1.1 "Don't Quit Your Day Job"
2. "No Sign of Reform in NAR Leaders"
3. "The Wrong in the Percentage Commission"
Reality In Realty 2006
Making Magic in Chicago© 2006 by Ray Wilson
As a sociologist, my whole professional focus is the study of social reality and, specifically, to separate it from emotionally, politically, economically, and ideologically based illusion. That first led to my book on the reality of the real estate industry, Bought, Not Sold. That was followed in 2001 and 2002 by more than a dozen IRED articles, all part a copyrighted series entitled "Reality in Realty" (sometimes shorthanded in other venues as "Realty Reality").
I am not in the real estate business, though I dabbled in it for a while. My academic background and life commitment is as a sociologist. The real estate industry simply presents an irresistibly rich opportunity for sociological study. Nowhere can one find a better place to view and analyze the dynamics of the deliberate distortion of social reality by a powerful and economically motivated establishment. Put simply, it's all about exposing "spin."
The obvious play on words between "realty" and "reality" was surely used by someone somewhere before my IRED articles, and I would not have made it my series title if I saw any evidence that anyone had used that word play in an earlier article or series title. It's a matter of principle.
So, it did stick in my craw just a bit when the Bob Hunt "Realty Reality" articles began appearing long after the IRED series. The agitation moved from craw to the pit of my stomach with the added realization that my unofficial trademark was being co-opted by a Director of NAR, the very soul of the above-noted powerful, economically motivated, reality-spinning establishment. Then came the most recent gut-wrenching Realty Times installment epitomizing not only the very mechanics of illusion, but ultimate disregard for anything real beyond self-interest.
It's just too much. I'm back. It's time to get real....
What ended my sabbatical was Hunt's January 18th Realty Times piece, " Realty Reality: NAR Report Shows Lawsuit Trends."
Recently the National Association of Realtors© (NAR) released the 2005 Legal Scan. This is a report - commissioned by NAR - to systematically collect information involving the legal liability of real estate brokers, agents, and managers. Says Laurie Janik, NAR's general counsel, "Legal Scan...provides NAR members with a wealth of trend information on agent/broker liability...."
Hunt covers himself with a mention that property management is a collection of many sub-areas, but then displays another NAR trend by dismissing that critical disclosure with a big "but":
but, overall, property management is far and away the leading area of real estate related litigation.
In fact, the property management category as used here includes almost any and every event of human life occurring on either rental or owner-occupied property which ends up in court, from rent default to dog bites. It is a collective category which includes tons of things having nothing to do with the main business of NAR and NAR membership -- i.e., real estate sales, salespersons, sellers, or buyers. But, because these things happen on real estate or involve real estate, NAR can point to them and pretend that their common thread (lawsuits , however unrelated) has relevance to the real estate sales industry.
In your basic disappearing-coin trick, a magician's right hand
Let's watch the trick in slow motion:
The Janik and Hunt show is that of master illusionists who know that no good magician would disclose that the right hand is palming the coin. Normally, the issue of disclosure is about what is revealed or withheld from buyers and sellers, but the audience for this magic act is the NAR membership itself. It is from Realtors that disclosure of that trick-spoiling truth is being withheld. Their focus is being distracted to "property management" in the one hand while the other palms -- i.e., covers up -- the true magnitude of agent/broker liability.
Again, it is not the disclosure, agency, or liability issues that are being covered up -- just the magnitudes. Straight mathematical adjustment (extracting the irrelevant property management data) puts property disclosure cases at 24% (not 13%) and agency issues at 20% (not 11%).
However, the distortion goes beyond what is fixed with this simple correction. No one should be surprised that property disclosure is the number one issue; product misrepresentation claims always are in virtually any sales area. It goes with the territory. But here's the rub: in all such cases, trust in the salesperson is at the core. In real estate that misplaced trust is inevitably that they were getting information in their interests rather than a sales pitch. That puts agency at the center as a matter of social reality, whether or not it is specifically expressed in the actual charges.
Why the numeric and literal acrobatics? Levels like 13% and 11% of cases sound like the kind of risk levels that occur in the normal course of business. But when the numbers start getting close to a quarter and a third of litigation, people start asking why. 11% and 13% indicates a need for training against liability -- what actually justifies much of the NAR Legal Counsel's job -- but when it gets higher, people start re-thinking about where the source of the problem might actually lie. Combining quantitative and qualitative analysis of just agent/broker litigation could reveal agency to be a key factor in more than a third of the cases, suggesting the possibility that the whole agency approach pushed by Chicago lies at the root. NAR's leadership is not hiding the issues of disclosure or agency, but rather the magnitude of the danger and anything which might move members to look in its direction for the cause.
Hunt ends his piece with the cliche, "Be careful out there." Again, it is that right hand pointing to the wrong place. On the contrary, NAR members would be well-advised to "be careful IN there..." and -- while we're using cliches -- to beware the enemy within.