The calendar flip to a new year often brings changes to the way real estate brokerages do business. Sometimes a new policy comes down from corporate. Other times a city ordinance or a state or federal law comes into effect, leading brokerages to reexamine their standards and take a fresh look at the policies they have in place to protect themselves legally.
Finding the time
Mike Opyd, managing broker for RE/MAX Next in the West Loop, feels that managing brokers should take a look at the policies they have in place at least annually. He likes to conduct a review near the end of every year to make sure he didn’t miss any legislative or regulatory changes that must be addressed.
But Opyd noted that his modus operandi is probably not the norm. “From what I’m seeing, the reality is it probably doesn’t happen very often,” he said, adding that he suspects many brokers don’t conduct a review of their policies until a question about them comes up. “They think they’re checked out every couple of years when there’s something that triggers a reminder. Somebody asks about a policy, and then they look and go, ‘Oh, we haven’t updated this thing.’ … There’s just so much going on at one time in a brokerage.”
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Kathy Kalnes, sales manager and managing broker for Compass in Hinsdale, agreed that policies should be updated at least annually, but sometimes more often than that.
“We do review them every year, if not sooner than that,” Kalnes said. “For instance, this year we have a license law change. [In that case] we may not wait until October, which is when we normally do it. We’ll do it earlier.”
Compass is also currently looking at how to handle other local matters, such as recreational marijuana use. “This is all a new path for a lot of us,” Kalnes said. “So, this is an opportune time that we are reviewing all of that in determining which should be a part of the manual and what is just dealing with the city of Chicago.”
Ian Robinson, designated managing broker for Baird & Warner’s Glenbrook office, said he believes many offices and some small brokerages don’t have policy manuals at all. Furthermore, those that have policy manuals don’t always follow them closely.
“In general, once they’re created, they’re pretty much ignored to a great extent,” Robinson said. “That is an issue in our industry. I believe that they should be reviewed at least annually, and more frequently if there are changes that come up.”
Many brokerages have the autonomy required to set their own policies, depending on the topic. While an office’s parent company may take a more hands-off approach to setting policies and establishing guidelines for how agents conduct their business, managing brokers are responsible for ensuring their associates follow the rules.
Compass has two manuals. One is national and sets rules for every office to follow on matters such as working with teams. The other is applied locally and is tailored to respond to state and local regulations.
“We might have different showing responsibilities when we’re showing properties here versus in, say, New York,” Kalnes said.
“And then we may also have some different nuances with local laws. We all have the same ethics [requirements] and all that, but there’s local fair housing [rules], and some ordinances are different in the Chicagoland market than they are in, say, New York or California.”
The relative newness of Compass to the industry means that the company’s policies are also fairly fresh. Kalnes said the company has legal counsel on board to help with policy revisions, and that the company took great care to set strong policies in place when it launched in the Chicagoland area in November 2017.
“There were a lot of things we were working through in the policy manuals when they first started,” she said. “That took a lot of time when we initially created them. Now that they’re in place, it’s easier to fine-tune the nuances as time goes on.”
With a local company like Baird & Warner, the process is closer to home. Robinson is the primary driver behind policy changes in his office, though he sometimes involves his staff in the process. He takes recommendations from an Illinois Realtors ombudsman who works in his office, as well as from two past presidents of the North Shore-Barrington Association of Realtors and other experts on professional standards.
“It’s mostly me, but I do take input from other people,” Robinson said. “And then my office staff and I will work on making the changes to it. Then we will usually have a few of the people I mentioned read through it and make sure that we covered what we needed to cover.”
Robinson said his brokerage’s policies are currently in the process of being updated to address state matters like the legalization of recreational marijuana and new licensing guidelines, as well as the Cook County Just Housing Amendment that’s designed to prevent housing discrimination against people who have criminal backgrounds (see page 15 for more on this). The ordinance is in effect as of Jan. 31.
While he does gather a great deal of feedback, Robinson said he does not feel the need to have an attorney review policy changes.
“We’re not creating anything that’s really any more than you need to follow these Golden Rule-type of things,” he said. “Even our dual agency and multiple offer policies are all based on what the law and the code of ethics say to do, so it’s not stuff we’re creating. At the company level, though, they’re definitely taking legal advice and [human resources] department advice.”
Convincing agents to play along
As independent contractors, agents often have some autonomy regarding how they conduct their business. Work ethics and willingness to follow the rules will vary from agent to agent, and managing brokers have to convince them that it’s in their best interest to buy into office policies.
Taking care to hire agents who are likely to fall in line with the company guidelines eliminates some of the risk. By establishing a strong screening process, managing brokers can spot red flags or potential problems before formally bringing an agent on board.
Opyd attributes his success in recruiting ethical agents to a rigorous screening process. He also makes it clear to agents from the outset that the brokerage can terminate them if they are not following procedure or if they are doing things improperly.
But screening isn’t everything. An agent who starts out with every intention of following the rules may inadvertently violate a policy or yield to temptation and commit some transgression for the sake of convenience.
Robinson said too many companies are willing to overlook ethical transgressions when hiring agents. “It’s our job to make sure that the people are doing things the right way and obeying the laws and the code of ethics and the company policies,” he said.
Still, Robinson noted that rapid turnover in the real estate industry makes it easy for bad apples to bring their unscrupulous habits over to another company: “The problem is if you have one company where somebody is not doing what they’re supposed to and that company decides to let that person go because of their behavior or they’re not doing things the right way, another company will grab them up right away.”
Robinson argued that establishing a culture of accountability throughout the office helps keep agents honest. Managing brokers have to make sure that everyone knows the rules and is aware that there are consequences when those policies are broken:
“Probably the most important thing they can do is to say, ‘We expect this of you, and we’re going to hold you accountable to abide by all of the laws and code of ethics and everything that is at the core of our business.’”
While making office policy manuals easy to access is key to agents’ understanding of what’s expected of them, sometimes other documents can help make the case. Opyd suggested brokerages make copies of the National Association of Realtors’ Code of Ethics available to agents at all times. Having access to the document that outlines the industry’s standard of behavior would clear up many questions agents might have as they work with clients and navigate transactions.
“You don’t really have to sit down or review [it] with someone, but I do think it’s important at least from a broker’s perspective and protecting ourselves that we at least give that to an agent that joins the office in the beginning, regardless of if they were somewhere else,” Opyd said. “That’s something we do. We share a Dropbox folder with an agent when they first join, and that
Dropbox literally has the code of ethics that everyone should have at least on file.”
He also passes the NAR’s “Pathways to Professionalism” guidelines on to his agents when they are hired. Unlike the NAR’s Code of
Ethics and Standards of Practice, the voluntary list of professional courtesies is not enforceable. But it does outline how agents should behave toward the public, how they should treat property and how to best interact with their peers.
“We give them that and discuss it on a case-by-case basis. If there is something that comes up, it’s a direct conversation with that person,” Opyd said. “It’s tough to judge anything until you know the facts.”