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Ethics hearings in private a disservice to consumers?

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.”

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“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?

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Written By

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.

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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