Would you know housing discrimination if you saw it?

Are you sure?

And what would you do about it?

If you’re a real estate agent, broker or Realtor, you’ve had a fair amount of training on fair housing laws. But discrimination can sometimes creep in in subtle ways – from which listings you offer a client to which clients you decide to work with to just an offhand remark about a neighborhood.

What if you’ve been part of the problem – and you didn’t even realize it?

Now you can test yourself while sharpening your understanding of housing discrimination to ensure you’re offering all clients a fair, equitable, and positive experience.

This week the National Association of Realtors (NAR) launched an online interactive training tool – Fairhaven.realtor – to let you do just that.

In the fictional town of Fairhaven, you work against the clock to close four different transactions that involve some kind of discrimination. You must choose how to respond, and those responses determine your journey through the simulations. Built-in feedback along the way illustrates how you could avoid the fair housing pitfalls in each situation.

To deepen the impact, the course puts you in the role of a client experiencing discrimination and pairs that with testimonials from real people whose lives have been impacted by it.

“Fairhaven uses the immersive power of storytelling to deliver powerful lessons that will help promote equity in our nation’s housing market,” said Charlie Oppler, CEO of Prominent Properties Sotheby’s International Realty, NAR’s incoming president for 2021. “NAR will continue our work to create innovative anti-discrimination training and to champion efforts that encourage diversity, fight racial bias and build more inclusive communities.”

The online platform is free to real estate professionals and doesn’t require NAR membership to use. NAR will also offer Fairhaven as a software package for brokerages and associations to incorporate into their learning management systems. It was developed in partnership with global professional services firm Ernst and Young.

Fairhaven.realtor is the latest resource offered to realtors as part of its Accountability, Culture Change and Training (ACT!) initiative designed to promote equal opportunity in real estate.

At the Nov. 19 Diversity and Inclusion virtual summit hosted by The Hill, Oppler offered a formal apology for the role realtors have played in the history of housing discrimination, including the practices of redlining and blockbusting.

“We can’t go back to fix the mistakes of the past, but we can look at this problem squarely in the eye,” Oppler said. “And, on behalf of our industry, we can say that what Realtors did was shameful, and we are sorry.”

Bryan Greene, NAR’s director of fair housing policy, discussed the effects of housing discrimination, including creating disparities in wealth. Discrimination denied Black families the same opportunities to build wealth through home ownership, Greene said, adding that white Americans own 10 times the wealth of African-Americans.

“Realtors have an admittedly tough history,” Greene said. “But we have turned the corner and now have emerged as leaders on these important issues.”

I am a member of NAR, and for full disclosure, I am not an attorney. I reviewed the various complaints and performed research, discovering information that could aid in the defense. In my view, Plaintiff (Conti-CA) makes misleading claims and adds assertions to muddy the waters in this class-action suit.

For example:

“Requiring every seller‐broker, when listing a property on an MLS, to make a “blanket unilateral offer […] of compensation” to any buyer agent who may find a buyer for the home;”

This is misleading; compensation is not paid to agents who “find a buyer for the home.” Commissions are earned upon an Agent procuring a client who successfully closes on a transaction that includes mutually agreed terms and conditions. This is not an adversarial transaction, despite how Attorneys try to frame it. Sellers want to sell; Buyers want to acquire, and Agents facilitate.

Moreover: “Requiring that the offer of compensation to the buyer agent be a blanket offer — i.e., the exact same compensation terms must be simultaneously offered to every buyer agent without regard to their experience, the services they are providing to the buyer, or the financial arrangement they have made with the buyer;”

If a Buyer’s Agent procures a Buyer who successfully acquires a residence at a price and terms agreeable to the Seller, then “compensation terms must be simultaneously offered to every buyer agent without regard to their experience” is irrelevant.

Furthermore, I challenge these “high power” law firms to name a profession where compensation is not established upfront.

Additionally, they claim “NAR’s requirement that offers of compensation be expressed in specific dollar or percentage terms enable buyer agents to easily compare the financial compensation offered to them by home sellers and steer their clients to higher commission homes.”

Would the Plaintiff’s Counsel share an alternative method for conveying compensation? Maybe the Peso so Agents would take extra steps using currency converters?

In the same complaint, Plaintiffs assert, “According to data from the NAR, many homebuyers no longer locate prospective homes with the assistance of a broker, but rather independently through online services. Buyer agents increasingly have been retained after their client has already found the home the client wishes to buy.”

These assertions obliterate the Plaintiffs’ allegations of massive steering. If a Consumer finds a home, and a Realtor refuses to show the house, the Consumer will find another Agent. Zillow had 9.8 billion page views in 2020.

Conspiracy

The most significant allegation is that a conspiracy exists between NAR members to use the MLS to create a supra-competitive pricing scheme, and decoupling agent commissions (each Consumer pays their agent) would result in a significant decline in commission structures.

This claim fails.

1st Plaintiffs attempt to frame the argument based on the percentage of the sale price when the fees to transact are a superior factor. Consumers bank dollars, not percentages. Moreover, they cherry-pick a few markets with an emphasis on Singapore as examples of lower commission percentages.

In a three-minute discovery session, I researched the US v Singapore markets, and these are my findings.

• The average price of a US residence totaled $389,400 (based on 2019 data.)
• The commission paid, based on the US average of 4.94%, totaled $19,236
• The average price of a Singapore residence totaled $874,372 USD.
• The commission paid, based on the Singapore average of 3%, totaled $26,231 USD.

Moreover, some publications suggest there is commission sharing between Buyer/Seller Agents in Singapore. Again, Consumer’s bank dollars, not percentages, it appears that the Plaintiff’s counsel is oblivious to this variable.

It is MORE expensive to transact in Singapore.

Decoupling Commissions

I have found no evidence that decoupling reduces commissions. As shown in the following images, I discovered the opposite based on a 2015 study by the Wall Street Journal. The WSJ articles display in the first position when performing a simple Google search; however, I have yet to see WSJ commission studies cited in any complaints. Alternatively, they cite studies from 2002. Furthermore, the US average rate is only slightly higher than the 10-Country average.

Data | WSJ

Counterclaims Against Plaintiffs

In my view, a reasonable person would conclude Plaintiffs used irrelevant data and omitted material information. Most purchase agreements include language similar to “ATTORNEY FEES: In any action, proceeding, or arbitration between Buyer and Seller arising out of this Agreement, the prevailing Buyer or Seller shall be entitled to reasonable attorney fees and costs from the non-prevailing Buyer or Seller.”

Considering Plaintiffs are suing NAR, the four largest Brokerages, the MLS system, and smaller Brokers as co-conspirators, these misleading claims impact 1000’s firms, so I suggest counterclaiming Plaintiffs for $5,000,000 and publicize it.

This may deter Consumers from engaging with ambulance-chasing law firms.

The issue of who pays commissions is irrelevant and undeterminable because Sellers will claim they are deducted from net proceeds while Buyers will claim it is baked into the purchase price, thus commissions are paid by Buyers. Even the various class-action claims conflict related to the party paying commissions.

In reality, the commission percentage assertions are a feeble attempt by parties to create an apples-to-apples comparison to other markets, however the information included in this opinion makes these claims defective.

It is time to inflict an overwhelming response.

The National Association of Realtors® is demonstrating its commitment to addressing housing discrimination and racial injustice through an Implicit Bias Training video that is being distributed to members. The online video proposes to “give (real estate agents) the tools to help override the effects of implicit bias. This means that the next time (they) work with clients from other cultures and backgrounds, (they) will be in a position to provide equal professional service, because (they) have embraced the work we all need to do to treat everyone fairly.” This 50-minute video is just one part of NAR’s work to reduce discrimination in housing.

The NAR is committed to fair housing

This video isn’t just a kneejerk reaction to the recent protests. In January, the NAR leadership announced a plan that emphasized Accountability, Culture Change, and Training (ACT) to protect housing rights, and uphold fair housing standards in the NAR’s code of ethics and in United States law.

Housing discrimination and implicit bias

In 1968, Congress passed the Fair Housing Act, which outlawed discrimination based on race, color, or national origin pertaining to housing. The Act has been strengthened over the past 52 years, but enforcement is still inconsistent. The problem isn’t that people are explicitly biased, but that there are many barriers and practices that are leading to continued housing segregation.

One practice that the NAR is responding to is implicit bias, which is an unconscious bias that affects how you interact with others. Consciously, you might never discriminate against another race, but you may unintentionally react differently with another race than you would with someone of the same race. This might manifest itself in many ways as a real estate agent. The Kirwan Institute or the Study of Race and Ethnicity research suggests that implicit bias can be showing black buyers fewer homes than a white homebuyer, even if they are pre-qualified.

Check your biases

The NAR is doing more than simply changing its social media status in light of #BlackLivesMatter. The NAR is working for real change for fair housing. I’d encourage you to watch the entire video to really understand implicit bias in real estate, and how it affects everyone. You can examine your own implicit biases through Project Implicit, a research collaboration project. We aren’t going to end housing discrimination through legislation without real reform by the people who act as guides into the real estate industry.