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Ethics

No More BPOs For You! (How You Could be Violating RELRA)

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Take a moment:

housesIf you are a Realtor (especially in Pennsylvania) who has been performing BPOS (Broker Price Opinions) for lenders, you might want to stop and take a moment to read this.

Perform a BPO and you may be violating the Real Estate Licensing and Registration Act (RELRA) and the Real Estate Appraisers Certification Act, and could be prosecuted by the Real Estate Commission or the State Board of Certified Appraisers or both.

If you are reading this saying, what????? You are not alone. There are many Brokers and Realtors scratching their heads saying the same thing.

The harsh reality

But, the harsh reality is that simply put, the only people who are allowed to perform BPOs are certified appraisers.

Brokers and Realtors can only perform CMAs (Comparative Market Analysis.) And, get this, unless you are either representing the lender or trying to obtain the listing, you can’t even perform the CMA. So for instance, if you have no chance of getting the listing and the lender just wants a BPO, say goodnight Gracie. No BPO or CMA for you or the lender.

However, if the lender states that whoever does the BPO or in your case, the CMA gets the listing, you should get that in writing along with any fees that the Broker charges for the CMA. You must also include the limiting language in your CMA exactly how it is published in RELRA and must be on the first page of the CMA.

Completely oblivious

I find that most lenders do not want a CMA, they want BPOs and are not aware of the various state laws or rules.

For those Brokers/Realtors who are currently performing BPOs or those who have been performing BPOs to get extra income, those days are over and they should be grateful they have not yet been caught thus far.

There’s no patch to help those who need to quit performing BPOs over a period-of-time. You have to quit cold turkey and if I were you, I’d do it today.

If you are not certain of your state’s laws, you should check with local counsel or your Real Estate Commission.

Writer for Agent Genius Magazine. Renee's primary focus has always been on changing and improving the real estate industry through her words and her "big mouth." She is not afraid of a little controversy or ruffling a few feathers every now and again and is always up for a good debate. Renee prides herself on being different and is definitely not your Mary Jane, beige, tweed skirt suit, knee high wearing mother's Realtor. Renee is best known for her humor, sarcasm, her keen wit and is a social media junkie who can usually be found tweeting at odd hours of the evening. Check Renee out on her popular website www.reneeporsia.com

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29 Comments

29 Comments

  1. Fred Romano

    February 16, 2010 at 1:00 pm

    Wowie! Thats sucks for PA agents. BPO’s really suck anyway, but I guess there are agents out there that make money doing this. – Cold turkey is good with mayo 🙂

    • Renee Porsia

      February 16, 2010 at 1:17 pm

      I’m sure the Real Estate Commission could have a ball finding all the Realtors who are doing them. I’m not a cold turkey and mayo gal… I prefer ham & cheese with mayo! YUM!

  2. John Ringgold

    February 16, 2010 at 1:19 pm

    In Kansas real estate agents are still allowed to do BPO’s, but with the changes we have found that BPO’s are now a act that can only be performed by a licensed agent. This puts more burden on the Broker because if it is a stated as a function of a licensee, the Broker is responsible. Per our Real Estate Commission the Broker now has to assign a transaction number to the BPO and keep a file. We are affiliated with a franchise that requires a % of every transaction so now the franchise is getting a % of every BPO. If the office takes a small fee for paperwork processing, there really isn’t much left for the REALTOR(r) that did all the work.

  3. ktcoz

    February 16, 2010 at 1:23 pm

    This article really should be more clear. RELRA pertains strictly to PA. There are many states that agents & brokers can be paid for BPOs.

    • Renee Porsia

      February 16, 2010 at 10:49 pm

      I think my article was pretty clear in that the first sentence states if you are a Realtor especially in PA.

  4. Ken Montville

    February 16, 2010 at 1:28 pm

    Sounds like a mission for PA RPAC. I don’t think Realtors who are doing BPOs for the little extra money it brings in are going to stop until they get the nasty-gram in the mail. There is just too much of it going on and let’s call a spade a spade, this is one way for Realtors to make a buck in hard times.

    I don’t do BPOs myself. Never have, probably never will. I know puh-lenty of reputable Realtors that do, though. Pin money. Mad money. Grocery money. Whatever you want to call it, it’s a nice little add on.

    This is just another example of some nit picky nook in the legal system that needs a good lobbyist to go down to the Harrisburg to get it all straightened out. Appraisers have plenty on their plate.

  5. Ross Therrien, Prudential Verani

    February 16, 2010 at 3:24 pm

    Haven’t done a BPO or CMA for anyone but the homeowner in years so I’ll have to check with NH’s laws. I know ALOT of agents that do that would be concerned. Thanks for the post.

  6. Mark Hanna

    February 17, 2010 at 8:37 am

    Renee, I’ve been saying what you wrote for years to my PA colleagues, some listen, some don’t. The turkeys will be those who don’t heed this important advice. Thanks for the post.

  7. Gia Freer

    February 17, 2010 at 10:19 am

    Hi all…just an update from Florida (and the FAR legal hotline which I called after I read this article 🙂 ) – As BPO’s are part of regular real estate activities here in Florida, only licensees (licensed agents and brokers) are allowed to perform them (so long as they are NOT called appraisals) and they must be done under their Broker. In other words, the licensee cannot do them for the lender and get paid directly from the lender (same as a commission). Hope that helps for any Florida agents doing Broker Price Opinions.

  8. Sus

    February 17, 2010 at 2:48 pm

    Be aware that many of the Asset Management Companies…Use the BPO’s as their “Guide” for value. (exterior drive by/BPO – yes the house is there….seldom an Interior inspection of the property).
    They then have a “licensed Appraiser” do a “review/reconcillation” for a supplemental value verication….(not a typical at site interior appraisal inspection), these Appraisers/Review/Reconcillation …typically ARE not from the Market or the same State & have limited access to “Real Market Data”.
    The BP/Reconcillation is just another cheap way to get “value” from RE Agents & Appraisers , while putting the RE Agents & Appraisers license/E/O insurance on the line……

  9. Cindy

    February 18, 2010 at 10:40 am

    This applies to North Carolina also.

  10. Alice Keife

    February 20, 2010 at 6:58 pm

    This applies to West Virginia as well.

  11. Ron

    May 18, 2010 at 3:31 pm

    Great article, unfortunately some people will continue to skirt the law thinking that they will not be the one who gets caught because the real estate or appraisal board already has toooooo many things to keep track of to pay attention to little old them. Lollol…illegal activity can blow up in your face any number of ways, especially in this environment, bankruptcys, foreclosures, whistles blowers, loan audits, valuations audits and even the company you do the BPO for, especially if they get in hot water and need scapegoat. So check your state law and adhere to it. The small BPO fee is not worth your license and all of the expense you will encounter when you get caught in violation of your state law.

  12. Katherine Scheri

    September 15, 2011 at 2:04 pm

    I know that this is an older article however, the entire premise is not accurate. Certified Appraisers ARE NOT PERMITTED to complete BPOs or CMAs as they do not comply with USPAP. It is an ABSOLUTE violation of our licensing standards The only professionals that should be completing BPOs or CMAs are brokers. Lenders are not permitted to use them for lending decisions – they are permitted as a secondary instrument but for lending, Fannie, Freddie et al will only accept an appraisail with a loan origination. Most of the new regulations do not apply to REO and internal-use appraisal products. The bottom line is that BPOs and CMAs do not employ the uniform standards that appraisers are required to employ and therefore, appraisers are not permitted to use them as valuation tools. That is not to say that in this economy, many appraisers have opted to add this product to their lineup because they need to supplement their dwindling appraisal income. They are doing so in violation of their licensing and USPAP.

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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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