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Hot Squabbles: Trends in REALTOR Dispute Resolution

As the average real estate practitioner’s economic outlook starts to dim in light of the industry cool down, some associations are experiencing an upsurge in Realtors® going head-to-head against one another in disputes over issues ranging from commission splits to client agreements. In short, when times get tough, the fight for every dollar can become relentless. And even if the dispute is not about commissions, AEs say that members realize today’s failure to stop poor or unethical business practices can lead to tomorrow’s lost commission.

“As the market slows, ethics activity always picks up,” says Jacquie Wolff, director of administration and education with the Denver Metropolitan Commercial Association of Realtors®. At her association, ethics caseloads have quadrupled in the past year, although she is quick to point out that this can be partially attributed to their active promotion of ethics training (and retraining where necessary), as well as the atmosphere created by the 2004 mandatory ethics training rule. “Our membership has grown in recent years, and we’re finding that newer brokers are filing more ethics complaints where more senior brokers would tend not to.”

Alice Martin, executive vice president of the Arizona Association of Realtors®, also saw an increase in ethics hearings in 2006. The association handles statewide enforcement of the Code of Ethics and logged 46 complaints between January and August. Though this figure is roughly the same as it was a year ago, the number of hearings has increased. According to Martin, this is because fewer brokers are settling. “Competition is fierce and there’s less business to go around. To some degree, there’s a little more time on their hands to wage a dispute if one exists,” she posits. “We’re seeing parties that are a little more contentious. Each side thinks they’re absolutely right.”

The way Martin sees it, the amount of disputes progressing to formal hearings reflects the higher amount of money at stake between brokers. “Recently, we’ve seen a majority of disputes in a $5,000-$10,000 commission range, but at the uppermost level of the market, you’re talking about commissions that approach six figures.” That’s money most professionals are willing to fight for, particularly in a tough market.

Janet Golding, director of professional standards at the Realtors® Association of Greater Fort Lauderdale, says that although the overall number of ethics cases in her area is down slightly, there are more appeals and procedural reviews than ever before. “More members are not happy with hearing panel decisions, especially if they are required to pay an award,” Golding explains.

Likewise, Melissa Maldonado, South Metro Denver Realtor® Association’s professional standards administrator, reports only a slight increase in ethics cases (proportional to an increase in membership). She has, however, noticed that the cases are more complex and that counter-complaints and appeals are more prevalent.

Same Old Complaint

Regardless of the number or complexity of ethics cases, the topic is fairly consistent: Article 16, concerning respecting the exclusive representation of a buyer or seller.
Since the national association doesn’t track dispute trends across the country, the reports here reflect individual markets. Still, Bruce H. Aydt, national specialist in Realtor® ethics and arbitration issues, says he’s not aware of any new trends in Realtor® disputes.
“The classic commission dispute between brokers usually involves, and continues to involve, the buyer working with more than one agent. It happens all the time,” says Aydt, the senior vice president and general counsel at Prudential Alliance, Realtors® of St. Louis, and Realtor® Magazine ethics columnist. “In Illinois, for example, buyers don’t have to sign any disclosure of who they’re working with, and they might work with one broker on one property and with another broker on another and it might happen that both meet on the property that ends up in the deal. That’s when the problems happen.”

Cheryl Nelson, association executive with the Iowa City Area Association of Realtors®, finds that although disputes have increased on the whole, they’re primarily over client retention issues. “We’ve noticed that ‘going behind the sign’ [soliciting another broker’s client just before his or her contract with another broker is ready to expire] issues are on the increase. Business is tougher, and some brokers are pushing the envelope.”

The Ethics Training Factor

Just like Denver’s Wolff, some associations are making the correlations between an increase in ethics disputes and the 2004 mandatory ethics training. The theory is that training made members more aware of their right to file a complaint when they encounter unethical practices. On the other hand, some associations have speculated that their lower dispute numbers can be attributed to the fact that the mandatory ethics training has prevented unethical behavior in the first place. In either case, the Realtor® associations’ role in ethics awareness, training, and dispute resolution has grown and evolved.
Arizona’s Martin stresses that individual associations need to focus on the strength of their dispute resolution services, keeping professional relationships intact and serious disputes to a minimum.

At the Ohio Association of Realtors® Director of Board Support Services Ann Swisher notes that over the past 12 months, arbitrations have been down because her association is pushing mediation heavily. The disputes that advance past mediation, she explains, typically hinge on infringement—when a broker accuses another of unfairly trying to represent his or her client.

In Iowa City, Nelson explains that the association has had success with its ombudsperson system, which serves to defuse situations before they escalate and require arbitration. “We progressively saw fewer Realtors® willing to go through the grievance process due to the cumbersome, time-consuming procedures and knowing they’d still have to work with the other Realtor® down the road. So we instituted the Ombudsperson system here and trained members to deal with the nonbinding resolution aspects of the program,” Nelson says. Since most of the conflicts are the result of a lack of communication, the very act of getting two opposing brokers to simply sit down and go over the dispute has a way of settling most issues very quickly.

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