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Three Areas of Real Estate
Industry Vulnerability
Carol Johnson calls for the Real Estate Industry to
Take Responsibility for Accurate Sales Claims and Recruiting Numbers
Carol Johnson

The legal action by the Department of Justice (DOJ) in Kentucky, could be the tip of a legal iceberg. The real estate profession is riddled with old systems and politics that dominated the Mom and Pop era, but will not support today�s changing business and consumer demands.  The rules have changed!  The feds signaled their interest in real estate when they investigated Cendant�s accounting, and more recently, mortgage and title fraud.

After Enron�s fall and Martha�s disgrace, government agencies have been sniffing in some previously sacred areas. State and federal budgets are strapped for cash and real estate is booming.  In this climate; every aspect of business, MLS and association activities are ripe for investigation.  Aggressive prosecutors are looking for high profile, deep pocket cases that would showcase their ability to save consumers money.  Real estate trade associations, MLS providers, franchise and networking organizations need to take a fresh look at the street level components of our industry.  They need to work together to strengthen the level of service provided to both consumers, brokers and agents.  I propose we start with three areas of vulnerability.

1. Take Control of Industry Statistics 

No organization, including NAR, MLS providers or national franchise organization, takes responsibility for the regulation and dissemination of accurate real estate sales data. There is no third party regulation or authentication of industry statistics.  Real Trends, who publishes the leading broker statistics, requires brokers to certify their own numbers; but they don�t have access to MLS data for third party verification.  They, like the public, must rely on broker generated stats.

In most markets, brokers do not have access to accurate MLS data that could hold them accountable.  Accurate reporting, industry wide, would provide a better standard of service to both brokers and consumers. Often, statistics presented to agents and consumers would not hold up in a court dispute.  Only a few organizations invest in qualified independent experts to validate the statistics they publish.  Even fewer have the courage to challenge competitors for false advertising or manipulating data.  Industry stats, could and should be policed at the association, MLS and franchise levels.  This would eliminate enhanced or fabricated numbers being released to consumers.

2. Establish Legally Defensible Documentation

If documentation standards for statistics, policies, procedures, training and accountability are not in place and operational; an organization is at greater risk of investigation. This could result in government, consumer or employee litigation for discrimination, harassment, false advertising, or fraud.
3. Systematize Recruiting, Interviewing and Training Processes

It is a rare real estate organization that has had lawyers, versed in human resource laws, review their recruiting, interviewing and training processes. Managers lack consistent training on the legal aspects of prospecting, interviewing and documenting problems with employees and independent contractors. They don�t have company mandated and enforced policies and procedures.  They fail to consistently use recommended dialogue that complies with federal requirements for protected class candidates.  If you doubt this claim, list the protected classes.  Did you get 7 or 11?  Either way it could be an expensive gamble.

Brokers; or groups of brokers may be at risk for investigation and/or litigation over their recruiting, interviewing and/or training procedures.  There are numerous areas of exposure for investigation by lawyers or the DOJ, as it relates to industry statistics and what brokers are representing to consumers and agents entering the real estate business.

For example: protected class prospects could seek legal remedies because they feel deprived of an opportunity to, �earn unlimited income or were not treated equally when applying for a position.�  Their lawyers may discover a breakdown in the prospecting and interviewing process, leading to the identification of a (class action) law suit. The boiling point could well be a group of rookies, who blame a broker, franchise or association for failing to provide the level of training and services they were promised. There are thousands of agents who leave the industry disillusioned every year.  Of course, many leave a trail of the poorly documented training, policies and procedures.  The industry vulnerability lies in their ability to document undelivered promises and false statistics. 

It�s time for brokers to addresses their own areas of vulnerability and for a credible industry watchdog to step forward and establish rules and accountability for disseminating accurate professional information.  The longer we wait the more the remedies will cost in time, money and professional reputations.

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The content of this web site is for the exclusive use of Recruiting Network Members and must be used according to the terms and conditions of membership.  This article was published by The Recruiting Network Inc., Schaumburg, IL 60168.  The rights to this article remain the exclusive property of the author, written permission is required for duplication.  For Recruiting Network Membership information Click "Join" at  � Copyright The Recruiting Network , Inc. 1990-2005

Carol Johnson is President of The Recruiting Network and Publisher of The Recruiting Pipeline web site, the real estate industry's leading source for strategic recruiting resources. She is the author of The Recruiting Revolution in Real Estate and a leading authority on recruiting systems, products and services.  Her monthly Teleclasses attract some of the most influential brokers and recruiters in the industry. Her coaching has increased individual manager�s recruited volume with astounding results.  For information on Carol Johnson's coaching and consulting programs call: 847-524-8487.PD