people in general don't know how to use that information. And, to the extent that they do anything at all, they actually tend to underestimate the severity of these conflicts."

The real estate industry would do well to take a careful look at how the medical community is dealing with gift practices, influence, and conflict-of-interest issues that are common to both enterprises. We'll consider some specific issues in the next column.

Published: March 19, 2007

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Bob Hunt is a former director of the National Association of Realtors and is author of the recently published book, "Real Estate the Ethical Way." A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at .