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REALTOR® Professionalism: Rising from the Bottom

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Raising perceptions of REALTOR® Professionalism both within our industry and in the eyes of the public is key to the long-term health of the profession. Real estate agents consistently rank in the ...

Raising perceptions of REALTOR® Professionalism both within our industry and in the eyes of the public is key to the long-term health of the profession. Real estate agents consistently rank in the bottom 25% in terms of perceived honesty and ethics. Our research uncovered the need for immediate action, and provided insights from both within real estate and other industries on how strategies could be developed. Join us for second of our three summer webinars where we will share our research and examples of how REALTORS® can leverage current opportunities to raise Professionalism.

This research report is a part of the British Columbia Real Estate Association's Journey of Discovery. BCREA launched the Journey of Discovery (JOD) to help our organization and BC’s eleven member boards strategically plan for the next five years. This project seeks to understand where the greatest contributions of products and services could be for increasing the innovation of REALTORS® in service of their consumers. If organized real estate is to effectively adapt to and proactively initiate change, which we believe is necessary now more than ever, the first stage is to gain a solid understanding of the current and future states of the industry. For access to the slides with links and our other reports, please visit http://web.bcrea.bc.ca/jod/reports.htm

This presentation was prepared by CE Holmes Consulting, Solvable & Monique Morden Consulting

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    REALTOR® Professionalism: Rising from the Bottom REALTOR® Professionalism: Rising from the Bottom Presentation Transcript

    • JOURNEY OF DISCOVERY REALTOR® PROFESSIONALISM: RISING FROM THE BOTTOM FORCE OF INDUSTRY CHANGE 2: PROFESSIONALISM SLIDE DECK 6 June 2014
    • “How can we expect to create a strong trusting relationship with the public when we knowingly allow those with a lack of integrity to continue to operate?” Marilyn Wilson, WAV Group
    • Image Credit: Gallup “Honesty/Ethics in Professions”, December 5–8, 2013 Real Estate Agents
    • Image Credit: Gallup “Honesty/Ethics in Professions”, December 5–8, 2013 Very low / Low % 24 25 20 22 23 26 22 23 25 26 27 25 26 22 25 34 31 28 30 31
    • While many of us likely take comfort in the 50%+ of buy- ers/sellers who are highly satisfied and would recommend a REALTOR®, our focus should be on the other 50%; par- ticularly sellers, who do not show high levels of satisfaction or perceptions of value to fees paid. The main driver of dis- satisfaction for buyers/sellers is a lack of Professionalism. Even for those who are highly satisfied, Professionalism often ranks far down the list of contributing factors. Data* from both within BC and the U.S. reinforces the need to address Professionalism head-on. Public polling paints an underwhelming, and, in some cases, alarming public view of the real estate agent. Real estate agents consistently rate as one of the top five most distrusted professions in the Reader’s Digest poll with Canadians. Gallup provides a much more comprehensive view of public perceptions through historic, longitudinal data. The Gallup data shows real estate agents are un- derperforming other professions, although perceptions are trending slightly positive. At no time over the past forty years have our “honesty and ethical standards” been ranked “very high/high” by more than 20% of respondents. In every year but one, a greater proportion rated the pro- fession “very low/low” (currently 22%) compared to those who rated it “very high/high.” Poor perceptions of real estate agent honesty and ethics is not unique to North America. Ipsos found similar results in the UK, as did Roy Morgan, the largest research firm in How We’re Seen Australia. Nor are these perceptions unique to real estate agents alone. Even concerted efforts to change public perceptions of REALTOR® honesty and integrity will likely be incremental over time. We can look to other comparative professions in the Gallup poll such as lawyers (who share our standing for honesty and ethics at 20%) to see perceptions basi- cally unchanged over forty years. In other words, a huge boost in perceived REALTOR® Professionalism is only possible through a watershed event. This is not to say that ORE should not make every effort to improve Professional- ism; rather the opposite is true. And given both the historic and shared global perceptions of real estate honesty and ethics, it is likely to be a tide only turned through dedicated and extraordinary measures over a long period of time. The good news is that Canadian REALTORS® seem to recognize the importance of this issue. According to a 2013 member survey conducted by OREA, members felt the two most important issues for their industry related to Professionalism: “Consistent professional standards among REALTORS®” (90% rating it very important) and “General negative perceptions of REALTORS®” (80% rat- ing it very important). More than seven-in-ten members felt these issues required immediate attention. It is clear that REALTORS® recognize and support ORE addressing Professionalism as a first-tier priority. * REBGV & FVREB Buyers & Sellers Survey, 2008 NAR Home Buyer and Seller Generational Trends, 2013
    • Image Credit: CREA The REALTOR® Code THE REALTOR® CODE OF ETHICS The exclusive designation for a member of The Canadian Real Estate Association is the trademark REALTOR® . It symbolizes a commitment to competence, service and professional conduct. In the quest for these high standards, REALTORS® in Canada have been bound together by a Code of Ethics since 1959. As REALTORS® , we accept a personal obligation to the public and to our profession. The Code of Ethics of The Canadian Real Estate Association embodies these obligations. As REALTORS® , we are committed to: • Professional competent service • Absolute honesty and integrity in business dealings • Co-operation with and fairness to all • Personal accountability through compliance with CREA’s Standards of Business Practice. To meet their obligations, REALTORS® pledge to observe the spirit of the Code in all of their activities and conduct their business in accordance with the Standards of Business Practice and the Golden Rule — Do unto others as you would have them do unto you. The technological forces changing our world have illuminated a new path, a path leading to a whole new engineer, an engineer appropriate to our time and the foreseeable future, appropriate to the eager young people of our world, appropriate to those who wish to join the excitement of our times actively, directly, wholeheartedly, and now. Therefore, we come together, in the light of growing awareness and heightened urgency, and shine a big beacon upon needed change.  The status quo will not go easily, but go it must.  Image Credit: Big Beacon Manifesto
    •   • Association: membership organization(s) responsible for advancing common professional interest and supporting practice excellence • Recognition: excellence is rewarded and publicly ac- knowledged These attributes provide a myriad of opportunities for ORE to create and implement strategies that increase industry Professionalism. As we anticipate significant shifts in the role of the REALTOR® and their body of knowledge over the next five years, it is imperative that these strategies are revisited annually. Fortunately, a number of efforts are underway to create a unified understanding of Professionalism across the coun- try. Building on the efforts of the REBGV, research and standards developed by the Ontario Real Estate Association (OREA), together with CREA’s national con- versation around Professionalism, the foundation is in place for orchestrated action. . We hope the Journey of Discovery research will strengthen the national conversa- tion, and provide resolve and direction for BC ORE. Professionalism Deconstructed ORE needs a comprehensive understanding of what is meant by Professionalism in real estate. We need to move beyond Professionalism as a general term with varying meanings to a multi-faceted concept with distinct sub-com- ponents. Only then can BC ORE create explicit initiatives to address different facets of the Professionalism puzzle, and define expected behaviour to REALTORS®, consum- ers, and communities. Combining the work of Beslin Communications Group and the Institute of Electrical and Electronics Engineers (IEEE), we suggest the following attributes to define the term: • Body of Knowledge: education, knowledge, competen- cies, skills to be acquired and maintained by practitioner • Quality: practice increases the likelihood of desired outcomes, are consistent with current knowledge and deemed worthy of compensation • Ethics: code that establishes shared values and expected behaviours • Public Service: practice that protects public health and welfare through independent judgment • Licensing: right to practice is granted, upheld and en- forced by an authorizing body
    • Image Credit: Orlando Regional REALTOR® Association, The REALTOR®’s Critical Role in the Real Estate Transaction 110 Prepare and convey any counteroffers, acceptance or amendments to buyer's agent 111 Fax copies of contract and all addendums to closing attorney or title company 112 When Buy-Sell Agreement is accepted and signed by seller, deliver to buyer's agent 113 Record and promptly deposit buyer's earnest money in escrow account. 114 Disseminate "Under-Contract Showing Restrictions" as seller requests 115 Deliver copies of fully signed Offer to Purchase contract to seller 116 Fax/deliver copies of Buy-Sell Agreements to Selling Agent 117 Fax copies of Buy-Sell Agreement to lender 118 Provide copies of signed Buy-Sell Agreement for office file 119 Advise seller in handling additional offers to purchase submitted between contract and closing 120 Change status in MLS to "Sale Pending" 121 Update transaction management program to show "Sale Pending" 122 Review buyer's credit report results -- Advise seller of worst and best case scenarios 123 Provide credit report information to seller if property will be seller-financed 124 Assist buyer with obtaining financing, if applicable and follow-up as necessary 125 Coordinate with lender on Discount Points being locked in with dates 126 Deliver unrecorded property information to buyer 127 Order septic system inspection, if applicable 128 Receive and review septic system report and assess any possible impact on sale 129 Deliver copy of septic system inspection report lender & buyer 130 Deliver Well Flow Test Report copies to lender & buyer and property listing file 131 Verify mold inspection ordered, if required Tracking the Loan Process 132 Confirm Verifications Of Deposit & Buyer's Employment Have Been Returned 133 Follow Loan Processing Through To The Underwriter 134 Add lender and other vendors to transaction management program so agents, buyer and seller can track progress of sale 135 Contact lender weekly to ensure processing is on track 136 Relay final approval of buyer's loan application to seller Home Inspection 137 Coordinate buyer's professional home inspection with seller 138 Review home inspector's report 139 Enter completion into transaction management tracking software program 140 Explain seller's responsibilities with respect to loan limits and interpret any clauses in the contract 141 Ensure seller's compliance with Home Inspection Clause requirements 142 Recommend or assist seller with identifying and negotiating with trustworthy contractors to perform any required repairs 143 Negotiate payment and oversee completion of all required repairs on seller's behalf, if needed
    • The relationship between quality and standardized out- comes is thoroughly understood in healthcare. OREA’s Standards of Professional Excellence similarly references positive outcomes. However, real estate has no standard, desired outcomes across the transaction process. A uni- versal push for quality improvement that starts by identify- ing service outcomes is a clear missing link to enhanced Professionalism. Imagine a real estate culture of continuous improvement that ensures our processes are constantly evaluated and improved upon in light of their efficiency and effective- ness. Could this radically alter real estate Professionalism through higher and more consistent quality? We looked to CREA’s REALTOR® Code, which makes no mention of “quality,” and OREA’s Standards only mentions it once. Perhaps one of the missing elements of REALTOR® Pro- fessionalism is the drive for our own quality movement? There is a long scientific history of quality improvement in other industries. “Efficiency” and “scientific” manage- ment techniques have transformed how industries assess and measure quality through new processes (Kaizen, Six Sigma), and standards (ISO), and also in the culture of the organization (Total Quality Management), which demands Quest for Quality universal commitment across the organization. In Fourteen Points for Managers, Charles Deming empha- sized that quality improvement should focus not on solving the problems of individual people or parts, but on the entire system of their interactions (aka ORE not REALTORS® or brokers). Deming was a relentless supporter of the use of data rather than opinions to understand outcomes. The most dramatic quality improvement in the service sector has been in healthcare, specifically the move to checklists for their simplicity in cutting costs and saving lives. Avedis Donabedian proposed a three-tiered structure for measuring the quality of health care that we also found instructive: • Structure measures assess the accessibility, availability, and quality of resources; • Process measures assess the delivery of health care ser- vices by clinicians and providers; and • Outcome measures indicate the final result of health care Without both the shared understanding and commitment of the entire profession to quality and continuous improve- ment, transformative efforts will fail to realize their potential to systematically boost Professionalism.
    • Image Credits: Redfin
    • Could compensation models be linked to improving/de- clining quality outcomes? Research discussed in the article, New Health Rankings: Of 17 Nations, U.S. Is Dead Last, revealed a distressing story of poor historic performance outcomes in healthcare. In its quest for improvement, the American medical system is experimenting with major shifts in the compensation models, from increased percentages of salaried employees to pay-for-performance (P4P) for physicians. By extension, what started with hospitals being financially rewarded/ penalized based on their performance on patient outcome benchmarks, has now evolved to hospitals creating the same incentives for their doctors. Will it work? According to Ashish Jha (Harvard), the key to significant results from P4P is making the incentive pay- ments big enough, which the industry failed to do by start- ing with too small of incentives. It also needs to ensure the performance formulas are simple and the outcome indica- tors are kept to a few, clear measures that the industry agrees matter. Could P4P work in real estate? George Jackson, associate professor of accounting at Longwood University thinks it could. He sees the problem simply: “The buyer wants the Rewarding Outcomes lowest price possible, which reduces the broker’s commis- sion. So the harder the agent works, the less the reward.” Jackson is calling for the use of preprinted buyer contracts that include an option for a bonus commission on top of the negotiated fixed commission if a home sells for below a predetermined amount. And the point is not just academic. All Redfin employees are salaried and compensated based on customer satisfac- tion (a noncontroversial outcome indicator). Redfin agents on average receive a 97% customer satisfaction rating. Impressive. But perhaps even more impressive is that top- performers end up earning more than commission compen- sated agents (details here). And they have tools that likely make them more efficient than their non-tech peers: “Redfin agents have access to special software that ena- bles them to recommend the right homes for their clients to go see, and to determine the right price at which to buy or sell a home. Redfin is also investing in routing and opti- mization software and back-end logistics to deliver “instant tours,” so...[it is] as easy as booking a taxi.” With the goal of increased Professionalism, which is di- rectly correlated with achieving desired outcomes, perhaps new rewards systems should be part of the equation.
    • Image Credit: Airbnb Image Credit: Eight11 + Zurple
    • “This epic failure to serve the consumer actually repre- sents the greatest outstanding opportunity for real estate professionals.” - WAV Group A recent WAV Group report, Agent Responsiveness Study 2013, discusses the results of one year of posing as home buyer leads across hundreds of brokerages in eleven U.S. states (likely no different in BC). Here is what they found: • 48% of buyer inquiries were NEVER responded to • Average number of call back attempts after initial contacts was 1.5 • Average number of email contact attempts was 2.07 • Average response time was 15.29 hours WAV Group’s response, “There is no strategy for business effectiveness in real estate that can trump the revenue that would be generated by firms who tackle lead responsive- ness and fix it.” Well, yes, and we are particularly interested in not just business effectiveness, but also its impact on perceived industry Professionalism, particularly by Millenni- als who will likely be floored by those response times. Since we don’t have correlating data between Profes- sionalism and response time in real estate, let’s draw a parallel with the aid of a recent blog post by Rob Hahn. Are You There? Airbnb, the peer-to-peer rental networking site worth $10 billion, demands accountability from its sellers, and also sets expectations of its buyers with fields for “Response Rate”, “Response Time”, and “Calendar Updated”. He then goes on to imagine a scenario where REALTOR® portals include these fields. Perhaps they will follow Airbnb’s lead. Regardless, sites like Airbnb set expectations on what response time should be for any online inquiry. And, given the numbers shared by WAV Group, home buyers are likely to be sorely disappointed. In Rob’s words, “a part-time landlord on Airbnb cannot have a better response rate than a professional agent.” Well, perhaps technology is here to save the day again. In a great profile by Tracy Weir, it sounds like Zurple might have cracked the lead generation code through analytics. However, one comment was of particular interest, “Zurple treats its automated emails like gold — and you can’t edit or personalize them.” On the one hand, response rates and the quality of those responses should dramatically increase for Zurple customers. A plus for Professionalism. On the other, REALTORS® have outsourced the very thing they are supposed to be best at: identifying the needs of their clients and catering offerings and communications to them.
    • Image Credit: Dmetric “Engg Ringing CU.jpg”, Wayne State University, under Creative Commons Attribution-ShareAlike 3.0 LicenseImage Credit: Gallup
    • summed up the role of the ceremony: “The Ritual of the Calling of an Engineer has been insti- tuted with the simple end of directing the young engineer towards a consciousness of his profession and its signifi- cance, and indicating to the older engineer his responsi- bilities in receiving, welcoming and supporting the young engineers in their beginnings.” The Professionalism of engineering has recently taken a new twist, despite the continued significance of the century old ceremonies. The not-for-profit, Big Beacon, has been on a campaign to ignite “a movement to transform engi- neering education.” The Big Beacon Manifesto is a thirty- one point document describing the attributes needed for the future, “whole engineer.” Perhaps it is this unrelenting drive towards excellence that is at least partially responsi- ble for the forty-year climb. While these efforts at increased Professionalism started nearly a century ago, perhaps that is the time horizon ORE needs to be considering as it looks out to its own sea change in perceptions of honesty and ethics. Let us hope we don’t need a watershed moment equivalent to a bridge collapse in order to inspire action. Our Bridges Will Stand: A Case Study The previous slide discussed the potential of a watershed moment that would set in motion radical change to industry Professionalism. We were inspired to look more deeply into one profession based on their Gallup poll results–engi- neers. Unlike most other professions in the poll, engineers have experienced a huge upward swing. Over the past two decades, engineer honesty and ethics increased 25% points from a low of 45% to a high of 70%. While we don’t have the complete picture of the transformation, we did find instructive lessons for increasing Professionalism. Engineering experienced a watershed moment in 1907 and again in 1917. The Quebec Bridge collapsed on two occasions, killing nearly 100 people in total. These events inspired the creation of the organization of professional engineers and the Ritual of the Calling of the Engineer. All graduating engineers go through a ceremony where they subscribe to “The Obligation,” which states the duties and responsibilities of the engineer as a solemn expression of intention. Following “The Obligation”, an iron ring is placed on the little finger of the working hand as a symbol and continuous reminder. The creator of the Ritual, Rupyard Kipling, perfectly
    • Image Credit: realtor.ca based on random search results for “realtor.ca designations”; note most REALTOR® profiles have no listed Designations
    • “It is important to signal to others what makes you a cred- ible, knowledgeable authority before you make your influ- ence attempt” - Robert Cialdini, Arizona State University Low levels of perceived Professionalism place unique strains on personal expertise being sought and trusted. Yet REALTORS® have a number of distinct credibility advantages: • Requirements to acquire a body of knowledge in order to be licensed; • Authorizing bodies collecting and enforcing infractions; • An authorizing organization that ensures continual ad- vancement in that body of knowledge; and • E&O insurance to protect consumers from fraud or breach of trust While many REALTORS® know this, consumers are al- most entirely in the dark about all four points. Consumers don’t understand the distinction between a REALTOR® and licensee; they do not know about infractions generally, or specifically how to report them; they know little to noth- ing about ORE; and don’t know about E&O protections. Influence researcher, Robert Cialdini, has led a myriad of experiments on authority and why people defer to experts. In his Harvard Business Review article, Cialdini tried to Credibility on Display understand why stroke patients would follow the advice of their physicians, but ignore the advice of their physical therapists (to great frustration). By just having the therapy director display all the awards, diplomas, and certifica- tions of her staff on the walls of the therapy rooms, they increased at home compliance 34%. It turned out patients were familiar with the background and training of physi- cians, but not those of the physical therapists who were urging them to exercise. And, as it turns out, he led a similar experiment with a real estate broker. By having the receptionist mention the credentials of the REALTOR® before routing a call, the brokerage was able to increase appointments by 20% and contracts by 15%. And while displays of authority can lead to REALTORS® being more trusted, the power lies not just in display, but also in the significance of the credential. Could “raising the bar” on entrance requirements to be a REALTOR® increase perceptions of Professionalism? What role could specialty certifications (e.g. REBAC’s ABR® or NAR’s e-PRO®) play? Higher expectations in the shared body of knowledge, service quality expectations, competencies, ethical behaviour, and public service are likely to raise Professionalism across the board.
    • Image Credit: Ushahidi-Haiti Tufts University Image Courtesy of REBGV
    • How do we know that the majority of infractions are being reported? How can we eliminate obstacles to reporting? A self-regulated industry establishes its own rules for eth- ics, conflicts, disciplinary action and accreditation. Effective self-regulation also relies on professionals and customers to report ethical and legal violations in conduct. However, the reporting process in B.C. is cumbersome and opaque for both consumers and REALTORS®. Reporting. Let’s start by looking at baseline BC data. How to make a complaint is clear on most board websites, as is where the complaint should be filed. However, we identi- fied numerous obstacles to report a complaint: • Three boards have no complaint forms on their websites; • Of the eight Boards with forms, most need to be filled in by hand, and all need to be mailed; • While some forms are one-page, half the forms are three or four pages long; and • No forms provide the option for anonymous filing. As Marilyn Wilson described in her blog post, “Agents are reticent to report their fellow practitioners. They are afraid of negative repercussions for their own business. They tell us that if I report unethical behaviours, other agents may target me unfairly. In most cases they remain silent.” Collective Enforcement In our path to increase Professionalism, one goal could be to ensure that all suspected conduct breaches are re- ported across British Columbia. What can ORE learn from others in how to achieve this? • Pioneering organization, Ushahidi built an open-source platform that uses SMS/MMS to collect incident reports in locations around the world, from reporting violence during elections in Kenya to civic outages from Hurricane Sandy. Anyone can deploy the Ushahidi platform for free. • 3-1-1 is used by communities across North America to allow citizens to quickly report civic concerns. City of Van- couver 3-1-1 consolidated 550 different telephone num- bers into a Contact Center that handles 45,000 inquiries per month. Almost all requests have a tracking number. Transparency. The next step to increasing Professionalism is enabling transparency so that the data becomes vis- ible and potentially actionable by other REALTORS® and consumers. RECBC posts its disciplinary decisions and industry withdrawals. However, it is in examples like Usha- hidi where we can see an even more powerful model where incident reports could become easily navigable visual information to guide selection of a REALTOR®. These inci- dent clusters and their segments could become important indicators for Professionalism as measured by BC ORE, and as education tools for consumers.
    • Image Credit: Canadian REALTORS® Care Foundation Image Credit: REBGV REALTORS® Care
    • “As part of our jobs, we are educators, negotiators, tour guides, advisors, facilitators and friends. Sometimes we clean homes, rearrange furniture, water plants and occasionally mow lawns or shovel snow and with every deal we apply our knowledge and experience to the paperwork. We lobby government and seek political changes that help our communities because we see the bigger picture and feel a responsibility for our Canadian quality of life.” Beth Crosbie, 2014–2015 President, CREA The topic of Professionalism clearly sits near and dear to the hearts of all of us in real estate. As a profession, we clearly care a great deal about how REALTORS® are perceived by our clients, our communities and the general public. The general perceptions of the profession are all the more dishearten- ing when we have so many reputable members who do anything and every- thing for their clients and their communities. The majority of REALTORS® take great pride in the profession. In a recent survey, CREA found 84.1% of members agree with the statement, “I am proud to be a REALTOR®.” We find similar results at the provincial and regional levels. We consistently rank Professionalism as one of the most urgent issues for organized real estate to address. Incremental changes are unlikely to result in the sweeping change we would all like to see in perceptions of REALTOR® Professionalism. To measurably improve, we need an industry transformation in our commitment to Professionalism. The opportunity is immense if we can collectively rise to the challenge and grab it. REALTORS® certainly have the professional pride to make it happen. REALTOR® Pride