1.1 "Don't Quit Your Day Job"
2. "No Sign of Reform in NAR Leaders"
3. "The Wrong in the Percentage Commission"
No Sign of Reform in NAR Leaders
"'Fessing Up" to Disclosure Failure© 2006 by Ray Wilson
On January 17, 2006, the National Association of Realtors (NAR) released the "2005 Profile of Home Buyers and Sellers,", based on survey responses from more than 7,800 consumers. The report included the fact that more than two-thirds of real estate agents (most being member Realtors) were in noncompliance with laws requiring timely disclosure to buyers and sellers of their agency commitments. Some frequent critics of NAR expressed surprise at the revelation, openly speculating whether it might signal a policy turn toward openness.
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I looked out the window of my new condominium to see someone waiting matter-of-factly while his leashed dog took a dump in my flower garden, right outside the window.
He wasn't ten feet from me when I protested with, "Hey, what are you doing?"
Startled, and caught red-handed, he pointed to the dog and said, "It's not me. It's him!"
Recognizing that they could no more avoid the mischief being exposed than my neighbor could make his pooping pooch disappear, Chicago based officials of the National Association of Realtors (NAR) published their own "research" pointing to what investigators already know - namely, noncompliance with agent disclosure laws. NAR General Counsel Laurie Janik even went so far as to go on record saying, "Disclosed dual agency is probably the most difficult form of representation to perform properly. These statistics say that people are being sloppy. They need to take agency disclosure requirements seriously; it is a critical element of consumer protection."
Translation: "It's not us. It's them!"
"Disclosed dual agency is probably the most difficult form of representation to perform properly."
I believe her. Dual agency itself is obviously not difficult for Realtors, given the frequency of its practice. The difficulty is in the "disclosed" part which means simply to tell the truth about it. This is an interesting admission from NAR's General Counsel.
While NAR's leaders aren't about to cop to complicity in its members dumping on people's rights, they have indeed walked them to the place where they can comfortably squat in the garden of consumer trust. Of course, they never said, "break the law and don't disclose your status" -- for a dog owner does not need a command to tell the dog what to do once it has assumed the position. What NAR did do was twist and redefine legal and customary definitions of agency and abandon established principle regarding honest disclosure so that members are left with no more respect for people's right to know than Rover's respect for my roses.
NAR at one time sanctimoniously proclaimed the common law of agency as the one true faith. It taught that listing agencies owed undivided loyalty to sellers with no room whatsoever in a listing agency for buyer agents and -- being consistent -- no room in a buyer agency for seller agents. In NAR's 1993 agent's guide, "Agency: Choices, Challenges & Opportunities," "Exclusive Buyer Agency" (EBA) is defined as
The practice of representing only buyers and never sellers in a transaction. The company never lists a seller's property and thus never has a seller as a client. Agents never accept subagency that is offered by a seller's agent.
Then, no one could imagine buyers beginning their house search with a firm having no listings.
Even more unimaginable to those of us who once admired the Realtors for their professed ethics was the betrayal of faith so extreme that NAR officials -- despite the above definition -- now callously refer to "Exclusive Buyer Agent" and "EBA" as terms that have never been given specific meaning. The preposterous denial is a blatant cover-up for unscrupulous listing firms who advertise their own "Exclusive Buyer Agents." Listing firms get their lists (of home inventory) by promising homeowners to actively sell, entailing all the dynamics and nuances of the word "sell." Promises made in a listing firm to help buyers buy are also agency commitments and directly adverse to the sales agency promises. When the firm manages to keep a promise to one side, it necessarily betrays its promise to the other.
NAR's siding with sellers is appropriate, for it is a sales trade association which historically preached and boasted undivided loyalty to sellers. However, the masquerade of listing firm members as buyer agents is unconscienable, and the Association is an unabashed accomplice, if not the actual mastermind behind it. The latter seems likely, considering NAR's own continuing masquerade (begun just in the last decade) as something it never was and never can be -- an organization representing both professional seller agent and buyer agent trades. That charade began in 1997 with the purchase of the Real Estate Buyer Agency Council (REBAC), a privately owned for-profit peddlar of buyer representation training and certification. At the time of the sale, membership in REBAC was something simply handed out to those who bought the training package, the overwhelming majority of whom were not practicing buyer agents. Put simply, the word "council" was a simple marketing fiction. NAR then restructured itself, incorporating the fiction as its buyer agent front. It then packed REBAC membership from its own massive numbers of listing agents who now took the REBAC-Realtor labels to costume themselves in their local markets as buyer agents and confuse buyers who might otherwise bring their business to those in the legitmate EBA trade.
In most states in 1997, listing-firm buyer agent pretentions were plain old-fashioned law-breaking since the Common Law still governed real estate agency and outlawed such deception. Nevertheless, even in common law agency states NAR distributed its new REBAC "buyer representative" credentials to post on the walls of listing firms. Like the dog in my garden, local Realtors looked to the authority they trusted and thought they heard, "Go ahead. Find a comfy place, and move your tail out of the way."
NAR policy is certainly against practices which are unconscienable and illegal, so a nationwide Realtor campaign was launched to make listing firm buyer-agent pretentions legal. In state after state, Realtor lobbies and PAC money successfully pushed legislation abrogating the common law NAR once held sacrosant, but which now stood in the way of efforts to restrain the growth of that upstart new trade, true buyer agency. Concocted new labels like "designated agency" and "transaction brokerage" were pitched as new choices for consumers, but which provided nothing not already available under the now-scrapped common law. What it really provided was cover for false agents playing both sides of the street.
The cover of course was in the form of orchestrated confusion among both buyers and sellers. The great irony and greater hypocracy lies in the fact that these new laws were inevitable proposed as something to "clarify" the concept of agency -- ignoring the fact that NAR had already done that in its 1993 "Agency: Choices, Challenges & Opportunities."
The 1993 clarification actually clarified. It was wholly consistent with the conception of agency held by the industry before the EBA trade became inconvenient to sales agent exploitation of unrepresented buyers. It was also and still is consistent with the conception of agency throughout the western world beyond the real estate sales industry. In contrast, provisions of the common-law abrogating legislative changes are 180-degrees inconsistent with the 1993 document.
How in the world can anyone at NAR headquarters be surprised that disclosure -- a simple matter of telling the truth -- is difficult for Realtors to perform? This is the same headquarters that cannot admit to -- let alone disclose -- inconvenient truths today that it actually published yesterday. Leaders in every sense, they have led in the mischief. More than simply an "organization," NAR is a complex and cohesive social structure with cult-approaching influence over its members which enables its leaders to literally lead by example so compelling that it may well-indeed be analogous to a leash.
My dear NAR officials, the problem is not them. It is definitely you...