Does the real estate industry need more standards?

By
Real Estate Broker/Owner with Catarra Real Estate, Inc CA BRE #01191946

I've heard several people describe real estate as the last industry of pure capitalism.  It's a bit like the wild west with plenty of opportunity for those willing to work hard.  As the real estate industry matures, we're seeing a lot of issues that parallel the growing pains of the old west.  Many of today's hot topics involve MLS data, agency laws, and contract terms that are all significantly different around the country.  Is all that freedom really hurting our industry?

 

Everybody Else Has StandardsIn most industries new products come to market because a trade organization or standards group develops some set of rules that everyone in the industry will play by.  You know that USB port you plug your flash drive into?  That port is a result of such efforts to set a standard.  If everybody did their own thing in the consumer products space, there would be chaos.

There are industries around us that already follow standards, some by law.  Banking is a good example as loan rules are set at the Federal level.  Sure, there are some variances on lending limits from region to region but the rules are generally the same everywhere.  Even title companies have to follow RESPA regardless of where they are.  Where does that leave real estate?

 

A Wholesale Lack of Standards

Around the country, the practice of real estate varies dramatically from state to state, even within the same state.  Different forms, different laws, different practices.  All different.  MLS systems are the same way.  The model rules mean nothing because they're just guidelines.  The reality is that the databases themselves, the terms used, and even statuses are different everywhere.

50 states, hundreds of MLSs and associations, hundreds of thousands of members...

How do we even get most of them to agree with so many differences?

Somewhere along the line the real estate industry needs to decide to standardize so that at least some part of it is the same...everywhere.  I'm not talking about socialism.  I'm talking about strength in numbers.  The power that comes from concensus.  The power that comes from standards.

 

Standards Drive Growth

When I used the USB example above, it's because getting a standard in place puts all the players on the same field.  Once that happens, products and services can be provided to the marketplace where variety and choice drive consumer decisions.  The same thing is possible in the real estate industry.  Establishing true standards would have a huge impact on what brokers and agents could do while simultaneously sending a message to consumers that our services have substantial value.

Imagine a single MLS database standard and rules nationwide.  Could you imagine that?  Such a thing would reduce the cost of MLS services while also driving a huge change in data analysis.  Vendors would design for one standard, not 100.

Imagine consistent transaction processes, title procedures, brokerage rules, and others.  Sure, there would have to be allowances for some regional dfferences.  But right now there's almost no standard. 

 

Real Estate 1.0

The reality is that standardizing laws across all 50 states is unlikely to happen.  It might, but it would take a lot of work and time.  MLS standards would be easier but still take a lot of work and time.  The point is that our industry needs to get to Version 1.0 on some standard.  When that happens, we'll see growth and change like we've never seen before.

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Re-Blogged 1 time:

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  1. Morris Massre 12/17/2013 10:08 AM
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Rainmaker
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Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
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Most people need to just be rationally fair. All else will follow in my opinion. :)

 

Love and light,

Laura

Dec 13, 2013 08:30 PM #13
Rainmaker
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Sally K. & David L. Hanson
Keller Williams 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Short Sale - CDPE, REDS

I don't think standards are the problem...it is enforcement...we all have the same code of ethics...when was that ever enforced in any market on a consistent basis ?

Dec 14, 2013 03:01 AM #17
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Or, we can eventually be so controlled, ala health care, that the real estate industry is strangled by regulation. 

Dec 14, 2013 03:20 AM #25
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Joan Cox
Metro Brokers - House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Bryan, I wish our real estate forms and process would be the same across the Country, especially when we work with relocation families.   The process is so different from the East coast and Denver!   One MLS would be beneficial too, and cheaper for our users.

Dec 14, 2013 06:06 AM #26
Rainmaker
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Michael Setunsky
Michael's Commercial LLC - Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Bryan, I don't think we will ever see the type of standardization you are discussing. Having 50 States agree on some form of standardization would be impossible.

Dec 14, 2013 06:20 AM #27
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Doug Rogers
Bayou Properties Realty - Pineville, LA
Your Pineville Louisiana Agent

In my small market anyone you rip-off is somebody's cousin. This alone drives most of the REALLY BAD APPLES out of the biz in a couple of years.

Dec 14, 2013 06:47 AM #28
Rainmaker
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Karen Feltman
Cedar Rapids/Iowa City, IA Skogman Realty - Cedar Rapids, IA
Relocation Specialist

I think that the biggest issue may be the threshold of education to receive your license in the first place.  Every state is different.  Some allow reciprocity and others do not.  Some have only broker licenses, while others have salesperson licenses as well.  This education to have a license should be standardized period.  Then reciprocity would be a moot point.  You could transfer your license to any broker in any state with no issues because brokers would know that everyone was trained the same way with the same standards.   I see the point with the MLS thing.  That would be nice too, but may be much harder to enforce.  Too many different systems out there.

Dec 14, 2013 06:49 AM #29
Rainmaker
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Richie Alan Naggar Author PEARLS SERIES of books
People first then business! Ran Right Realty Riverside, Ca - Riverside, CA
on LIFE and LOVE plus Real Estate too!

Integrity cannot be put into law nor can honesty, devotion or responsibility...I agree with Lenn #25. The government already has foiled and spoiled just about everything they touch with rules & regs...What irks me the most is the absence of common sense

Dec 14, 2013 08:24 AM #30
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Bryan Robertson
Catarra Real Estate, Inc - Los Altos, CA
Broker, Author, Speaker

Karen - That would be a good standard to set.  Ensuring a high level of qualification criteria just to get into the business would help a lot.  There is resistance in California as our state government wants to encourage lots of agents.  It's kind of sad.

Joan - Having a standardized form would be a huge victory.  Then it would just be a matter of adding in disclosures to cover regional issues.

Lenn - I'm not advocating government regulation but industry regulation.  It's different.  The groups within the tech industry are just reps from companies working together.  We'd need something like that in our industry.  That said, standardizing some laws would make sense such as education, forms, and agency.

Sally & David - The COE isn't a standard that simplifies business practices, it just promotes the idea of ethical behavior.  It's nice to have but not what I'm thinking of.

Richard - I think it should be possible to normalize education, basic forms, and agency across the country.  One thing I'd like to see is making form prep and negotiation standard everywhere (no lawyers).  Using the same basic transaction form should be easy to do.  Then leave regional disclosures to the states, counties, cities, etc. 

Dec 14, 2013 08:59 AM #31
Rainmaker
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Gene Mundt, Chicago-area Mortgage Lender - www.genemundt.com
NMLS #216987 - New Lenox, IL
708.921.6331 - 37 yrs experience

I agree that it might be needed.  But I don't think we'll see it happen in our lifetime. JMO ... but certainly the points you raise provide the foundation and strong argument for movement in that direction ...

Gene

Dec 14, 2013 11:51 AM #32
Rainmaker
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Carla Muss-Jacobs, Principal Broker/Owner
BuyersAgentPortland.com | (503) 810-7192 Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% o... - Portland, OR
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WHAT?  You're saying that the practice of real estate AND running my own real estate business needs to be federally mandated?!?  Standarized of all 50 states. Whose is going to "oversee" your bright idea?  A soverign real estate governmental entity?  Under what jurisdiction?  Federal?  This makes absolutely no sense to me.  My state has it's own rules, regulations, and that applies to ALL things:  driving, owning / operating a business, how many chickens I can have.  Why don't we make all driving rules standardized?  Everyone drives.  Why can't I turn right on red in one city, but I can in another.  

Dec 14, 2013 12:19 PM #33
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Maria Morton
BHG Real Estate - Kansas City Homes - Kansas City, MO
Kansas City Real Estate 816-560-3758

I think we need to be very careful about allowing the federal government in to regulate anything at a state or local level. As far as MLS's, they are currently owned and maintained by local associations. They are accurate and function well for local agents. There are a number of companies outside of the real estate profession servicing the computer applications that allow us to communicate MLS information in real time. These companies have increased costs and, if we let them, will find a way to further monetize the MLS data for their own benefit. IMO, we need to not allow this to happen. 

Dec 14, 2013 12:49 PM #34
Rainmaker
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Jordon Wheeler
The Jordon Wheeler Group - Fairburn, GA
J W Group Real Estate Sales and Service

Hey Bryan,

I feel where you are coming from, but the tone of the post does speak to more regulation and government involvement in the real estate industry.  And since most politicians who make the laws are lawyers, it will be almost impossible to remove lawyers from the equation.

Best of GREAT success to you always!

Dec 14, 2013 09:41 PM #35
Rainer
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Richard Bazinet /MBA
Realty ONE Group - Scottsdale, AZ
Phoenix Scottsdale Real Estate

Thank you for your reply Bryan. Good thinking. To some extent, come to think about it, we have some close-to national standardization already in with buyer-broker and listing agreements, likely as well in agency agreements. In AZ, we have no attorneys already in RE transactions and we use title/escrow companies. 

Dec 15, 2013 07:11 AM #36
Rainmaker
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Marti Steele Kilby
Steele Group Realty - La Mesa, CA
Broker/Owner, San Diego, CA

Interesting points Bryan.  I agree that standardization spurs growth in any industry, but I don't think that the real estate industry should be nationally regulated.  Rather, I see this as a function of NAR to create suggested standards and guidelines.  For instance, if NAR had a committee that represented different areas and practices from throughout the country and created standardized forms, such as our CA Association does, that might be a service to everyone.  It wouldn't be mandatory that the national forms be used, but over time it is likely they would become the accepted standard.  Same would possibly work with a committee to develop suggested standards for the MLS.  I believe that it is up to us to improve the industry through standardization and in my opinion, that should be what we're paying NAR to help organize.

Dec 15, 2013 07:36 AM #37
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Bryan Robertson
Catarra Real Estate, Inc - Los Altos, CA
Broker, Author, Speaker

THIS IS NOT ABOUT FEDERAL REGULATION!

OK, just had to get that out there in big bold letters.  It's about industry regulation from within.  If NAR can do it, fine.  However, I'd put much more faith in the brokers doing it collectively just as it's done in the tech industry.  And no, having such an industry standards group is NOT an anti-trust violation in any way. 

There is some standardization already, true, but having more would make things much easier because we could, as an industry, speak the same language.  We could clearly communicate to home buyers and sellers the many aspects of real estate.

Dec 15, 2013 08:50 AM #38
Rainer
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Robert Henley
REMAX Alliance Group - Sarasota, FL

I'd also favor letting the brokers work out greter standards if tht can be shown to be legal

Dec 15, 2013 06:01 PM #39
Rainmaker
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Michael Russell
Keller Williams Realty Partners, Inc. - Overland Park, KS
Overland Park Kansas Real Estate

I am a big believer in transactional experience. Taking 12 hours of CE every 2 years is not enough if you are not actually practicing real estate.

Dec 15, 2013 07:55 PM #40
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Bryan Robertson
Catarra Real Estate, Inc - Los Altos, CA
Broker, Author, Speaker

Standardizing education and CE across the country would be a good and attainable goal.  There are associations looking at standards from one state to the next.  That's a start.

Dec 16, 2013 07:08 AM #41
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Peter Pfann @ 1 Percent Realty Victoria, and Pay-Less For Victoria Real Estate Results!
1 PERCENT REALTY, Victoria BC www.1percentrealtyvictoria.com - Victoria, BC
Talk To Peter 250-213-9490 www.pay-lessrealty.com

Thanks for this excellent information about standardizing Real Estate....

It would be nice to dream about it, however in reality, we can get streamlined between cities, agent accountability, licensing, mls systems, on and on, so although its a nice "dream" 26+ years, we have only gotten further aprat than closer together frankly..... :(

Happy Holidays and a Pfanntastic 2014

Dec 17, 2013 10:43 AM #42
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