Publications

Phillip C. Querin
Partner - Portland, Oregon Office

philquerin@dwt.com
(503) 241-2300

The Advantages of Best Practices
[April 2005]

The Portland Metropolitan Association of Realtors® has recently adopted a series of ideal practices of professional courtesy for Realtors® known as “Best Practices.” They are not intended to serve as licensing or ethical standards, which are already well-established under Oregon laws and the National Association of REALTORS® Code of Ethics. Compliance with these Best Practices is not “mandatory” for any PMAR member. Choosing to follow the stated goals will be an individual decision for each company, broker and manager, and is not regulated by the PMAR organization. In other words, although recommended by PMAR, the failure to follow any one of the Best Practices is not intended to provide the basis for any sanction or other penalty.

In establishing Best Practices, there were several considerations of intended and unintended consequences. On the downside, for example, is the question of whether a plaintiff’s attorney could use the failure to follow Best Practices as evidence of a licensee’s failure to meet the applicable standard of care for Realtors® in the Portland-Metropolitan area? The answer is “No.” Best Practices makes it clear that it is not a standard of care – it is aspirational only, i.e. something one aspires to, similar perhaps to the Golden Rule.

On the upside, there are many benefits to adopting the Best Practices goals. First, there is always an advantage of committing oneself to a series of professional goals that are generally recognized by leading industry members as being good for everyone to follow. A review of the individual Best Practices goals will be quickly recognized as the sort of informal rules of conduct by which most Realtors® would like to be treated themselves. It is useful in Realtor®-to-Realtor® interaction and it is good for Realtors® when dealing with members of the public.

Today, with the incursion of new business models in the real estate industry, some involving rendering minimal service (e.g. listing only) to the consumer, and the erosion of the proprietary nature of MLS data, the service Realtors® provide is increasingly defined more by their individual professionalism and less by the uniqueness of their actual “product.” This is not a phenomenon unique to the real estate industry. The title insurance industry, which is highly regulated by the Oregon Insurance Commissioner, has known this for years. When was the last time you selected a title company because their preliminary title reports were “better” than their competitors? When was the last time you recommended a title company to a seller or buyer because their rates were “cheaper” than their competitors? When was the last time you compared the list of special title endorsements of one company over another? You don’t! The reason is because these “products,” i.e. title information, insurance and cost, are virtually the same from company to company.

The reason you select one title company over another, or one escrow officer over another, is because of your perception that on an individual basis, one is faster, more courteous, more helpful, or more knowledgeable, than the competition. The name of the title company is of less importance to most Realtors® than the accessibility and responsiveness of their favorite title or escrow officer. If this were not true, the marketing departments for the title companies would spend less time hosting free breakfast and lunch meetings telling you about their ancillary services that make your job easier, and more time handing out glossy samples of their preliminary title reports and charts favorably comparing their rate schedules over the competition.

So it is with professionalism and service in the real estate industry. Your ultimate success depends upon your ability to instill confidence in your client and satisfaction with your service. But there is one major difference between real estate agents and title/escrow officers. In most real estate transactions, you are dealing with only one title company. Generally the title side cooperates with the escrow side to get the transaction closed. But in many real estate transactions, there is a good chance that you will have to deal with another agent – sometimes within your company – but oftentimes associated with another company.

As a result, while individual professionalism is an essential hallmark of a successful Realtor®, it frequently cannot be accomplished alone. The listing agent must cooperate with the selling agent if there is to be a successful closing. And even if the transaction does close, if one agent makes it difficult, it can have the effect of poisoning the transaction such that one or both sides are left with an unpleasant memory of the event. This is why, from the principal broker on down, professional cooperation at all levels is essential if the customer is to be left with a favorable experience and come back to the same agent again and again. Closing the transaction is the short term goal for the Realtor® – reaping the benefit of repeat and referral business is the long term goal. For these reasons, following standards of professional courtesy are worthwhile goals and – sooner or later they translate into economic success.

On a company level it is also important that its management adopt Best Practices. For example, one goal is to encourage that communications between firms be agent-to-agent and manager-to-manager. If Agent A is having a problem with Agent B from a different company, the matter should be resolved on the same peer level. If a principal broker from one company complains directly to an agent from another company there is a greater likelihood of a failure in communication than if the issue is resolved between principal brokers. That way the agent whose conduct is being criticized is corrected (if necessary) by his or her own manager. Conversely, if the criticism is inappropriate, better that it be discussed between principal brokers, where there is a higher likelihood it will be heard and respected.

The same holds true of regulatory complaints. The first response to an agent’s dissatisfaction with another agent’s handling of a transaction should not be to file a complaint with the Real Estate Agency or local board. Best Practices suggests that the agent should first attempt to discuss the matter with their own manager to ensure that the complaint is appropriate in all respects. It may be that the source of the dissatisfaction can be resolved on a professional level without involving the Real Estate Agency or local board. Remember, the filing of a complaint with the Agency can have a boomerang effect. More than one complaining licensee has found his own license in jeopardy when the Agency begins looking at how the entire transaction was handled. Moreover, filing of a complaint against another company’s agent can result in counterclaims by the responding agent. Before long, both company’s dirty linen is laid out in the public record at the Real Estate Agency. Cliché’s about “glass houses” and “casting the first stone” come immediately to mind.

In addition to the tangible benefits of adopting Best Practices to increase professionalism on an industry-wide basis, there is the risk management factor. There is a direct link between claims and the failure to adopt certain business protocols in the handling of transactions. For example, Best Practices encourage companies to develop a consistent multiple offer policy for each agent and branch office. Multiple offers mean multiple buyers. Only one buyer or set of buyers wins. The rest lose. When this happens, there is a risk of claims. If the multiple offers occurred within the context of a disclosed limited agency transaction, the risk of E&O claims are compounded.

Another area of risk that is addressed by following Best Practices, is the suggestion that agents partner with or refer clients to other agents when the transaction is outside of their expertise or involves a property that is in an unfamiliar locale. You wouldn’t expect a probate attorney to be well versed in real estate law, and you wouldn’t expect your real estate attorney to probate an estate. The same holds true for Realtors®. Remember, the assistance of another more qualified agent not only helps you avoid making costly mistakes today, but it also enables you, over time, to become an expert in that area yourself. Clients can quickly discern whether you’re in over your head, and most will respect you for associating a more qualified broker. And with luck, perhaps the referral or association will result in the favor being returned by the other agent. This is commonplace among lawyers, and over time, everyone benefits.

The goal of Best Practices is to instill goals that will benefit the entire profession. If enough Realtor® members and companies adopt Best Practices as a professional goal, it may soon become a marketing advantage which consumers will recognize as a hallmark distinguishing their Realtor® from the one they decided not to select.

© Copyright 2005. Phillip C. Querin, Davis Wright Tremaine. No part may be reproduced without the author’s express written consent.