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Ethics

Changing the Code

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REALTORS Complain About the Code

Timeless and Universal? Image Courtesy of Creative CommonsIt’s too harsh or restrictive – or its not restrictive enough. Its enforced too harshly, or not harshly enough. There always seems to be some issues about the Code of Ethics. The first Code of Ethics was published in 1913, five years after the founding of the National Association of REALTORS. It has been changed numerous times and has had as many as 34 Articles, though currently there are only 17 (and only one of those deals with money disputes).

The Code has survived so  long, and been as effective as it has, because the Code is a living document, reviewed and modified every year. And in that process the voice of any member can be heard.

So How Does it Work?

Anyone can initiate a change in the code, or an issue for the consideration of The Professional Standards Committee. Often it starts with someone standing up at the Professional Standards Forum, a meeting open to all members, which takes place immediately before the Professional Standards Committee meeting at the Mid-Year meeting in Washington and the Annual Meetings in November. The Forum has an agenda created by the Volunteer leadership and the Staff, but they exist to solicit information from members about what their concerns are.

Those members who do not attend these meetings can always send a letter directly to the Professional Standards Committee at NAR’s headquarters in Chicago. Sometimes letters will come from local or state associations who have a concern either about the Code, the standards of practice, or the enforcement of the code.

Then What Happens

Once the item is brought before the committee, if it warrants further consideration, it is referred to the Interpretations and Procedures sub-committee, sometimes called the small committee. Chaired by the immediate past chair of the Professional Standards Committee (sometimes called the large committee) , this group discusses issues that will be presented to the large committee at their twice annual meetings.

The small committee does the wordsmithing and discusses new issues, to help develop the agenda of the large committee. It does not however have the authority to act without the approval of the full committee, which includes members from every state in the union. The small committee (which meets in March and September in Chicago) will frame the items to be brought to the large committee with their recommendations.

Once the times have been framed for the agenda, the large committee will either defeat the recommendation, send it back to the small committee for further work, or pass the recommendation (possibly with changes from the floor).

If the item passes, then the real fun begins.

NAR’s Leadership Team

After an item has been recommended by the Large Committee, the Chairman of the Professional Standards Committee has the job of presenting the recommendations to the Executive committee. The Executive Committee meets the day before the Board of Directors. They will hear the recommendation an its rationale, and either decide against the recommendation and send it back to committee, or approve it and send it forward to be approved by the Board of Directors.

Though presenting to the Leadership team of NAR is intimidating, presenting in front of the all of the directors of NAR is as daunting a task. The committee chair presents the recommendation to the Board where it is discussed yet again, and either sent back to committee for further consideration, defeated or approved. If approved, the matter is published and distributed to the members. And that dear REALTORS is how the changes are made to the Code of Ethics, the Standards of Practice, and the manner in which they are administered.

Photo Credit: Ethics and Morals- Timeless and Universal? Image Courtesy of Creative Commons

Bill is an unusual blend of Old & New - The CEO Century 21 Advantage Gold (Philadelphia's Largest Century 21 company and BuzzBuilderz (a Social Media Marketing Company), He is a Ninja CEO, blending the Web 1 and 2.0 world together in a fashion that stretches the fabric of the universe. You can follow him on twitter @Billlublin or Facebook or LinkedIn.

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18 Comments

18 Comments

  1. Steve Simon

    November 26, 2008 at 12:35 pm

    The local Board here went from 1600 to 1400 to 800 and half of them are late with their dues (that from the local Board Pres.)…
    They are not interested in enforcing anything, they are interested in collecting money to survive.

  2. Mike Farmer

    November 26, 2008 at 1:38 pm

    I’m getting ready to quit our board. Does this mean I can become unethical?

  3. Monika

    November 26, 2008 at 3:59 pm

    You’ve done such an awesome job as committee chair that I can truly say it’s been a pleasure being one of your committee members.
    Excellent explanation of the process Bill!

  4. Bill Lublin

    November 26, 2008 at 4:41 pm

    @steve Simon whether a local association is having a tough time making ends meet or not, being concerned about doing business the right way should be a priority – shame for the consumers if its not..

    @Mike You can be as ethical or unethical as you wish – its your conscience- But I always looked at the dues we pay as part of the price for taking up space in the industry. Then again I always made enough of a living that paying my dues wasn;t my biggest issue in any market…

    @Monika – Its because of the contribution of committee members like you that I could do that job at all – Thank YOU for your service
    😉

  5. Danilo Bogdanovic

    November 26, 2008 at 5:35 pm

    Thanks for the great and detailed explanation of the process Bill!

    It would be nice if we could just put up a poster of the Spike Lee flick “Do the Right Thing” and call it a day…

  6. Jim Gatos

    November 27, 2008 at 9:11 am

    I have no problem in “subscribing” to a code of ethics..

    However in the “real” world, it’s a royal pain to call another agent up against ethics charges, it costs money just to file, and it’s potentially embarressing, no matter who’s right or wrong. Personally, I have NO problem witn the code itself, I just can’t understand WHY my board of realtors forces me to join the board of realtors my individual office and manager is a member of (so there are no more “virtual” real estate boards?), and why their charges went up.. (New building? Less members?). I asked 3 times myself; still waiting for an answer.. They even made a couple of “lame” attempts to get membership dues early by offering a little cut and a drawing for a free membership…

  7. Bill Lublin

    November 29, 2008 at 5:11 am

    @Danilo – I think the Code is pretty much like Spike Lee’s advice 😉

  8. Bill Lublin

    November 29, 2008 at 5:18 am

    Jim; I operate a company in the real world, and have never found it a problem to make a complaint against an agent who is doing something unethical. As the English philosopher Edmund Burke said ‘The only thing necessary for the triumph [of evil] is for good men to do nothing.’
    And I don’t experience any embarassment in the complaint or the process.

    As far as the budget issues of your association, I don’t know anything about them and really can’t comment, except to point out that if you participate in the association, you get input on those decisions. Regarding the association your broker belongs to, in our area, since my company is a multi-state company, I belong to several assocations so that my associates can chose where they wish to belpng. You might wish to talk to your broker about that if you have a strong reason to belong to one association rather than another. And I don;t undertans the virtual assocation concept. Local associations have importnant local functions revolving around community activism and legislation 0 but that’s a matter for a different post and discussion.

  9. Danilo Bogdanovic

    November 29, 2008 at 3:48 pm

    Bill – Yeah, but “right” to you and I may be different than “right” to someone else.

  10. Mike Farmer

    November 30, 2008 at 9:51 am

    Uh, Bill, I was just joshing. I’ll try to be more, like, serious minded next time.

    But since we’re being serious, I’m quitting the board, not because I can’t pay the dues, but I no longer need the board and it offers no value. I’ll be ethical with or without a board or a code of ethics.

    I do mostly investments now.

  11. Bill Lublin

    November 30, 2008 at 2:09 pm

    @danilo – And that’s why we have the code Mookie!

    @Mike Sorry if I get to serious about this stuff, but it is so important to people who need to be representing the interests of others and cooperate with each other. Sorry that piece of your career is going away, but best of luck with your investment career.

  12. Teri L

    November 30, 2008 at 5:02 pm

    MIKE!!!!!

    Oh my gosh, thanks for that. 😀

  13. Mike Farmer

    November 30, 2008 at 6:44 pm

    TERI!!!

    “Sorry that piece of your career is going away, but best of luck with your investment career.”

    No need to express sorrow, it’s a glorious development from my perspective. Investment is the best way to make money in this business. I started investing years back, and now it seems like the way to go permanently — many good deals in the market, and rentals are strong.

  14. Bill Lublin

    December 1, 2008 at 4:18 am

    Mike – I spend a pretty good chunk of time investing also, and I agree with you that investing is a great opportunity to accumulate wealth, especially in this market. For me it was an addition, not a substitution

    The sorrow was actually not only for you but also for the people that won’t be getting the benefit of your expertise, and the sector of the business that loses your contribution…

  15. Ginger Wilcox

    December 3, 2008 at 11:24 am

    Thanks for the explanation of the process. I think it is really important for people who have complaints about the process to get involved and do their part to make it better.

    As for the Code of Ethics- it is crucial to our business. While there are people who don’t abide by the code, can you imagine what the business would be without it?

  16. Dan Homan

    May 29, 2009 at 9:23 am

    The problem is theleadership team itself. The system of shoosing leadershio on the self appointed and inbread methosd stinks for us in the real world who have a clue about what is going on in the market place and on he internet.

    The NAR leadership constantly violates the COE with a nod and a wink in their daily practice of real estate.

    Two quick examples. 1- Advertise your listings with postlets or the real estate book, let them sendyour listings to as many websites as they can, many scrub them clean of broker information – in vilation of COE and most state licence law – nod nod, wink, wink. 2 – Or try this hire an economist who paints a rosy picture of a market in the tank (the previous economist had to change employment when he had the brass to predict a 2.5% decline in the market when the majority of economists were talking 10% decline to or even melt down). Use the words of your paid patsy economist as the basis for advertising – knowing that since you are atributing this info to an “expert” you are not really violating the COE with your advertisng by intentionally misleading people about the values of their homes. And lets throw in the disclaimer about all real estate is local – nod nod wink wink.

    If the leadership does not recognise their ethical responsibilities, all they are going to use the COE for is to contol the unruly masses who pay dues to support their power games and ego.

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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

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?

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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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