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Ethics

If A Realtor is Unethical in the Woods

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If a Realtor is found to be unethical in a vacuum, does it matter?

Have a hypothetical:

Realtor X has a listing that has been on the market for 180 days. When re-listing the property on the 181st day, Realtor changes the street name from “Main Street” to “Main St” – Days on Market reset – thereby making this a “new” property on the market. Other Realtors may catch this, consumers may suspect this, and the systems – MLS and Realtor Ethics – lose trust and credibility.

Realtors gaming the MLS to manipulate days on market is an old story and makes good blog fodder, but if we just accept this as “the way it is” aren’t we all culpable? Coincidentally, Missy Caulk wrote a related article last week.

There are two questions –

1 – Is it ethical?

2 – So what if it isn’t?

Let’s look at the Realtor Code of Ethics … (bolding mine):

Article 12

REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations. REALTORS® shall ensure that their status as real estate professionals is readily apparent in their advertising, marketing, and other representations, and that the recipients of all real estate communications are, or have been, notified that those communications are from a real estate professional.

Specifically:

Standard of Practice 12-10

REALTORS®’ obligation to present a true picture in their advertising and representations to the public includes the URLs and domain names they use, and prohibits REALTORS® from:

1. engaging in deceptive or unauthorized framing of real estate brokerage websites;

2. manipulating (e.g., presenting content developed by others) listing content in any way that produces a deceptive or misleading result; or

3. deceptively using metatags, keywords or other devices/methods to direct, drive, or divert Internet traffic, or to otherwise mislead consumers.

Is Anonymity the Answer?

By doing nothing, Realtors potentially protect their current and future clients from retribution wrought by Realtor X. If anonymous reporting were an option, I’d argue that there would be more reporting of violations. Sure there would be frivolous accusations, but in the current environment, less is certainly not more. Less is less – less reporting + less accountability + less fear of the system = less trust.

Anonymity – Some MLS’ have anonymous reporting for rules violations, but anonymous reporting for ethics violations are anathema to how we work. Why?

Our business as it is currently set up requires competition and cooperation. Wouldn’t you be inclined to hold a grudge against someone who filed a complaint against you? (assuming that for readers here it would be a frivolous complaint 🙂 )

Solutions:

1 – File an ethics complaint and accept the consequences – Realtor X may not present your offer next time, may bad-mouth you to her customers and fellow Realtors … and your clients may (will) suffer.

2 – Do Nothing. Continue weeping about the dearth of ethical Realtors without doing anything, and allow the systems to be devalued.

3 – Direct the Association to file an ethics complaint against one of their own members. (is this even possible?)

Until the public can search on a state or national site whether a Realtor has a history of ethics violations, why bother with the system?

But here’s the rub – There are no real consequences for unethical violators and – the results of ethics hearings are secret. The only ones who know are staff, the accused and the accuser. Heck, the only way other Realtors find out is a certain behavior has been deemed unethical is when the NAR releases a “case study.”

Keeping Realtor ethics “in house” doesn’t work. We’re not protecting the public from ourselves by not telling anyone. Hell, we’re not even protecting ourselves.

If a tree falls in the woods and no one’s around, does it make a sound?

Personally, if there is an egregious violation, I am more inclined to file a complaint with my state’s regulators; at least that way the public will be informed – and there will be a public record of the violation.

Here’s another twist:

If this behavior is never proven to be true in a Code of Ethics Tribunal (or whatever it’s called) could a story or statement about this specific behavior fall under the new social media section of the Realtor Code of Ethics?

Dad, Husband, Charlottesville Realtor, real estate Blogger, occasional speaker - Inman Connects, NAR Conferences - based in Charlottesville, Virginia. A native Virginian, I graduated from VMI in 1998, am a third generation Realtor (since 2001) and have been "publishing" as a real estate blogger since January 2005. I've chosen to get involved in Realtor Associations on the local, state & national levels, having served on the NAR's RPR & MLS groups. Find me in Charlottesville, Crozet and Twitter.

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30 Comments

30 Comments

  1. Matthew Rathbun

    July 28, 2009 at 10:51 am

    Jim,

    I know that you’ve written this same post before and I’ve commented the same way before.

    Sure, make it public. But I GUARANTEE that you and everyone who reads this has violated the Code of Ethics. 1-13 and 1-15 are violated every day. 14-3 almost every time a complaint if filed. There are far too many rules in RE to not have stumbled over one or the other.

    No matter how minor the infraction, if a consumer was actually going to look up their agent (which they don’t) all they would see was a violation of the Code of Ethics, they wouldn’t know or care . Which isn’t ethics at all… it’s the members of NAR trying to tell one another how to behave. They maybe a good “Standard of Lofty Ideals”, but as long as the process is done by peers who are picked politically at the local level, I don’t trust my fate in the hands of 70 year old agents when it comes to a potential violation of internet marketing.

    Coincidentally everyone in Virginia complains that the Real Estate Board doesn’t take action, or make the results of hearings public enough. Yet, they send out a letter to all members with the results of the hearing, its on the state Real Estate Boards webpage and the meetings are public. Yet, no one cares. The consumer just wants their home sold and the buyer just wants to buy something, almost all the rest is hurt feelings and bravado.

    I honestly wish that NAR would dissolve the pursuits of “Ethics” and concentrate on developing good legislative ideology and create tools and resources for its members. The states should be governing licensees.

    Hiding from the consequences of making a complaint is why wives don’t press charges against abusers and end of up dead. This has nothing to do with how NAR works – it’s human nature. File a complaint, don’t file a complaint – that’s up to the agent. We do the best with what we have to work with.

    Maybe the real answer is do away with the real estate industry and let buyers and sellers use Trulia, Combo-boxes and Attorneys. #justsayin

    I can’t stop thinking how funny it is when members of NAR try to talk about NAR as if it were someone else. If a majority of members actually wanted something and were willing to do something about it, then it would change. Same with the government. I think in both instances, that people learn to compromise so much in this life, that by the time they make it to a position to make a difference they just roll. The majority of members of NAR are happy to just not care.

    So long as Brokers are making money off of agents, they aren’t going to care what they do. So long as we just write the complaint on the blogs and not to the real estate board we’re not going to change.

    Everyone can rant and rage against NAR and their only real estate boards all they want, but the system will remain broken so long as there are people involved. This is no different than the political or even religious systems.

    People are evil, mean, paranoid, nefarious, greedy, gossipy and lazy. Humanists call it “Human Nature”, Calvinists Theologians call it “Total Depravity of Man”.

  2. jlittleaz

    July 28, 2009 at 11:01 am

    I am fortunate. My MLS records days on the market by the tax number and geocode. No one can game this system easily. DOM manipulation was a huge problem before implementation of this system.

    In addition, we have anonymous reporting of MLS violations. Interesting, the biggest violation is no pictures of the home.

  3. Joe Loomer

    July 28, 2009 at 2:03 pm

    An optional solution would be to add an actual “report a violation” tab to the Realtor only-MLS itself – thereby requiring someone at the actual Board to respond (either by making the agent fix it – or responding back to the complainant that it is not in their view an MLS or RE Ethics violation).

    You can’t polish a turd.

    Navy Chief, Navy Pride

  4. Geordie Romer | Leavenworth WA

    July 28, 2009 at 4:08 pm

    Folks will always try and game the system when it comes to DOM. As long as the system is broken and it’s commonplace to game the system we might have a duty to our sellers to go ahead and play the game.

    I come to that perspective because of much worse violations I see day in and day out.

    * Sign on a listing that wasn’t listed. (and never ended up listed either) “It’s such a long drive, might as well put the sign up since I’m here.”

    * Re-listed home on MLS. Did not contact owner or get new listing agreement. (I know because I listed and sold the home after this.)

    * Told another agent that condo development that was Exclusive listing was “sold out” – three years later 3 out of 24 units have sold.

    We have a mess to clean up and the 3 hr ethics class every few years isn’t going to do the trick.

  5. Charles McDonald

    July 28, 2009 at 6:02 pm

    Jim, Your example is from a real situation in our local MLS. About a week or so ago, I flagged the violation and reported it to our association. I was pleased to see that our association corrected the issue right away. Your point about if it is “Unethical” can certainly be argued either way.

    One thing I learned (long before real estate) is that if I know something is wrong, I just do not do it…

    The agent or agents who are gaming the system, know it is wrong!

  6. Jim Duncan

    July 28, 2009 at 6:13 pm

    Matthew – Thanks, as always. A question – if the systems are so broken, why do we still cling to them?

    Geordie – What are the solutions?

    Charles – In this case, I was actually thinking of a case from another MLS where an agent would omit “0”s from parcel ID #’s so as to reset this, but made up the Main Street because it’s more evocative than “00-aaa–00000 vs 00-aaa-0000” 🙂 Right or wrong, how do we fix it? MLS rules? Ethics? Leave it alone?

  7. Mark Jacobs

    July 28, 2009 at 6:53 pm

    I see this almost every day in our local MLS. Agent changing information to reset the “Days on Market” number. This does not present the public with a true picture and I feel it is unethical.

    The problem we have here is that our local board will not do anything about it even if you file a complaint. The local board tries to make you look like the bad guy when you do file a complaint.

    The other problem we have here is agents using the Visual Tour link in the MLS to redirect Buyer to another website. This results in agent stealing leads off another agents website who is using the IDX feed.

    Our MLS has rules but it picks and chooses how and who they apply too.

    As long a the Local MLS and Boards allow this to happen is is going to happen. This must me addressed at the local level.

  8. Elaine Reese

    July 28, 2009 at 8:45 pm

    Our MLS has a red flag on each listing that we can click – record the violation – then it’s handled promptly anonomously. Depending on the violation and whether it is a 1st or 5th time, the agent stands to be fined for the violation. Works very well.

    The fine system has cleaned up the MLS considerably. There are still those that try to game it, but having the anonymous red flag encourages fellow agents to do more reporting.

  9. jf.sellsius.theclozing

    July 28, 2009 at 10:41 pm

    I want to take this in a different direction, if I may (heck, I just did).

    Is DOM fundamentally fair to the seller, whom I serve? A breach of my fiduciary duty to disclose?

    Is it merely an MLS requirement or is it required by state or federal law?

    IMO, DOM operates to penalize the property and property owner. As a fiduciary for my client, do I serve his or her interest by disclosing this just because my MLS says I must. Does my duty to my client override this rule?

    For if the DOM is contrary to my fiduciary duty, then it’s circumvention may be a moral imperative.

    I don’t know the answer to this and defer to the ground troops for some insights. I also ought to check the state law on DOM.

  10. Jim Rake

    July 29, 2009 at 8:08 am

    Jim – looks like most of us agree…there is a better way to do business. But, how do we get there? (DOM? There are so many better violations to choose from!)

    Can the greivance/complaint process be improved? How can it be more transparent? Will that matter?

    If the vast majority of our peers agree that improvements are needed, maybe they’re on to something.

    While I can’t say I agree with Matthew’s cynicism (“as long as the process is done by peers who are picked politically at the local level, I don’t trust my fate in the hands of 70 year old agents when it comes to a potential violation of internet marketing….So long as Brokers are making money off of agents, they aren’t going to care what they do.”), there certainly are challenges and hurdles to overcome in attempting to change the way we do business. But, that’s always been the case.

    Do nothing? That’s not an option.

    Edmund Burke may have said it best, “All that is necessary for the triumph of evil is for good men to do nothing.”

  11. Matthew Rathbun

    July 29, 2009 at 8:48 am

    Duncan – Every system is prone to mistakes. It’s simply the best we seem to have at this moment. My entire comment is based on the fact that agents love to complain, but not use the system. I think that the mainstream Realtor, at least from my observations, will more readily file a complaint with the Real Estate Board, than the local Association. So from that point they are not clinging to the Ethics system.

    Rake – It’s not cynicism when its the truth. I deal with these things daily and have for two years, prior to that I had a great deal of exposure as a broker and instructor. I have had countless brokers ask for advice on various agents and when I tell them that they need to get that agent out of their office, they routinely say that the agent makes too much money.

    The issue with peer based systems, such as this, is that the training to be on a panel is minimal. One day a year with an update to changes to the Code is not sufficient foundation to hold my career in one’s hands. The issues of procuring cause, agency and adherence to a (at times) ambiguous set of standards is too complicated for agents who don’t study it routinely. If there were a competency test for Professional Standards members, that was taken each year we’d have far fewer panel members. This isn’t as evident in our local board, but when you start going out of area, it’s scary some of the folks who serve on Association Panels.

    These points were made not to negate the system, but to show why I don’t support Duncan’s desire to have the results of such hearings made public. Court records and Real Estate Board hearing results are public, but the competency of Judges and trained investigators is far greater than volunteer panelists.

    If public executions are the answer than fine; lets just do it. But for all those who want transparency; remember that your name may very well be the next one on the wall-o-shame. You make yourself a target with these dialogues and no one is above reproach.

  12. Jim Rake

    July 29, 2009 at 10:01 am

    Matthew – Am not sure Mr. Duncan is advocating an “all or nothing” approach when he’s suggesting more openness.

    Often, especially when it comes to Ethics, in any profession, better training is a first step.

    Expanding the methodology we use to train ethics guidelines is another. The template is there, there is no need to create it. Many other professions, the military, business, the medical profession, to name a few, have a long history of ethical training programs as the foundation for the preparation of their practitioners. Let’s begin to leverage their experience and improve ours.

    Public executions? Wall-o-shame? I haven’t heard those recommendations. How about a serious examination of what, why, & how the current process works, and how it might be improved upon? Is that too much to ask?

  13. Matthew Rathbun

    July 29, 2009 at 10:17 am

    Rake – This is probably the third time, over two or three blogs that Jim and I have engaged in this conversation. Those comments are addressing this statement: “Until the public can search on a state or national site whether a Realtor has a history of ethics violations, why bother with the system?”

  14. Jonathan Dalton

    July 31, 2009 at 1:12 am

    Ah, but is a days on market a material fact about the house?

    Before you answer … is it is a material fact and you take a listing from a previously unrepresented seller (a FSBO for those without a copy of the home game), shouldn’t you be required to disclose the number of days the home was for sale even if it’s not “on the market” because it wasn’t in the MLS?

    It’s gaming for the sake of changing a number that any agent with the slightest degree of competency (all 12 percent of us) can figure out by checking the MLS archives.

  15. Houstonblogger

    January 2, 2010 at 11:44 am

    It is sad, but here in my section of the city, there is a constant joke about the NAR “code of ethics” amongst builders, contractors, vendors, etc. They laugh at the “higher ethical standard” we as Realtors hold ourselves to, when in reality most Realtors I’ve known have violated that code in one form or another. Some violate it in the most egregious manner.

    With regard to DOM, it annoys me as much as the square footage issues annoy me. Garage apartments do not equal square footage. However, I understand that in a lot of cases, listing agents are trying their hardest to please their clientele-usually builders in the square footage scenario. Even so, I report it b/c it is wrong, screws up my comps and makes for bad business across the board.

  16. Houstonblogger

    January 2, 2010 at 11:56 am

    I totally didn’t respond to the DOM b/c I got off on my square footage tangent. DOM is such a grey area for me. I don’t report it because I don’t always believe in every case that the agent listing the property is trying to be dishonest or underhanded in an effort to “trick” consumers based on actual property data. I’m sure that this is the case more often than not, but I don’t want to report someone for something that could have been an honest mistake and that is not a clearly defined “violation”, in my opinion.

    Besides, I research homes enough to know how long they’ve been on the market. I don’t really need it to say “1” on the MLS sheet. I would think most agents can do the same for their buyers, and the time this information is most necessary is in negotiation anyway. If a buyer chooses to purchase a home without the help of an agent and believes the DOM is as low as it purports to be, then that is their mistake for not hiring me.

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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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