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Ethics

Ethics hearings in private a disservice to consumers?

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Fight Club and real estate

For those of you that saw the movie ‘Fight Club’ you’ll remember that Rule #1 is “You do not talk about fight club,” followed closely by Rule #2, “You DO NOT talk about fight club.” Which, believe it or not, brings me to today’s topic: The Real Estate Code of Ethics and Arbitration. Article 17 obligates Realtors to resolve fights disputes with another Realtor through arbitration (not litigation). Arbitration is conducted at the local board level, and I am not aware of a local board that doesn’t require arbitration to be confidential.

I respect that public internecine warfare amongst Realtors isn’t in the interest of our industry, and doesn’t belong in the public spotlight. I’m not here to advocate the collective airing of our dirty laundry. That said, I wonder if our collective agreement to keep our concerns confidential can inadvertently harm the consumer and ultimately makes all of us look a little shoddier?

To find the first arbitration guidelines created by NAR and distributed as a set of suggested rules for boards to follow, we have to travel all the way back in time to 1929. NAR’s first Code of Ethics & Arbitration Manual wasn’t created until 1973, and it credited a 1965 California Association of Realtors version as its model.

Appalling conduct

I can think of two instances in the past year where I was so appalled by the conduct of a fellow Realtor that I went to the trouble to inquire about how to lodge a Code of Ethics complaint with my local board. After weighing the time required to make a competent complaint and comparing it with the best case outcome (a closed-to-the-public hearing in which they were found to have violated the code of ethics), I decided not to pursue a complaint in both cases. My association’s bylaws (and probably yours) give it the power to discipline any member based on the results of a Code of Ethics hearing, “provided that the discipline imposed is consistent with the discipline authorized by the Professional Standards Committee of the National Association of REALTORS® as set forth in the Code of Ethics and Arbitration Manual of the National Association.”

“Sanctioning Guidelines” – (Appendix VII of Part 4 of the 2011 manual for the very curious), guides member boards to impose disciplinary consequences that are progressive and fair, taking all considerations into account. Sample first-time disciplinary actions include suggestions of a letter of warning, a fine (amounts range from $200 to $5,000 depending on the severity of the violation), and attendance at relevant education sessions. Not to sound defeatist, but a confidential letter of warning and a fine of around $200 doesn’t seem like an outcome worth investing much of my time in.

Practicing in the internet era

Given that we live and work in the internet era, and review sites like Yelp abound, it seems a bit odd to me that a local board might know of an agent with problem behavior that is documented yet choose to make that information unavailable to consumers. My understanding is that the results of a code of ethics hearing are confidential with disclosure authorized in a few situations, none of which deal with informing the public.

Many of my fellow colleagues feel that the best response to a bad agent is to be patient and give them enough time to work themselves out of business. I can respect and understand their hands-off approach. But what about the damage that individual does to our industry as a whole? While we whisper, warn in confidence and know amongst ourselves how awful they are, the public doesn’t get the benefit of our perspective. Deprived of it, they turn to consumer review sites like Yelp.

How do you think we, as an industry, can help consumers in their quest to find a trustworthy agent?

Matt Fuller brings decades of experience and industry leadership as co-founder of San Francisco real estate brokerage Jackson Fuller Real Estate. Matt is a Past President of the San Francisco Association of Realtors. He currently serves as a Director for the California Association of Realtors. He currently co-hosts the San Francisco real estate podcast Escrow Out Loud. A recognized SF real estate expert, Matt has made numerous media appearances and published in a variety of media outlets. He’s a father, husband, dog-lover, and crazy exercise enthusiast. When he’s not at work you’re likely to find him at the gym or with his family.

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26 Comments

26 Comments

  1. Sig Buster

    January 13, 2012 at 7:58 am

    It's almost a waste of time to file a complaint against another REALTOR because in the end, if a REALTOR is found guilty, nothing substantial is done. They won't get thrown out of the board, they won't get sanctioned publicly, so who cares?

    This attitude of a secret trial, secret results, secret sanctions, completely negates the code of ethics. We still have a code but it's in name only. There needs to be some teeth in the punishment. But, all a convicted REALTOR has to do is stomp his/her feet and threaten a lawsuit and the Board folds like a cheap beach chair.

  2. Judith Lindenau

    January 13, 2012 at 10:18 am

    The Realtor association is a trade association which exists for its members: it is not a consumer advocacy group. That is not to say that Realtors ignore skilled, competent and ethical behavior on the part of its members as a part of a good consumer experience–that is why the organization exists. However, it does not guarantee a transaction success, and it does not offer consumer protection. It also does not license its members as practitioners. Thus, what you are suggesting is really outside the bounds of this trade organization–or any trade association, most likely. That isn't to say that such consumer protection isn't needed: it is. But it's not really appropriate to the Realtor organization as it currently exists.

    • Matt Fuller, GRI

      January 13, 2012 at 11:35 am

      Judith,

      Thanks for your thoughtful comment.

      According to NAR's own website, NAR "Serves The Consumer" https://www.realtor.org/home_buyers_and_sellers/nar_works_for_you, and then goes on to list ways that it does. If it isn't in the business of consumer advocacy, it should be clear with consumers about that.

      I'll agree with you that it doesn't license its members, but by mandating subscription to the code of ethics as a condition of membership of a local board (and thus, almost always, the local MLS, where most transactions originate in my area) I would say that NAR acts as a de-facto "licensing" entity. In fact, I'd say
      they go beyond a license – which would suggest a bare minimum of skills required to comply with the law – and promise consumers that by working with a Realtor they are getting a level of skill and competence that is greater than just a licensed agent…

      Those are just some of my thoughts!

      Best,
      Matt

  3. Ruthmarie

    January 13, 2012 at 11:01 am

    OH BOY! You hit a nerve. This is a much bigger problem than we think. Why is the public turning to Trulia, Zillow, Yelp and other parties that have nothing to do with NAR. For that matter, have you taken a look on YouTube lately. Agents are major fodder for comic relief and the picture isn't pretty. Yet NAR touts its COE and brandishes it like a badge of honor.

    One thing I have found as a "smaller agent" (in the top 20% but not in super-agent status) is that so-called top agents who have the name and the brand but appear to be somewhat ethically challenged are almost impossible for someone like me to take on in a serious way. Their boards and brokers defend them to the hilt and who am I as such a small-fry to mess with them? Eventually – you learn to keep your mouth shut. But that's not a solution is it?

    The dynamic has to change – and the real estate industry has to clean house. Because the cream does not always rise to the top. Just my $0.02.

    • Matt Fuller, GRI

      January 13, 2012 at 11:42 am

      I agree with you and share your concerns about exactly those types of individuals. I think there is a concern that discussing these issues looks like "sour grapes."

      I sometimes feel that Realtors believe other Realtors only complain about another agent because they are bitter and didn't get the business. While I have seen this happen, I'd say it is pretty rare, and that agents with ethical concerns about other agents are usually motivated to complain for good reason.

  4. Rachel LaMar

    January 13, 2012 at 10:09 pm

    Great post, Matt. I tend to agree with your points. I am an attorney as well as a Realtor, and ethics violations amongst attorneys are taken more seriously. Furthermore, if an attorney is found to be in violation of our ethical code of conduct, his/her name is published, along with the charges and punishment. If we keep everything in our (real estate) industry under lock and key, there are several negative consequences – it doesn't deter other potential violators, it perpetuates the negative view of our profession and makes the would-be customer think twice about working with us.

    There are bad apples in every profession. But the way to let the public realize there are more honest and true people is to hold the bad ones accountable. If we show we care about our dedication to service, our industry will gain the respect it deserves.

  5. Jeff Brown

    January 14, 2012 at 3:24 pm

    Hey Matt — I'm pretty hardened on this issue, as I've been watchin' the Keystone Kops, um, I mean all levels of Realtor Boards since Nixon's first year in office. They're an old, toothless, arthritic, lion with a loud roar.

    Their track record speaks for itself.

  6. Steve Nicewarner

    January 15, 2012 at 1:42 pm

    A code of Ethics means nothing if it is not enforced. If the whole Raise the Bar movement is to have lasting effect, we need to make sure we attract good, qualified people as agents, and help them to remain good, qualified agents throughout their careers.

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Ethics

The problem with a self-policing industry: you have to be a narc

Ethics violations in the real estate industry can make or break a Realtor’s career, depending on the severity, so it would stand to reason that all would be mindful of the rules, but there are always individuals in the field that act as if the Code of Ethics is irrelevant.

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An animated discussion on ethics training

“Does anyone else find it ironic that NAR – the trade association for Realtors – has to mandate that members take an ethics class every four years?” An agent who attended one of my company’s broker opens yesterday posed that question to the wine and cheese grazing attendees. Of course, that opened up an animated discussion on the value of etchics training and the lack of enforcement when the rules are violated.

One agent volunteered that the guy sitting next to her in her last ethics class played games on his cell phone and then cheated during the test at the end of the class. Seriously, dude? You cannot even pay attention long enough to pass what should be the easiest test you’ll ever have to take in your career? Perhaps he was just seeing how far he could push it by cheating during an ethics test, to see if anyone else around him caught the extreme irony there. None of the other agents around him – including the agent he cheated off – turned him in and the instructor didn’t notice.

This same agent later called one of my sellers and tried to convince him to break a listing contract with me, because he had a “guaranteed buyer” in the wings. The seller was an attorney, and this bozo tried to get me cut out of the deal, offering the seller a reduced fee to dump me. The seller held firm and directed the agent to call me, then the seller called to let me know about the conversation.

“But you know if you file something the other agent will know.”

It gets better. After the deal closed, I requested paperwork from our local Board of Realtors to file an ethics complaint. The person in charge said, “But you know if you file something the other agent will know.” Gee. Really? I asked her to send the paperwork over anyway.

I called the seller/attorney and asked him to repeat the conversation to me, because I was documenting it to file a complaint. He turned wishy washy on me at that point and his story changed from “The other agent tried to get me to dump you as the listing agent to cut you out” to “Well he really only asked a few questions and I told him to call you. He probably didn’t mean any harm by it.” So there goes my star witness, who doesn’t want to rock the boat.

I didn’t file the complaint. I resorted to the “turn the blind eye but never trust the sleazeball again” path. And that is what happens to almost all ethics issues I hear about / see in person.

That’s what happens when you have a self-policing group of “professionals” who would rather not “narc” on a fellow agent. After all you’re probably going to end up on the other side of a deal from this guy some day, right? The guy in my example has sold two of my houses since that run-in. Why tick him off by filing a complaint and going through all that hassle? If he stops bringing buyers to my properties then my sellers ultimately lose, right?

Boiling down the CoE

The NAR Code of Ethics takes up pages and pages of tiny print, and it runs each year in their trade magazine (I think it’s the January issue). Does anybody read that? Probably not many. I’d argue none of us ever should have to read it again. Simply follow this advice instead. The thousands of words in the Code boil down to one thing: Do unto other agents, and consumers, and clients, what you would have them do unto you. It’s the Golden Rule. Simple. Well, obviously not, for many agents and brokers.

The sad part is the agent in my example had no clue how close I was to filing that compaint, and if he did know he’d probably scratch his head and wonder why his actions were “wrong.” Making us take a one-day class every few years won’t “make” the unethical agents suddenly operate ethically. Most of them just don’t get it.

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Ethics

Realtors, we really need to get over ourselves already

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A letter from the child of a Realtor.

Real estate now vs. 1987

In Real Estate, some things are always changing, like financing, education, laws, rules and technology. The two that will always remain constant, as long as they are within the law, are following our clients’ directions, and working with their best interests in mind.  I’m not sure we always follow through with this, though.

Some of us knowingly take over priced listings.  Some of us take listings that are out of our area of expertise.  Some of us won’t show short sales or REOs.  Some of us won’t show homes with low co-op splits.  Some of us don’t have Supra/e-Keys, and miss out on those listings entirely.

Putting our interests first

When these things occur we are putting our own interests first, not our clients’.  We may think that by having as many listings as possible is a good thing, that’s what we’re taught after all, isn’t it?  It may not matter that some are overpriced, eventually, whether one month or four months down the line, the price will be reduced.  It’s just a matter of time and money, for our clients, after all.  The same can be said when we take listings outside our area of expertise, just to add on to our inventory.  If we don’t know what we’re doing, on a short sale listing, for example, it will only cost our clients a lot of time and money.  A lot.

By eliminating certain houses our clients see, that may already fit their criteria, we’re taking away their choices.  Distressed sales account for close to 40% of the market.  This is probably higher in some local markets.  There is no legitimate way to ignore roughly 1/3 of the homes being sold.  Co-op fees are often a touchy subject, especially when they are, not “enough.”  If everyone utilized a Buyer Broker Agreement that stipulated what their fee was, the issue would take care of itself.  Not being able to access listings with the use of Supra/e-Keys is a choice.   Choosing not purchase one will mean agents will not be able to access Fannie Mae (and eventually, probably additional Gov REO homes) along with the listings that are already using them.

Our priorities versus theirs

We totally need to get over ourselves already.  We are not bigger than our clients.  Our priorities are not more important than theirs when it comes to the actual listing and selling of homes.

Recently, my awesome parents dug through a few boxes and rounded up one of my first art projects. About 25 years ago I did the poster featured above about my Mom, and her Real Estate career.  It was for an Open House (no pun, honest!!!) for the elementary school where I attended first grade.  It was just, what she did according to me way back then.  Things are way more complicated now, than when I was six.  There’s a heck of a lot more paperwork for one.  But the same basic principle still applies.

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Don’t hate me because I’m a real estate agent

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ocar magLast month I spent a day at a seminar for real estate agents. The hotel I stayed in was packed with other real estate agents all attending the same event and following dinner, I went to sit down in the packed lounge. Tables were filled and there were very few empty chairs, however one nice guy, we’ll call him John Doe,  invited us to join his table.

This article was first published here on September 09, 2009.

Poor John… can you imagine poor John’s surprise when he realized that his business trip coincided with this huge real estate extravaganza?  He was surrounded with 100’s of those in the real estate industry.  And guess what?  He wasn’t a huge fan…he didn’t really like real estate agents.

John Doe Has Some Questions

When I sat down initially we talked about family, our kids, their ages, and then of course – ‘what do you do?’ came up and I could sense the hesitation when I gave my occupation.  He was really pleasant and I think he genuinely was curious to hear my answers to some of his questions.  As we talked, another agent had just joined our table and conversation.

John said, “It doesn’t seem right to me.  Our last home purchase, I did all this research and found the homes we wanted to see online and the agent just showed them and got this big paycheck.  Can you explain that to me?”

Of course, I have a lot of knee jerk responses to this question but instead I really wanted to know more about what he had experienced.  Sadly, my agent counterpart took this on as a challenge.  Clearly, it had become her goal to convert our John Doe friend before the night was over.  I admit I did withdraw from the conversation a bit as she worked her magic and he glanced over at me periodically with eyes glazing over.

No Conversion That Night…

…and not likely ever.  Poor John may have been one lone voice in a sea of Realtors that night, but the reality is, he is very common.  His perception of our industry is pervasive and was probably only further validated that night by the verbal barrage of justifications he received from my agent counterpart.   Yet, I know that his one question is the tip of the iceberg.

The Perception Versus The Reality

The perception is that this job is easy.  Income is unearned.  We make too much.  Real estate agents lack training and real knowledge.  Real estate agents are just looking for a sale.   Maybe real estate agents aren’t necessary at all.

Maybe that’s all true – I don’t think that it is – but the fact is that it really doesn’t matter.  We can debate it with the same verbal justifications that John Doe heard that night or we can really hear our consumers and respond in ways that provide real tangible value and real industry change.

I cringed a little when I saw the cover to our local association’s publication.  I know the idea of promoting the value of a ‘Realtor’ has become so important but I think it’s fallen on deaf ears.  While I know how hard many of us work and I know how dedicated we are, I also know that if John Doe were to read that cover, ‘The hardest working letter in the alphabet,’ his eyes would surely roll.

When the industry starts to hold itself to a higher standard, when we as agents start providing real value rather than marketing pieces dripping with ego, when we talk less and listen more, when integrity begins to be more that a catch phrase on our cards, only then will we see the John Doe’s of the world not cringe at a hotel filled with real estate agents.

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