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?

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.

Last 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.