Realtor ethics and presidential election

realtor ethics
Realtor ethics (infographic from visualistan.com)

Allegations of sabotage, fraud, and collusion.  A yearning for power and money.  And let’s not forget about the sex, lies, and video tape.  No, I’m not referring to this year’s presidential election – I’m talking about Realtor ethics (although the similarities are intriguing).  I’ve reported in the past about real estate agents who’ve engaged in fraud, sabotage and collusion while taking part in scams.  There have also been the recent reports of alleged money laundering and extortion.  And let’s not forget the agents caught on video in homes for sale engaging in sexual acts, rummaging through underwear drawers, and stealing.

The National Association of Realtors® (realtor.org) is proud of their Code of Ethics, which was first introduced in 1913. And for years, the NAR has promoted the Code of Ethics as one of the feature advantages of hiring a Realtor®.  And notwithstanding the focus on high ethical standards, some agents still act repugnantly.  And as a result, it’s not a surprise that real estate agents typically fall in the lower to middle range of Gallup’s Honesty/Ethics in Professions poll (gallup.com).  The December 2-5th 2015 poll indicated real estate agents ranked below journalists, bankers, and lawyers in honesty and ethical standards (lobbyists and members of congress are at the bottom of the ranking).

So, why are agents often viewed as unscrupulous and dishonest?  The answer begins with the purpose of the NAR Code of Ethics.  Jeremiah Conway and John Houlihan’s 1982 study (The Real Estate Code of Ethics: Viable or Vaporous?; Journal of Business Ethics. 1;201-210) determined to find out if the NAR Code of Ethics was just a “clever” marketing scheme or a viable tool for “promoting and enforcing” ethical behavior.  Their critique of the 1982 version of the NAR Code of Ethics exposed “numerous ethical flaws.”  They revealed loopholes for enforcement as well as statements that promoted the interests of Realtors®, contrary to the “service of the public.”

And although required to adhere to the NAR Code of Ethics, there are still some agents who breach their duties to the public and their clients for their own benefit.  George Izzo’s 2000 study of moral reasoning and ethical decisions in real estate (Cognitive Moral Development and Real Estate Practitioners. Journal of Real Estate Research., 20;1;179-188) revealed that cognitive moral development and ethics are mutually exclusive.  While some are more “mature” in their moral reasoning and motivations, the study determined there is no difference among stages of moral development when making ethical decisions.

Sometimes a person’s moral reasoning is just irrational, illogical, or unfounded – regardless of how high the purpose.

It has been thirty-four years since Conway and Houlihan’s assessment of the NAR Code of Ethics.  Of course, the NAR Code of Ethics is updated each year to reflect changes in technology and business; however, the basic purpose remains unchanged – promote your client’s best interest, cooperate with other agents, treat all parties honestly, a commitment to the truth and refrain from misrepresentation (among other things).  Since then, the changes to the Code have been overwhelmingly positive such that the NAR Code of Ethics framework has been adopted into real estate licensing laws across the country.

Nevertheless, after decades of promoting Realtor ethics as a basis for hiring one, it became clear that consumers did not choose their agents based on ethical behavior.  As a result, in 2014 the NAR began to promote Realtor added value.

By Dan Krell
Copyright© 2016

Original published at https://dankrell.com/blog/2016/10/21/realtor-ethics-presidential-election/

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Presidential election and home sales

Elections have vastly changed in mood and intensity.  It used to be that the candidates debated about substantive issues looking for win-win solutions, including housing.  Maybe some of you remember how both the Clinton and Dole campaigns showcased their ideas of expanding the capital gains exemption during the 1996 election.  Housing and home sales doesn’t seem to be a platform issue anymore.  Elections have become divisive and nasty, even among the electorate; and for many Americans, the trending (real estate) election issue is – whom is moving to Canada!

That’s right, moving to Canada.  Maybe you’ve heard someone at work or at the store proclaim they are moving to Canada if “the other candidate” wins the election.  The theme of moving to Canada after the election has become a mantra so much so that it’s become part of pop culture. The idea has even been satirized by the likes of South Park.  And of course there is the growing number of celebrities who vow to move to Canada if the election outcome isn’t to their liking.

Of course the threat of moving to Canada is tongue in cheek (for most), or is it?  Nevertheless, leave it to astute real estate agents who realized that people considering such a move is now a target market.  Agent ads and blog posts popped up in recent weeks reaching out to those disaffected home owners asking for their business.  Reporting for Buzfeed, Craig Silverman reported on two agents who posted such an ad on their Facebook pages (Leaving Because Of Trump? These Texas Realtors Want To Sell Your House; buzfeed.com; May13, 2016).  Although both agents received a lot of attention for their seemingly whimsical posts, there was a mixed response; some did not get the humor.  It was reported that one of the two agents interviewed was asked to remove her post; and of course neither reported any new business from the posts.

Every four years, people wonder if presidential elections effect the real estate market.  During the 2012 election cycle, the real estate portal Movoto took it upon itself to find an answer (David Cross; Election Years Are Bad for Home Prices; movoto.com; May 12, 2012).  They analyzed historical data from the California Association of Realtors® and found that there is indeed a direct effect of a presidential election on home prices (at least in California).  They determined that the average home sale price during an election year is lower than that of the years preceding and following an election.

Movoto’s hypothesis was: “Presidential election years are stressful for the American people and in times of uncertainty people are less likely to take chances—this includes making large purchases such as a new house.”  While the National Association of Realtors® comment on Movoto’s findings was, “We’ve observed no correlation between levels of home sales and an election year. The market responds to a wide range of economic factors, including jobs, interest rates and consumer confidence.”

Although there maybe anecdotal evidence that presidential election years affect home prices; there is no doubt that the outcome of a presidential election effects policy, which as a result affects the economy and the housing market (see Experts: Housing to Grow Steadily, But Maybe Less So if Trump, Cruz or Sanders is Elected President; Zillow.com; May 17, 2016).  But no one has yet suggested that US elections would have an effect on Canada’s real estate market.

By Dan Krell
Copyright © 2016

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Housing and presidential election

from trulia.com

Another presidential election, and there will most likely be very little discussion and debate about housing policy. During the 2012 presidential election, housing seemed to take a back seat as the real estate market was still emerging from a foreclosure crisis and recession just four years earlier. Fast forward to today and homeownership is hovering near a 30-year low.  Homeownership is out of reach to many due to tightened mortgage qualifying and increasing home prices; while Americans’ incomes are being squeezed by rising rents.

Enter Ron Terwilliger. A successful real estate developer and philanthropist, Terwilliger launched the J. Ronald Terwilliger Foundation for Housing America’s Families in 2014. The organization’s mission is to “…recalibrate federal housing policy to more effectively address our nation’s critical affordable housing challenges and to meet the housing needs of future generations.”

Giving the keynote address at The Affordable Housing Developers Summit in Chicago, Terwilliger described an evolving “silent housing crisis.” He proclaimed that “A legacy of the great recession, the rental affordability crisis is often overlooked by policymakers, ignored by the media, and underestimated, at best, by the general public.” And although affordable housing is a bi-partisan issue, he stated that candidates don’t talk about the issue (housingfinance.com).

New Homes

So it should come as no surprise that the J. Ronald Terwilliger Foundation for Housing America’s Families and the Bipartisan Policy Center hosted a housing summit this past October. Speaking at the summit were a number of presidential candidates, policy makers, current and former Senators, a former HUD Secretary, local officials, and industry leaders and experts. Unfortunately, the presidential candidates that are still in the race, did not participate. The summit was held in New Hampshire, where housing costs for 36% of residents is more than 30% of their gross income; and median rents have increased 50% since 2000 (housingwire.com).

The housing summit seemed to inspire realtor.com chief economist Jonathan Smoke, who shortly afterward penned a statement declaring his candidacy for president as leader of the “Housing Party” (As President, I’ll Make American Housing Great Again—Really; realtor.com; October 21, 2015). Smoke believes that housing should be first on the national agenda stating, “The market won’t solve all of our housing problems on its own. And our government seems incapable of working together to find solutions that can help…” Laying out a detailed platform, Smoke proclaims that a vote for him would “…build our way to a stronger economy and more affordable housing for the middle class—a better America for all of us.” He said that he would work toward getting a home for every family.

But it may be that housing policy is a bit more complicated than just proclaiming “homes for everyone.” In a frank analysis of housing policy, Daniel Hertz laid out what seems to be diametrically opposed positions: policy should keep housing affordable so as not to price people out of the market; and policy should protect house values, because homes are an investment and wealth building vehicle (American Housing Policy’s Two Basic Ideas Pull Cities in Opposite Directions; theatlantic.com; October 14, 2015).

Hertz believes that these seemingly opposite policy positions can be “reconciled” by offering a wide variety of housing types for a broad range of incomes. Additionally, he discussed how local privately developed affordable housing programs (such as Montgomery County’s Workforce Housing and MPDU programs) is one avenue to a comprehensive housing policy.

By Dan Krell
Copyright © 2016

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

The Presidential housing debate

by Dan Krell © 2012
DanKrell.com

housing debateIf you watched the presidential debates last week, you may or may not have noticed that neither Presidential candidate specifically spoke about the housing market. And since the debate, some have cried foul that one of the largest sectors in the U.S. economy was given short shrift in a debate about the economy. But then again, why should you be surprised – housing has basically taken a back seat to other issues throughout the primaries and now again in the heat of the presidential race.

The lack of discussion about the housing market is probably not because of disinterest, but rather both candidates are focused on making the fundamentals of the economy thrive. There is an economic truth that the housing market benefits from a thriving economy, as well as being impeded when there is economic malaise.

But if you paid attention, you may have picked up on issues that were touched upon that affect the housing market, such as employment and Dodd-Frank.

Obviously there is a relationship between employment and home ownership. A 2010 study by Neil & Neil indicated that loss of employment is one of the unexpected life events that caused foreclosure.

In response to the recent jobs report, Matthew O’Brien wrote in his October 5th The Atlantic article (There Is No Jobs-Report Conspiracy: The Jobs Recovery Is Still Meh): “If we take the same long view over the past few years, it’s clear that not much has changed. Growth is painfully slow, just like before. In 2011 we created 153,000 jobs per month, and so far in 2012 we have created … 146,000 jobs per month. It’s barely been enough to keep up with population growth.”

It should also be obvious that elevated unemployment and economic uncertainty has eroded consumer sentiment towards home ownership. This was suggested in Fed Chair Ben Bernanke’s February speech to the National Association of Homebuilders (federal reserve.gov), when he said: “High unemployment and uncertain job prospects may have reduced the willingness of some households to commit to homeownership.”

Additionally, many in the industry have complained that mortgage lending has been restricted due to increased regulation after the financial crisis. The Dodd-Frank Wall Street Reform and Consumer Protection Act (also known as “Dodd-Frank”) is one of the wide sweeping pieces of legislation that was enacted after the financial crisis to regulate and oversee the financial sector of the economy, as well as offer consumer protections.

As we have lived with Dodd-Frank for over two years, critics add to their critique about the Act’s limitations, over reaching, and failures. Some critics point out a failure of one of the main tenets, which is that no institution should be “too big to fail;” under Dodd-Frank critics claim that some of the country’s large financial institutions have become larger; while smaller regional and local financial institutions (which invest in local communities) are increasingly struggling.

Additionally, critics claim that mortgage lending has been stifled by rules devised to ensure those who securitize mortgages have skin in the game. Whether lenders comply with credit retention risk rules or they comply with Qualified Residential Mortgage rules (which requires strict credit underwriting and a 20% down payment), mortgage underwriting has become restrictive.

Make no mistake; the housing market is smack in the middle of the Presidential debate. The issues debated depict different visions for the economy, and of course, a housing recovery.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of October 8, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

Housing takes a backseat in election year politics

by Dan Krell ©2012
DanKrell.com

votingIt’s an election year and the spin is increasing. As the Republican primaries are focusing on economics and jobs, there has not been an honest discussion about the current state of the housing market and how to revive it. As the election cycle heats up, expect to hear increased rhetoric and spin about housing from pundits and candidates.

One hotly debated issue is government involvement in the housing market. The roles of Fannie Mae, Freddie Mac, and FHA in the housing bubble and recovery will undoubtedly become part of the election debate. However, the talks of winding down Fannie and Freddie’s operations continue, while secondary markets continue to rely on the mortgage giants for growth and stability.

Another issue that is certainly a hot potato is the mortgage interest deduction (MID). Argued by some as a government subsidy, the elimination or limitation of the MID has been recommended by the likes of the Congressional Budget Office and the National Commission on Fiscal Responsibility and Reform (also known as the President’s Deficit Reduction Commission) to reduce government budget deficits.

The fight to save the MID has become a local issue as Governor Martin O’Malley’s recent budget proposes to limit the deduction. Commenting on the Maryland MID limitation, Mary C. Antoun, Chief Executive Officer of the Maryland Association of Realtors® stated in a recent press release that, “Maryland is one of the most real estate tax dependent states in the country”… “The state has one of the most aggressive real estate tax structures in the country, ranking 11th among all states in terms of total real estate tax burden. And taxes on real estate are the primary source of revenue for Maryland’s local jurisdictions.” She added, “If tax deductions are capped, as proposed by the Governor’s budget, many Maryland homeowners will lose some of the value of their mortgage interest deduction and the deductibility of state and local property taxes…”

votingAs the benefits of homeownership are questioned, the MID has remained a major home buyer incentive; as demonstrated by a survey commissioned by the National Association of Realtors®. The 2010 Harris Interactive survey indicated that of the nearly 3,000 homeowners and renters who responded, about three-fourths of homeowners and two-thirds of renters said the mortgage interest deduction was extremely or very important to them.

Will the recent positive and optimistic housing figures recently released by the National Association of Realtors® (Realtor.org) and increased new home builder activity put the housing market in the back seat to other issues? Maybe, but positive housing news has been reported throughout the financial crisis and recession. Increased home sales were reported in the summer of 2008, which combined with optimistic housing and financial reports from many sources gave hope to a housing recovery. Likewise, positive housing reports in the fall of 2009 indicated increased activity with expiring home buyer credits. Optimism for housing in 2010 and 2011 was also reported because of activity spikes.

Traditionally, housing has been a major component of an economic recovery. This recession has been different such that housing has remained a drag on the economy. And even though our region has boasted impressive housing numbers compared to the rest of the country, issues remain (such as sliding home values, underwater mortgages, vacant homes, etc).

Yup, it’s an election year. Will we hear a viable solution to improving the housing market?

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of February 27, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.