ORLANDO, Fla.–Leaders of the National Association of Realtors last week snubbed a proposal that would have amended the group’s Code of Ethics to provide notification to prospective buyers that the terms of their purchase offers on property might be shared with other prospective buyers.
Supporters said this new standard of practice would provide additional disclosure to prospective buyers about a practice that is legal in many states. But its opponents said they worried that the new standard might imply acceptance or at least confusion about this “despicable” practice, which they said can lead sellers to “shop” these offers around and create a bidding war among prospective buyers.
Members of the association’s annual Board of Directors meeting, held on the final day of the group’s conference in Orlando, Fla., sent the proposal back to its Professional Standards Committee for reconsideration.
Also during the meeting, the association’s leadership approved new membership requirements barring professionals who work solely in the mortgage finance business; accepted changes to the associations’ Virtual Office Web site (VOW) policy; accepted nominations for the association’s top leadership in 2006; and established a new strategic directive to keep Realtors at the center of real estate transactions.
The rationale for the new standard of practice relating to disclosure about sharing buyers’ officers was that it “puts purchasers on notice that offers they make may be ‘shopped’ by the seller or by the listing agent,” according to the proposal presented to the board.
Russell Grooms, a Realtor for Watson Realty Corp. in Jacksonville, Fla., said, “Our members are very concerned. We don’t feel this is a new standard – we feel this is lowering our standards.” He said adopting such a standard may give the appearance that the national association “is sanctioning the shopping around of contracts. It really puts those of us who have this kind of protection in a pickle.”
Kenneth Warden, president of the Kentucky Association of Realtors, said adopting such a standard might open up the door to complaints by consumers.
The practice of shopping around buyers’ offers is “despicable,” said Stephen Hoover, a Realtor for MKB, Realtors in Roanoke, Va. “Unfortunately, despicable is not illegal,” he said, adding that the matter for him was more an issue of providing proper disclosure to prospective buyers that their offers might be known by other buyers.
The intent was not to change the law to make this practice legal in states where it is not now permitted, said Rose Galloway, a Realtor for Windermere in Federal Way, Wash. “People think this is for the purpose of making it legal – this is not true at all.”
Debora Ritchey, of Ritchey Real Estate & Investment in Albany, Calif., said she has worked with prospective buyers who have missed several opportunities to purchase a home because of bidding wars. “To tell them that their offers may be disclosed to others is, I think, a disastrous move,” she said. “The fact that their offer is confidential gives them some hope that the practice will be fair. We will be the bearers of this bidding-war-frenzy exposure.”
A majority of board members voted to refer the matter back to the committee for further consideration.
Directors, without any debate, approved proposed changes to Virtual Office Web site policies that were forwarded by a Multiple Listing Issues and Policies Committee. The board agreed to extend implementation of the set of VOW rules to July 1, 2005. Implementation was formerly scheduled for Jan. 1, 2005.
Changes accepted by the association’s Board of Directors provide for updates and other revisions to a “Fourteen Point Multiple Listing Policy” that was adopted in November 1971.
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This revised section of MLS policy, titled the “MLS Anti-Trust Compliance Policy,” states that Realtor boards and associations and their MLSs shall not “enact or enforce any rule which restricts, limits or interferes with participants in their relations with each other; in their broker/client relationships; or in the conduct of their business.” The revised rules provide that MLS agencies shall not “prohibit or discourage cooperation between participants and brokers that do not participate in the MLS.” And the revisions provide that agencies shall not “base dues, fees or charges on commissions, listed prices or sales prices. Initial participation fees and charges should directly relate to the costs incurred in bringing services to new participants.”
Revisions also expand the definition of an MLS and authorize MLSs to determine if limited participatory rights will be available. Several changes were intended to provide more clarity to the earlier policies and were referred to as “housekeeping” amendments.
Also, a work group of the Multiple Listing Issues and Policies Committee has been ordered to review and update the association’s Internet Data Exchange (IDX) policy, and a joint work group of the Multiple Listing Issues and Policies Committee and the Professional Standards Committee will be formed to “study the extent to which the Code of Ethics’ duties to clients, customers and the public might be imposed on MLS participants and subscribers who do not hold Realtor membership.”
In a separate issue at the annual meeting, directors recommended a change in membership policy that blocks those engaged exclusively in mortgage financing from joining, and the association’s delegate body formally approved the constitutional change. Laurie Janik, general counsel for the association, said the intent of the proposal was to keep the focus on real estate agents as the first point of contact in a real estate transaction.
Directors from California questioned whether this policy might be unfair to longtime members of the association who work exclusively in real estate mortgage financing. In California, a real estate license applies to mortgage financing, real estate brokerage and property management activities, so that the holder of a license in this state can engage in any or all of these activities.
Lucien Salvant, an association spokesman, said the constitutional change, which applies to current and future members of the association, is effective immediately.
The amendment does not apply to real estate professionals who work in mortgage financing but whose real estate work is not exclusively in mortgage financing.
Clark Wallace, a Realtor in Orinda, Calif., and past president of the national association, said during the Board of Directors meeting that he wanted further deliberation on the issue. “I would urge caution. I would urge we look into this again,” he said.
But Pat Kaplan, of Kaplan Real Estate Group in Portland, Ore., said it might send a mixed message to Congress if the association continues to allow professionals involved only in mortgage financing to continue to use the Realtor name, as the association has worked aggressively to block banks from entering the real estate brokerage market.
“I think it sends the wrong message if we do not support this amendment now,” Kaplan said.
The association’s constitution has historically extended membership eligibility to “real estate brokerage, management, mortgage financing, appraising, land development or building” professions.
Wallace said Tuesday that he spoke out at the meeting because the change in membership law will cast out dedicated members of the association who happen to work in mortgage financing. “That’s what is wrong with this thing – I think there is a potential to retroactively disenfranchise up to 2 or 3 percent of our members in California,” he said. “We’ve just cut out some longstanding members who serve in that capacity. I don’t think we’ve heard the end of it.”
New association leaders were installed during the meeting, including: Al Mansell, a Realtor from Salt Lake City, as 2005 president of the association; Thomas M. Stevens of Vienna, Va. as president-elect; Pat Vredevoogd of Grand Rapids, Mich., as first vice president; Mike Brodie of Plano, Texas, as treasurer; and Adorna A. Carroll of Berlin, Conn., as vice president and liaison to committees.
Directors also accepted Nominating Committee recommendations for the association’s top officials for 2006. The group of candidates will be formally elected at the association’s midyear conference in 2005. The committee recommendations include: Thomas M. Stevens of Vienna, Va., as president; Pat Vredevoogd of Grand Rapids, Mich., as president-elect; Richard Gaylord of Long Beach, Calif., as first vice president; and Bruce Wolf of Englewood, Colo., as Treasurer. The committee also found that J. Lennox Scott of Bellevue, Wash., was also qualified to be a candidate for the treasurer position.
Directors approved association support of up to $309,259 to support real estate-related litigation around the nation, including up to $200,000 for the continuing defense of an antitrust case against San Diego-area MLS service called Sandicor and its shareholder Realtor associations. In March 2003 the Ninth Circuit Court of Appeals declared that Sandicor and five Realtor associations had illegally fixed prices of MLS services in San Diego County.
The association’s directors also approved a contribution of up to $50,000 to the Ohio Association of Realtors’ legal action fund relating to the Commission Express National vs. Realty One lawsuit. A franchise of Commission Express, a company that advances an anticipated commission payment of an agent in exchange for taking assignment of the agent’s right to an impending commission payment, filed a lawsuit against Realty One and the Ohio Attorney General on several charges, including antitrust, the association’s Legal Action Committee reported.
Stephen A. Hoover, of Roanoke, Va., was named the 2004 recipient of the association’s Distinguished Service Award, and Joel Singer, executive vice president of the California Association of Realtors, received the association’s William R. Magel Award of Excellence for 2004.
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