Editorial: open letter to the National Association of Realtors

A finger on the pulse of real estate

Since our inception, we have been one of the biggest megaphones in the real estate industry, and we publish housing news so consumers and real estate professionals have the freshest data on hand, while simultaneously publishing industry-changing editorials over the years. Many a policy has changed based on our columnists and you (the reader), and we would argue that the industry is better because of how interested people are in making sure it is running as best as it can.

We recently received an open letter to the National Association of Realtors from from Daniel Bates, who is the owner and Broker-in-Charge of MCVL Realty, a boutique brokerage that specializes in real estate sales and rental management in McClellanville and Awendaw, SC. Bates is also the Chairman of the Bulls Bay Chamber of Commerce which also serves this rural niche located between Charleston and Myrtle Beach.

Upon reading, our first inclination is that we disagree with quite a bit of the content, but understand that many people agree with these points. The role of the world’s largest trade group is extremely complex, and while the member benefits (discounts on car rentals and such) mean little to paying members, the NAR’s policy and lobbying efforts, we believe are critical. The D.C. office is filled with extremely hard working unsung heroes whose fingerprints will never be seen as they help guide successful policy and block industry-destructive policies.

Although we agree with certain points made by Bates below, we disagree with others, so instead of us making the decision about whether Bates’ opinion is on point or not, we are publishing it in full and asking you to tell us in the comments what you think – what points do you agree and disagree with Bates on?

The following open letter is in the words of Bates himself.

An Open Letter to the National Association of Realtors

I am witnessing a rising level of discontent among members of the National Association of Realtors (NAR) is palpable through comment threads and forums of the internet. These voices have grown from seemingly few in numbers, written off as outliers, to a majority who are not pleased at the basic level of representation from their trade organization. The common thread of the complaints is that the organization values it’s own existence and money over preservation of the industry, it’s members, and the general public, which whom they serve.

With all this discontent, why do members remain? NAR would have you believe that it is because of the excellent services offered, however the answer is much more simple; it costs more to not be a member than it does to be one. Despite a DOJ ruling banning the organization from tying membership to access to the Multiple Listing Service (MLS) which agents rely on to share information about their listings and offer compensation to other participating brokerages, agents still find themselves having to be a member because of “non-member” dues which exceed the cost of membership and local REALTOR Associations built on top of the maintenance of these local databases. Reports from areas that have successfully severed the tie where vast majorities of brokerages and their agents have abandoned local, state, and national REALTOR Association membership is that all is rosy.

NAR leadership cite a plethora of reasons that the organization provides huge value to it’s members, but each argument they make seems to be flawed and causes dissatisfaction among members

A higher standard of professionalism?

NAR touts it’s Code of Ethics (COE) as the crowning achievement of bringing order to an otherwise chaotic marketplace. Perhaps these initial rules were valuable to have been penned, but can basically be summed up by the Golden Rule. There have also never been numbers produced to back up the argument that a REALTOR acts more ethically than a non-member, in fact, the opposite may be true – markets with high non-member numbers are performing quite well. State licensing commissions already enforce rules which guide the industry and protect the public and would cover the most egregious offenses performed by agents. As far as the agent-to-agent infractions, many believe that karma settles those scores and agents who can’t play well with others don’t make it far in the industry.

Ultimately, enforcement of the COE can be called into question because the complaint process is overbearing and impractical for the “victim” and the punishment is often no more than a slap on the wrist. Violators are not stripped of their membership and the records of what happened often remain private, so there are no lasting repercussions to the offender and no effort to clean up the industry.

A brand that attracts consumers?

Despite the organization’s age and advertising budget, the vast majority of the public is still very much in the dark as to any difference between a real estate agent, broker, or REALTOR. In addition, there is also still a large misunderstanding about what agents do, whom they represent, and how they get paid; all basic tasks that a competent trade organization should have successfully tackled from the beginning. Many members also feel that NAR’s decision to run advertising stating that it was a “A Great Time to Buy Real Estate” the entire way through the plummeting real estate market from 2007-2010 was misleading and did more harm than good to gain the trust of an already woeful public.

A lobbying voice?

One of NAR’s biggest arguments for it’s current existence is their great lobbying ability. They tout any cause that they supported as a victory which would have never happened without their involvement, a fact which is impossible to argue, but quite arguable. Even casual outsiders can see that the wheels of Washington are in fact greased by money, but my biggest argument is that most of their achievements while possibly helping real estate agents, have harmed the country in the long-run.

Tax credits to first-time home buyers was essentially cash for clunkers for the real estate industry; an artificial shot in the arm which helped a struggling economy, but also prevented capitalism from taking hold and allowing the market to seek a natural level. The biggest argument that it’s lobbying efforts are not supported by it’s members, was NAR’s own move to make contributions to their PAC mandatory. NAR also stated that they would not take sides in the national election and then proceeded to hire Hilary Clinton as the headlining speaker for their national convention. PAC donations should always be optional when membership crosses political lines.

Superior Training?

NAR is also quick to cite the many designations offered which ensure that their members are at the top of the profession. While there is no denying the value of education, the quality can always be called into question, but more than that; the motives.

NAR makes hundreds of dollars off of each designation issued to each agent anxious to differentiate themselves from the crowd and add some letters to the end of their name. Not only does is cost money to obtain this training and then apply for the designation, but agents are also charged annually to actually retain the ability to claim the use of the designation. The recurring fees just to claim the right to use a designation are like a college reclaiming a graduate’s diploma unless a contribute to the Alumni fund was made each year.

A consumer gateway?

In a move that can only be described as ludicrous, NAR gave away it’s rights and control of it’s own website, Realtor.com, to a third party (read: for-profit) company, Move, Inc. With a direct feed to the listings of it’s members, Realtor.com was able to boast a quality control that it’s competition did not have, however this fact was squandered while it’s competition (Trulia and Zillow) built better tools and features on a more user-friendly interface while convincing brokerages to volunteer their listings to get better exposure. Realtor.com was quickly bumped to the third on the list for most major real estate keyword searches.

Under Move, Realtor.com charged agents and brokerages to display their contact information and the total number of pictures on their own listings as a way to profit, yet brokerages still found a better ROI investing in Zillow and Trulia advertising. Realtor.com had but one claim to make over Trulia and Zillow, that their data was a clean as the new fallen snow, due to it’s source, and yet NAR leadership voted to allow FSBO builders AND non-member agents to supply their data directly to Realtor.com.

NAR then agreed to supply it’s membership records for a tool which had three times been objected to and shot down by REALTOR members which allows consumers to search for agents in an area, promoting quantity over quality and skewed toward the success of teams over individual performance of agents without regard to their abilities to serve a clients needs.

Value for the money?

NAR’s final argument to justify it’s existence is to state that most members get far more in services (like those cited above) than they pay for dues. While NAR (and state and local) memberships often include free and discounted services which can be used by agents, they also discourage free enterprise.

Contracts are struck with companies and then efforts are made to suppress competitors which would normally compete in the market and cause both companies to improve their products and services or lower their prices. Most will agree that if NAR disappeared tomorrow and they had to pay 10 percent more to rent a car, or purchase the complimentary document software (but have a choice on which one to use), but they were not responsible for paying for lobbying, designation use fees, or bloated leadership purchases including a new a high rise building in Chicago; that they would somehow be able to go on.

In the end, the overall grand scope and duties of the National Association of Realtors seems to have escaped their their mission statement “to help its members become more profitable and successful” and morphed into an organization who’s primary goal is to preserve and enhance it’s own existence.