The final draft of an "initiative to create the most important document the real estate industry has seen since the inception of its Code of Ethics more than 90 years ago", the "National Standards of Daily Practice" will be presented to the nation's Realtors® on November 3, 2004 at the at the Rosen Centre Hotel on International Drive in Orlando and again at the "Large Board Breakfast" at 7:00 a.m. on Friday, November 5, 2004, during the National Association of Realtors® Annual Conference & Expo, November 5th through 8th.

The "National Standards of Daily Practice" were written and compiled by Realtor members of the Orlando, Houston and Chicago associations of Realtors® in association with RECON Intelligence Services.

"This is independent from among the associations who saw a need and decided to get it done," says Orlando Regional Realtor® Association CEO Belton Jennings. "This is of those state and local associations."

Jennings says the standards, which were originally discussed during the Touchstone For Excellence conference in February 2004 will be set and administered by a real estate standards institute, which would include a cross-section of consumer representatives as well as others.

"Almost all major disciplines have adopted a set of standards for their practitioners to follow," explains Jennings. "Throughout the country, real estate professionals have long sought a need for a standards of practice, which goes beyond the scope of the Realtor® Code of Ethics."

Jennings says about 262,000 real estate industry professionals representing more than 50 local and state Realtor® associations have pledged support for the standards initiative, and that anyone who is interested is welcome to attend the November 3rd meeting. (The Large Board Breakfast is closed to all but participating executives.)

Steve Murray, hired by the sponsoring Associations as their consultant, will present the initial set of standards his organization developed over the summer from the input of the sponsoring organizations. Attorney Andy Updegrove will then offer up his considerable experience in setting up SDOs (Standards Development Organizations). In that vein, a suggested organizational framework for a "standards Institute" will be formulated, along with the "how to" of getting it up and running, ideas for initial certification, membership categories, etc., says Jennings.

According to the Touchstone For Excellence Website, the reasons for setting new standards are many, but center around the shift of the industry from a broker-centric model to an agent-centric one. With less oversight, it has become more difficult to set and maintain standards of business practices that result in consistent controls.

Writes the site:

"Top producers were given equal or top billing vis a' vis the brokerage. Self-promotion became the order of the day with agent's pictures taking up as much ad space as the photos of the homes they were selling – or more. Their brokers and sales managers assumed the role of "valet" or "maitre d'" to the industry's high rollers.

"Moreover, the responsibility for building and maintaining client lists fell to the agents, not the firm. And, not surprisingly, this also meant that customer loyalty was focused on the agent, not the firm.

The "bidding wars" among brokers for top producers that ensued in the 1980's and 90's saw higher and higher commission splits being offered in the hopes that a top seller's sales volume would generate enough net for the brokerage to make this gamble worthwhile. And it did, until the mid-90's when the economies of the marketplace began to extract their price.

With a labor cost exceeding 80% (compared to a general business average of 37%) and with the net per transaction sliding rapidly from $300-$400 to less than $100 per transaction in just five to seven years, the moment of truth was approaching for the traditional brokerage business model.

So, while the primacy-of-the-agent orientation worked until the mid-90s, the marketplace has began moving quickly to a strongly consumer-centric environment where the customer once again is the primary focus. In real estate, the new millennium's Internet-empowerment is serving only to seal the primacy of the customer in the transaction.

This sea change finds the brokerage and its agents at a crossroads. At a time when customers say they want a reliable, dependable, consistent home buying or selling experience, the industry is hard pressed to provide one, despite millions spent by brokerages nationwide in the attempt.

"Most Realtor Association executives would agree that the majority of complaints they receive from the public and other Realtors are not ethical in nature," suggests the organization. "Rather, they concern acts of unprofessional behavior – unreturned calls, no-shows for showing appointments, lack of feedback from listing agents, sloppy paperwork, lack of follow-through, doors left unlocked, promises not kept, and on and on."

"To its credit, for several years NAR has sponsored a continuing series of risk management seminars and forums at its national meetings," continues the site. "However, this emphasis and discussion has yet to result in any significant initiative to aggressively establish and promote the industries "best practices" as a method for lowering risk and for publicly associating these practices with the consumer's changing expectations of real estate professionals.

"Hence, it appears that any such standard setting must begin from the grassroots through an alliance among those most affected by the uneven business practices of today's practitioners. This means that local (and perhaps some state) associations, in concert with those brokerages willing to be early adopters of such standards, along with allied industry players such as E&O insurers, must step forward to meet this challenge head on."

Published: November 1, 2004

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