Realtor ethics Archives - Page 3 of 5 - Real Estate News and Commentary

December 8, 2016July 4, 2019

Real estate fakery

“Fake news” is the cause du-jour that has energized many into a movement to stop the spreading of falsehoods. Ironically, the crusaders who point their finger at alleged sources of fake news may also be guilty of promoting it; Fake news accusations are sometimes used to promote misinformation and half-truths. Unfortunately, fake news has become a meme that is becoming trite and meaningless. The promotion of fake news may be found throughout history, but real estate fakery is well established in the industry.

Fake real estate news isn’t always a manufactured story. It is more often a story that is misleading. When reporting real estate, the media typically sensationalizes a headline without reporting all the facts, which can make you draw inaccurate conclusions. An example of this is when the local media report on rising national average home prices, giving the false impression that the local market is expanding at the same pace. This is a mischaracterization of the local market because the regional data is often much different from the national trends.

The National Association of Realtors® is sometimes guilty of real estate fakery too by stating conjecture as fact when explaining market deviations. An example of this is when existing home sales declined about seven percent during February 2014 (March 20, 2014; nar.realtor). It was explained away because of the poor weather and snow that occurred that month. However, if snow is causal to poor winter home sales; then why was there a five percent increase in Montgomery County Home Sales during February of 2010 – when Snowmageddon and Snowzilla occurred? From “Real Estate, Climate Change, and Data-Porn” :

The National Association of Realtors® (realtor.org) March 20^th news release reported that February home sales remained subdued because of rising home prices and severe winter weather. The decline in existing home sales was just 0.4% from January, but was 7.1% lower than last February’s figures. NAR chief economist Lawrence Yun stated that home sales declines were due to “weather disruptions, limited inventory, increasingly restrictive mortgage underwriting, and decreasing housing affordability.” And although it may sound bad, Yun actually has a rosy outlook saying, “…Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year.”
So, if a snow filled and cold February is to blame for poor home sales, was Snowmagedden and Snowzilla the reason for increased home sales during February 2010? Of course not. And although home sales increased 5.1% year-over-year here in Montgomery County MD during February 2010, it was mostly due to increased home buyer demand that some speculate was due in part to the availability of first time home buyer tax credits.
Housing data cause and effect is only conjecture unless it is directly observed. To make sense of the “data-porn” that is excessively presented in the media, often without proper or erroneous explanation; economic writer Ben Casselman offers three rules to figure out what the media is saying (Three Rules to Make Sure Economic Data Aren’t Bunk; fivethirtyeight.com): Question the data; Know what is measured; and Look outside the data. Casselman states, “The first two rules have to do with questioning the numbers — what they’re measuring, how they’re measuring it, and how reliable those measurements are. But when a claim passes both those tests, it’s worth looking beyond the data for confirmation.”
Consumers also perpetuate fake real estate news by exaggerating their (good and bad) experiences, usually offering unsolicited advice or posting to the internet (to real estate forums and websites). Facts are often distorted or misrepresented about specific real estate situations, such as divorce, short sales, and foreclosure. Unfortunately, people in similar situations who are looking for answers are at their most vulnerable; and can take the “advice” as gospel, seeking a similar outcome with their transaction.

More real estate fakery on the internet comes in the form of fake reviews. Fake reviews has been an ongoing issue for a number of years. And although the online real estate portals have claimed to use artificial intelligence and other means to thwart the trend, fake reviews and those who provide them have adapted and have become more sophisticated such that it is increasingly difficult to spot. Even back in 2011, Cornell researchers claimed that detection of fake reviews is “well beyond the capability of human judges” (Proceedings of the 49th Annual Meeting of the Association for Computational Linguistics, pages 309–319).

From “Are internet Realtor® reviews real or fake?“:

The National Association of Realtors® (NAR) code of ethics prohibits deceptive practices, which includes posting or encouraging fake reviews. However, Lani Rosales of AGBeat (Sketchy new trend – hiring fake online review writers) argues that there has always been an element posting fake Realtor® reviews and testimonials.

Scammers and fraudsters also use fake real estate news to their advantage. Fake real estate listings have been an issue since the inception of the internet. Fraudsters publish pictures and information from a prior sale or rental, or may lift the photos and information from a legitimate listing being marketed by an agent. The con is to have the consumer send money, often before the home can be seen. Craigslist warns consumers: “Avoid scams, deal locally! DO NOT wire funds (e.g. Western Union), or buy/rent sight unseen.”

Real estate agents are also culpable for spreading fake news, which may be why agents are often characterized as being fake or phony sales people who will bend the truth to make a sale. Of course there are some in the industry who fit the stereotype, but many are “straight shooters.” Unfortunately, it is common for agents to use puffery to make a home seem nicer (until you visit it and realize the “rustic charmer” is a neglected home). Not as often, agents may create a history for the home that is not real to promote a lifestyle or even hide relevant defects.

When it comes to real estate news, advice, and listings – don’t take anything for granted. Don’t fall prey to real estate fakery – know the source, and verify the information with a local real estate professional or your real estate agent.

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.

October 21, 2016July 14, 2019

Realtor ethics and presidential election

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 2-5^th 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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September 23, 2016July 13, 2019

Notice to home buyers and sellers

I have always found it curious that area agents feel a need to be licensed in three state jurisdictions (Maryland, DC, and Virginia) as if there is never enough business in any one area. I get the idea that it potentially helps them make more money. Maybe they are putting home buyers and sellers at risk. Home buyers and sellers should be on notice.

Being a competent real estate agent requires more than just a license. It also requires more than an understanding of the neighborhood housing market nuances. A competent agent knows the jurisdiction and local statutory requirements where they are doing business. They should also be knowledgeable of and use the latest contracts and disclosures.

It’s more than a full time job to be a local expert; following sales trends, knowing the latest home listings, and keeping up with specific statutory requirements. It’s very difficult (maybe almost impossible) to be a local expert in more than one county, let alone three states! And as more state and local legal, zoning, and disclosure requirements for buyers and sellers become enacted – Home buyers and sellers at risk from incompetent agents.

For example, the statewide requirement of licensees to ensure home improvement contractor referrals are licensed is a consumer protection that many are unaware. The requirement ensures that consumers can go to the MHIC if the work is faulty and/or there are issues with a licensed contractor. If your agent unwittingly recommends an unlicensed contractor for home inspection repairs, (besides any potential action against the licensee), a home buyer could demand you make additional repairs and/or obtain certification from a licensed contractor that repairs were completed properly.

And effective October 1^st, Maryland is altering its agency law again. Among the requirements, agents conducting an open house must conspicuously post a notice from the Maryland Real Estate Commission. The notice (sounding like Miranda Rights) states that any information provided to the open house agent is not considered confidential and buyers are “entitled” to representation. What would your reaction be if your agent was unaware of this and the buyer is now seeking to void your contract because they were not given their “Real Estate Miranda Rights?”

Recent home seller requirements in Montgomery County are further example where you could be at risk if your agent is unaware of the local statutory requirements and ordinances (such as utility costs and radon test requirements). Non-compliance and/or non-disclosure could possibly result in a fine. And of course any future ordinances (such as a sign ban) furthers the risk. Who knows? Maybe the County Council will devise a local registry of agents doing business in the county to promote real estate agent competency and protect consumers.

Do yourself a favor and hire a competent real estate agent who is not only aware of sales trends and neighborhood values, but the local practices and regulations as well.

Increasing statewide and local regulation is making local real estate sales a specialized endeavor. And as a home buyer or seller, you should bear this in mind when hiring real estate agent. If you’re not being advised properly as a home seller, you’re at risk of non-compliance with statutes, regulations, and/or ordinances – which has potential for fines and a contract dispute. If you’re not being advised properly as a home buyer, you’re at risk of missing specific local disclosures and notices that could affect you financially and/or physically as a home owner. You’re on notice.

Original published at https://dankrell.com/blog/2016/09/23/home-buyers-and-sellers-at-risk/

By Dan Krell
Copyright © 2016

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April 8, 2016December 13, 2022

Real estate confessions

“How Working with a Real Estate Agent Benefits You” from rsimedia.com

When asked about their real estate agent, consumers logically list characteristics such as savvy, sharp, and knowledgeable. Some may even describe their agent as efficient, or someone who made the process easy for them. These descriptions usually attest to the agent’s business acumen and typically focus on the agent’s ability to market a home and/or negotiate a contract. However, one trait that is often overlooked is “authenticity.”

And it’s not just in the real estate industry. Authenticity just isn’t the trait that most seem to care about in a sales person. The reason may seem obvious; for most consumers and salespeople, it’s about money. So what role, you may be asking, does authenticity have in real estate sales?

In a recent article, Don Kottick wrote about the need for authentic leaders in the real estate industry (8 examples of authentic leadership in real estate; inman.com; March 17, 2015). Kottick talked about authentic leaders as creating their “legitimacy” through honest relationships. These are individuals who “remain true to themselves;” they are positive, truthful, empathetic, “introspective and aware of their own strengths and weaknesses.” Kottick reminds us that authenticity doesn’t come from what’s learned at business school, but what is gained through life’s journey.

Keeping that in mind, we agents are in an advantaged position. As real estate transactions tend to be associated with life events, we often experience these events as well; sharing in the promise of a new family, the joy of a new baby, the sadness of the loss of a loved one, and even the ambivalence of a divorce. And we spend a good amount of time with our clients, regardless if it is in person and/or on the phone. We become acquainted with who our clients are; we learn their vulnerabilities, and sometimes (whether they know it or not) we also become aware of their “dirty laundry.” Being in such a position, we become trusted advisers if not treated as part of the family (at least for the duration of the transaction).

The nature of the real estate transaction, and our involvement with our clients, places us (real estate agents) in a fiduciary role. Regardless of our feelings (positive or negative) toward our clients, or our personal and financial situation – we are to look out for our clients’ best interests. Unfortunately, many in the industry have forgotten that.

Similar issues about agent competency and ethics were discussed last year in The National Association of Realtors® DANGER report. And although concerns about agent competency and ethics have been discussed for years, the media glommed onto such quotes as “the real estate industry is saddled with a large number of part-time, untrained, unethical, and/or incompetent agents…” as if to say “we told you so.” But the truth is that competency does not guarantee ethical behavior, and vice versa. Additionally, competency and ethics do not assure a positive buying and selling experience for the consumer. The answers, like the issues, are complex; and advancement in the subject is debatable.

Don Kottick’s point, that authenticity is a foundation upon which agent competency and ethics is built upon, is overlooked by many industry leaders, brokers, office managers and agents. Considering authenticity, competence, and ethics together may not only facilitate an environment that creates a meaningful transaction for the agent and consumer; it may also be a response to treating consumers fairly, and putting clients’ best interests first.

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November 24, 2015November 23, 2021

Home marketing may be limited due to agents’ personal wealth strategy

From stagingworkstoronto.ca

If you ask a real estate agent about their home sale strategy, you may get a sanctimonious presentation of the best way to sell a house. However, if you question why they advocate specific procedures over others, chances are they will answer “experience.” Even in the face of an abundance of research, many continue to hold on to old and outdated beliefs about how to sell a house. Furthermore, consider that a real estate agent’s strategy to sell your home may not necessarily benefit your bottom line.

The latest study by Allen, Cadena, Rutherford & Rutherford (2015. Effects of real estate brokers’ marketing strategies: Public open houses, broker open houses, MLS virtual tours, and MLS photographs. The Journal of Real Estate Research, 37(3), 343-369) is the most recent extension of home sale strategy research. The study reinforces the outcomes of some strategies, while shedding light on others; and asks a compelling question about agent motives.

The study looked at home sale price, time on market, and the likelihood of a sale in relation to: broker open houses, public open houses, MLS photos, and MLS virtual tours. The results indicated that all four tactics positively influence home sale price. Additionally, conducting public open houses and having MLS photos have a positive influence on time on market. However, there is little evidence that having more than six MLS photos increases that positive effect. Surprisingly, MLS virtual tours and conducting broker open houses have a negative influence on time on market. The authors conclude that as a package all four strategies may be worthwhile to consider when home sale price is the goal, even though the time on market may be slightly extended.

However, if your goal is a successful home sale, you may consider another strategy. The study concluded that the probability of your home sale success increases when you have broker open houses, MLS virtual tours, and eight or more MLS photographs. The study found that public open houses actually decrease the probability of a successful home sale.

In light of these findings about home sale price and success of sale, the authors rhetorically ask: “Why do all sellers/brokers not use these marketing strategies in every transaction effort?” They propose that, “Perhaps the answer is that brokers follow a wealth maximization strategy that may result in an agency problem with sellers.”

It should come as no surprise that there are agents who have a “wealth maximization strategy” for themselves, and place their own needs before their client’s. However, the authors’ suggestion about agent motives could be problematic with respect to the National Association of Realtors® Code of Ethics (realtor.org). For example, Standard of Practice 11-2 indicates that, “The obligations of the Code of Ethics… shall be interpreted and applied in accordance with the standards of competence and practice which clients and the public reasonably require to protect their rights and interests considering the complexity of the transaction, the availability of expert assistance, and, where the Realtor® is an agent or subagent, the obligations of a fiduciary.”

If you’re selling your home, one takeaway you might have from this study is that you should exercise due diligence when choosing your listing agent. Consider discussing the sales strategy, and getting it in writing. Additionally, protect yourself by ensuring that your listing agreement can be terminated without penalty and within a reasonable amount of time.

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