The number one reason a consumer hires a licensed individual to help sell or buy a property is to bring in the expert. As a REALTOR®, you know the marketplace, you know the appropriate resources to provide consumers, you know how to connect parties when things are outside of your expertise, you know the best way to market that specific property, and you know the real estate forms. Simply put - you know the real estate process.
Consumers also hire you because they deem you as trustworthy, right? Yes. Well … kinda, sorta.
The top 10 most-trusted professionals included nurses, pharmacists, medical doctors, engineers, dentists, police officers, college teachers, clergy, psychiatrists and chiropractors. The 10 least-trusted included business executives, state governors, lawyers, insurance salespeople, senators, HMO managers, stockbrokers, advertising executives, members of congress, and car salespeople.
What do these results mean for real estate professionals? Real estate licensees were neither among the most-trusted professionals nor the least-trusted. How you choose to interpret these results is up to you as an individual — but as a profession, I ask you, "do you want to be in the middle of the pack?" Do you want a "kinda/sorta" answer when consumers are asked about your trustworthiness as a profession?
Take a look in the mirror: what do we think of ourselves?
In late 2013, the WRA conducted a survey of the readers of this publication. We asked you what you liked and what you didn't like about Wisconsin Real Estate Magazine, and we asked what you believe plagues the real estate industry. Over the years, we've seen many different answers to this question, including short sale challenges, foreclosure issues and dealing with bank-owned (REO) properties. But the 2013 results were much different.
There was a significant message throughout the 2013 magazine survey results: Undertrained agents.
Since the inception of the magazine 10 years ago, the issue of "undertrained agents" never ranked in the top 10 in industry issues in the survey results. As a matter of fact, this topic didn't just make the top 10 - it jumped to the very top to grab the gold as the highest-ranking industry issue in 2013.
What's even more astounding with the 2013 survey results is the fact that the top three industry issues, by rank, followed the theme of ethics. After undertrained agents, you ranked "public perception of REALTORS®" and then "ethics/decline of professional standards."
Over the course of the last several years, the WRA has been directed to raise the bar of professionalism in real estate. This mission began with what were perceived as small steps, bringing Wisconsin education hours more in line with those throughout the nation. First, we increased the continuing education classes for all real estate licensees from 12 to 18 hours every two years and increased the broker pre-license education from 36 to 72 hours.
However, the greatest stride we have taken is the recently passed legislation, AB240/SB208, which requires hands-on transactional experience as a salesperson for at least two years before becoming a Wisconsin real estate broker.
Current law
Currently, a Wisconsin broker is not required to hold a salesperson license for any amount of time prior to application for the broker's license. Before this legislation, Wisconsin was the only state that permitted a person in a supervisory broker role to have no real estate transactional experience. In addition, of the 49 other states, 26 of them have a documentation requirement; basically a requirement to show participation real estate transactions.
Looking back
In the 1980s, Wisconsin required a one-year holding time frame of an individual's salesperson license before that individual could obtain a broker license. This requirement was short-lived because it did not get to the root of the problem of real estate licensees understanding the real estate transaction. Because the requirement was just to require a broker to hold a license, salespeople typically had a broker hold their license for one year, and once the one year was over, the individual would apply for a broker license. While some individuals practiced during this one year, a good number continued in some other career during that time - rather than practicing real estate - circumnavigating the entire purpose of the one-year holding time frame.
Moving forward
With the complexity of today's real estate transactions, including foreclosures, short sales, bank-owned properties, and appraisal and financing challenges; hands-on experience is imperative for a broker. At least one broker in a company is responsible for those agents the company hires. A broker is responsible for document review, trust accounts, guidance as to practice questions for agents, establishing office policies, and confirming that the agent is appropriately licensed.
The idea of trying to "fake it 'til you make it" as the supervising broker of a real estate company is bad public policy, it's bad for the agents, it's bad for the business and it's bad for the consumer. Basically, it's an all-around bad plan.
If you've never gotten your hands dirty, how do you know what a real estate transaction includes? If you have never jumped out of a plane, how would you know what it feels like to fly? How would an agent know which form to grab as an agent of the buyer? … the WB-40 Amendment to Offer to Purchase or the WB-41 Notice Relating to the Offer to Purchase when the buyer's inspection reveals a defect? While no two transactions are ever alike, transactions have consistencies - showing the property, writing the offer, negotiating counteroffers, dealing with inspection results, or explaining to the buyer that they have been bumped out of primary position.
During the real estate boom, an influx of companies popped up almost overnight. How? … one individual for the prospective Wisconsin brokerage went through the sales and broker education classes, passed the exams and achieved the broker license. This person was the supervising broker of the company and often had little to no experience in real estate. The company then hired agents to work on the company's behalf. This raised a number of concerns:
- Consumer representation by agents without experienced supervision.
- Broker representation of consumers without any experience in a real estate transaction.
- Agents exposed to liability due to lack of experienced broker supervision.
- Incompetent consumer representation exposing the consumer to litigation.
The real estate downturn is a different tale. As the market began to lose steam, these companies closed their doors, forcing the agents who wished to continue in real estate to move on to another company. The company hiring this agent quickly noticed that the agent had been receiving little to no supervision, and what supervision they did receive was incorrect. Again, this lack of understanding of the real estate transaction and process placed the broker, the agent and the consumer at great risk.
The Broker Experience Bill - Effective July 1
AB240/SB208 was passed by both the Senate and Assembly in January 2014 and will be signed into law by Gov. Walker by the time this article is published. This legislation:
Requires documented real estate experience: At least two years of documented real estate experience as a real estate salesperson within the last four years preceding application as a Wisconsin real estate broker.
Provides a system for documented real estate experience: Creates a point system for the Real Estate Examining Board (REEB) to utilize when determining an applicant's experience. Each applicant who is a real estate salesperson must show evidence of completed or closed transactions to the REEB totaling at least 40 points based upon the following point system (applicants can mix and match how they achieve their points):
- Residential transaction is worth 5 points.
- Commercial transaction is worth 10 points.
- Property management contract is worth .5 points per month.
- Time share is worth 1 point.
Creates forms for applicants to show documented real estate experience: The REEB will generate forms for applicants to utilize to show documented real estate experience that will also be utilized by the REEB to calculate the points required to determine the applicant's experience.
Recognizes experience in other real estate-related professions: Applicants may be able to gain experience based on affiliated businesses such as attorneys and builders, as well as real estate experience in another state.
- An attorney licensed to practice in Wisconsin may submit documentation to the REEB showing experience related to real estate sales.
- An individual who holds a certificate of financial responsibility under Wis. Stat. § 101.654, which is basically a builder, may submit evidence to the REEB showing experience related to real estate sales.
- A person who is licensed as a broker in another state may submit to the REEB showing experience related to real estate sales if the individual has been a licensed broker under the laws of another state for at least two years within the last four preceding the date of application and there is not a reciprocal agreement stating to the contrary.
Allows the REEB to waive the experience requirement: A waiver may be granted by the REEB by the promulgation of rule.
Therefore, effective July 1, 2014, a Wisconsin broker applicant must show documented transaction experience as an active real estate salesperson within the last four years preceding application.
Raising the bar of professionalism takes many shapes and forms - from education to licensing requirements to the personal decisions real estate licensees make each day in practice. As a profession, when you looked in the mirror, you did not like the reflection you saw. And as a result, you decided to make an industry-wide change. As Michael Jackson famously sang, "and no message could have been any clearer / if you wanna make the world a better place / take a look at yourself and then make a change."
And a change you have made was the passage of AB240/SB208.
* GALLUP® "U.S. Views on Honesty and Ethical Standards in Professions" conducted December 5-8, 2013. See survey results at www.gallup.com/poll/1654/honesty-ethics-professions.aspx and official survey analysis/report at www.gallup.com/poll/166298/honesty-ethics-rating-clergy-slides-new-low.aspx.
Cori Lamont is Director of Regulatory Affairs for the WRA.