Home Brokers & Agents In Which I Propose a New Role for the REALTOR Association

In Which I Propose a New Role for the REALTOR Association

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I’ve been in the real estate market the last few months. It has been an interesting experience all around to be a straight up consumer, both selling and buying. And I’ll tell you what: it has been absolutely amazing to see the good, the bad, and the ugly of the industry personally from a consumer’s point of view.

If you read my previous post about the visionary memo from Cendant almost ten years ago, you’ll see that despite nearly a decade of experience with online marketing, the real estate industry still has a long way to go. The gap between the expectations and needs of both sellers and buyers, and the actual services delivered by far too many REALTORS is still far too wide. It’s hard to know how bad things are until you spend time as an actual buyer looking at listings online. I’ve done that the past couple of months, and… there’s work to be done.

This is an actual photo I saw from an actual listing of a home for sale here in the Houston area not two weeks ago:

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At first, I laughed. Then I thought, my lord… some poor seller is expecting to get buyers to want to visit his home and ultimately sell it with this? True, the property wasn’t all that expensive, as it was around $100K. But that’s still $3,000 or so that the listing broker would take from the sale.

The seller certainly got screwed, and maybe I, as the potential buyer, also got screwed since I didn’t put that property on the list of homes I’d want to go see in person. Perhaps it was the perfect home for my needs, but I’ll never know.

In what world is this level of performance acceptable for $3,000? It’s especially intolerable given that the Houston Association of REALTORS has struck deals with local photography studios where a basic 10-image package is only $85.

The only possible explanation is that the listing agent/broker in question here either (a) didn’t know about the HAR photography deal, or (b) didn’t care.

Can anything be done about this? And if so, who can do something about it?

My answer: The Association of REALTORS can and should do something about it. Here’s why and how.

The Need: Someone to Guarantee Quality

The basic need here is for someone, some organization, some company to guarantee some quality of performance. This need exists no matter what the product or service. You don’t want to buy a car not knowing whether the engine will blow up as soon as you drive it off the lot. You don’t want to hire someone to do your taxes without knowing that she would be competent.

In most cases, individual companies guarantee quality. If a Ford car malfunctions, then Ford has a vested interest in fixing that car, and preventing such quality defects in the first place. In many cases, government also provides minimum standards of quality and performance, whether through actual laws and regulations or through the judicial system (you can sue someone for poor quality product/service).

When it comes to real estate, a licensed and regulated industry, the government does provide a minimum floor of performance. A real estate agent cannot perpetrate fraud or do other things that are against the actual law. Consumers can also sue in courts. But legally speaking, the photo above is not exactly against the law. I can’t imagine a court awarding damages to a plaintiff because the listing agent uploaded a photo of a giant blue monster.

In real estate, fact is that many if not most brokerage companies do make attempts to guarantee quality. I worked at Cendant at the start of my real estate career. I know very well just how much money, energy, and attention are spent by franchises on helping their franchisees guarantee quality: training, systems, branding, marketing materials… all of that is to help brokers guarantee quality. Many if not most brokerages also spend enormous time and energy and resources offering training, systems, materials to their agents.

However, we must be sensitive to the realities of the business on the ground. Brokerages compete fiercely with each other for agents. Recruiting and retention is the name of the game. Some agents will certainly love being with a brokerage that offers great training, discounted marketing packages, and the like… but very few real estate agents — especially given their independent contractor status and personalities that aren’t all that conducive to being managed — love having someone look over their shoulders to ensure that their work product is actually good. A broker who really enforces quality might find himself losing agents to competitors who are far more lax about such things.

What is needed, then, is a relatively neutral third party who is insulated from the fierce competitive pressures that brokerages face, with the credibility to setup, support and finally enforce a level of competence on the part of real estate professionals.

There are three such entities: the government, the MLS, and the Association. My suggestion is that the Association undertake this task.

Why the Association?

First, the government is the worst possible entity for this guarantee of performance. Because laws and regulations must strive to be objective, rather than subjective. Government should operate on facts, rather than on opinions. But the nature of the need here is almost entirely subjective.

Look at the photo above. It’s bad, yes. But what’s so bad about it? The judgment involved is subjective, not objective. You can’t create a law that says, “You can’t have giant blue dolls in listing photographs” since that won’t cover giant green dolls.

What about the MLS? While I do think the MLS will need to be involved in the task, I don’t believe it’s the ideal entity for guaranteeing quality of professional services. It’s a bit too far outside the core mission of the MLS: data accuracy, intra-professional rules, and cooperation and compensation. I feel the MLS also must be objective as possible. It can regulate, for example, how many photos must be on a listing, but could it regulate the quality of those photos?

The Association, however, is the ideal entity to do this.

First of all, every single Association of REALTORS has adopted and abides by the Code of Ethics and the Standards of Practice. This is the second paragraph to the Preamble to the Code:

Such interests impose obligations beyond those of ordinary commerce. They impose grave social responsibility and a patriotic duty to which REALTORS® should dedicate themselves, and for which they should be diligent in preparing themselves. REALTORS®, therefore, are zealous to maintain and improve the standards of their calling and share with their fellow REALTORS® a common responsibility for its integrity and honor.

Right there in the lofty language of the Preamble is the core mission of REALTORS and the Association: zealously maintaining and improving the standards of their calling.

These standards, however, as codified in the Standards of Practice constitute a floor, not a ceiling. Furthermore, they tend to be concerned with the same sort of things that state laws and regulations are: honesty, conflict of interest, etc. Other sections of the SoP are concerned mostly with how REALTORS interact with each other (e.g., SoP 15-2).

As I see it, the government regulations provide the absolute floor. Go below that, and you’ll lose your license, get sued for huge damages, etc. It’s the really big hammer. NAR’s Code of Ethics provides another floor that is higher than the government’s. Go below that and you face penalties and sanctions from the Board. But the NAR Code and SoP have nothing in them today to deal with horrible photos or poor job of online marketing.

That requires something else, something new. A new voluntary standards of the calling that experienced real estate professionals come up with, agree upon, and agree to be held to.

The Good News

Happily for our purposes, at least the framework or loose understanding of those standards already exist within the profession. There are literally thousands upon thousands of real estate brokers and agents who do wonderful work, who hold themselves to a far higher standard than any government regulation or NAR Code do. They know what works and what doesn’t. They know what to do, and what not to do. They know the best way to do something if cost is no barrier, and the best way to do something if cost is an issue. As working REALTORS themselves, they know how to balance level of effort to the expected reward.

They’re already talking to each other, advising each other, counseling each other on virtually every aspect of the profession. Whether that’s in online forums on Raise the Bar on Facebook, or in private groups, or in person at networking events, there are really good professionals who do really good work, and who go out of their way to help others who want to learn.

If a local Association — why wait for NAR to act? why wait for the State to act? — decided to embark upon this project, I have no doubt in my mind that there would be no shortage of members who would love to help come up with this Standards of Performance.

The talent is already in place. The knowledge and the expertise are already there. Many of the members already know what, how, when, who and why. Give them the opportunity to expand that to the whole Association.

The Benefits

If living up to the words of the Code of Ethics itself is not enough motivation for the local Association to undertake this task, let us pause a moment to recognize the benefits of doing something like a voluntary Standards of Performance program.

1. REALTORS Make More Money

Fact is, the photograph above made me cross out that property from the list of homes I wanted to see. I am not alone in doing that. Who can say whether the listing broker/agent would actually make a sale on that property? Who can say whether he (and the seller client) would not have made even more had the listing been properly marketed with professional staging and photography, thereby drawing even more buyer interest?

Creating, educating, supporting, and finally enforcing a voluntary Standard of Performance would help buyers, sellers, and the people who represent them: the REALTORS.

2. The REALTOR Brand

If you have spent any time asking consumers about NAR and the REALTOR brand, you know that most consumers have zero idea that there is any difference between a REALTOR and a real estate licensee. In fact, even within the industry, even amongst REALTORS themselves, there is very little awareness of what the difference might be.

Having a voluntary, enforced standard of performance would go a long way towards creating differentiation.

3. The Value of the Association

In recent years, we have been engaged in a grand dialogue about the value of the Association. Most responses have been disheartening. Many of the so-called members join the Association for one reason only: access to the MLS.

Having something like this Standards of Performance would, once again, go a long way towards making membership in an Association valuable beyond access to the MLS. Why? Because someone has to review the marketing materials that members put together. Just like having an editor is valuable to a writer, having someone review your marketing can be extremely valuable.

And in the extreme case where the issue isn’t that a REALTOR didn’t know what to do for effective marketing, or simply made a mistake that was caught by the Association, but that a REALTOR simply doesn’t care to provide decent service to buyers and sellers… that person needs to be removed from the profession, period. The remaining professionals, who do take pride in their work, who do want to do better, who do want to learn, and who do value having someone catch any mistakes they might make, would rejoice.

Getting rid of bad apples is never bad for the barrel.

Possible Objections

So we know this project can be done. We know there are benefits to doing it. But what are possible legitimate objections to doing so?

It’s the Broker’s Job

First, one might object that the Association is stepping into the turf of brokers. There is some truth to that, since in an ideal world, each and every broker would perform this function to their in-house standards. But as noted above, brokerages compete with each other for agents. Some brokerages have as their business model the principle of non-interference: it’s your business, run it as you like. It isn’t that the other brokerages don’t want to enforce standards, but that they find themselves constrained in doing so due to the realities of the business.

Solution: make participation voluntary. Each brokerage can choose to participate or not. Let the REALTOR membership and the buying and selling public decide for themselves what to make of a brokerage that refuses to participate in a voluntary program of holding each other to a higher standard of marketing the properties of others. Most brokerages would not only participate in the program, but use it as a means to enforce their own, far higher standard of performance.

Who the Hell Iz You?

Second, one might object that enforcement is impossible. Who the hell are you to say that my photograph is bad? Who the hell are you to suggest that my listing description is poor?

The answer is that (1) the program is voluntary, so you (or your broker) have voluntarily agreed to abide by the standards, and (2) those standards are the product of discussion, consultation, and agreement by the members themselves.

This Standard of Performance cannot be imposed from on high by some consultant or some guru. Local business practices are too varied. Local members, local professionals who know the local market and how it works, and what does and doesn’t work, are the ones who need to come up with the Standard.

As such, the Standard must be flexible at all times, amenable to modification, and open to judgment calls. The whole thing is a set of subjective judgments as to what is good and what is not.

Furthermore, focusing on enforcement and penalties is the wrong approach. The correct approach is to focus on the support and assistance part first, and enforcement only as a last measure, and only to deal with those few people who voluntarily agreed to abide by the Standards, but then constantly violate them without showing any desire to learn and improve.

If someone keeps posting the same horrible photo time after time, even after being offered free training on performing to the Standards, even after warning after warning… perhaps that person needs to leave the business, lest her terrible work stain the reputation of the good conscientious REALTORS.

How to Do This

It is impossible to come up with an actual plan, since each Association, each local market, each situation is different from another. But the broad outlines of the approach will likely be something like the following.

  • Create Discussion: Start with a series of meetings, town halls, formal and informal surveys, discussion about whether your Association should do this.
  • Form Working Group: If there is broad agreement to explore the idea further, create a Working Group. But go outside the normal channels of creating such a group. Really open it up to all members, since for many of them, this might be the first opportunity for them to contribute to the Association. Not everyone is passionate about government lobbying, or networking events. It may be that you’ll find members-in-name-only who suddenly become energized around helping draft a Standard of Performance.
  • Draft the Standard: Let the Working Group go and come up with a first draft.
  • Member Input: Start a series of formal comment period, inviting all members and interested parties. As long as the Working Group regards this process as not attacking their work, but people genuinely trying to improve it, more member input, the better. Recognizing that consensus is impossible, figure out a process for approving or rejecting proposed Standards.
  • Setup Infrastructure: Once the actual Standards have been approved and accepted by the majority/supermajority of the members, the Association can then start to setup the appropriate suport infrastructure. A few items will be things like compliance, adjudication, dispute resolution, modification of the Standards, interface with the MLS, interface with third party marketing, etc. Certainly, training and resources to help those members who want to live up to the Standards will be required.
  • Launch & Revise as Needed: These Standards are not and cannot be static. Things change too fast in marketing and business. The process of constantly reviewing the Standards, making modifications, and getting member input will need to be put in place.

It is imperative that every step of this process be open, transparent, and democratic. Since we are talking about subjective judgments, and activities that are central and core to the practice of real estate brokerage, each and every member must have the opportunity to contribute, to disagree, to modify.

Obviously, as a strategy consultant, I would love it if you were to call me to ask for help. But this goes beyond my business interests. This goes to something that I truly believe is necessary and beneficial to Associations, to brokers, to agents, to consumers… to everyone. So hire someone else to help you, if you’d like. Or hire no one, and just go ask your membership. But consider the idea.

Because the current state of affairs hurts sellers, hurts buyers, hurts agents, hurts brokers, and the REALTOR brand. We can do better than this. We must do better than this.

The Association’s new role — to guarantee quality, to help with standards of performance — is a new role perhaps, but it is rooted in ancient soil:

Under all is the land. Upon its wise utilization and widely allocated ownership depend the survival and growth of free institutions and of our civilization. REALTORS® should recognize that the interests of the nation and its citizens require the highest and best use of the land and the widest distribution of land ownership. They require the creation of adequate housing, the building of functioning cities, the development of productive industries and farms, and the preservation of a healthful environment.

Such interests impose obligations beyond those of ordinary commerce. They impose grave social responsibility and a patriotic duty to which REALTORS® should dedicate themselves, and for which they should be diligent in preparing themselves. REALTORS®, therefore, are zealous to maintain and improve the standards of their calling and share with their fellow REALTORS® a common responsibility for its integrity and honor.

In recognition and appreciation of their obligations to clients, customers, the public, and each other, REALTORS® continuously strive to become and remain informed on issues affecting real estate and, as knowledgeable professionals, they willingly share the fruit of their experience and study with others. They identify and take steps, through enforcement of this Code of Ethics and by assisting appropriate regulatory bodies, to eliminate practices which may damage the public or which might discredit or bring dishonor to the real estate profession.

Your thoughts and suggestions are, as always, welcome.

-rsh

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