Jun072011

OC realtors seek to silence free speech by accusing IrvineRenter of lying

The Orange County Association of realtors is after me. They claim I am a liar. Today, I will present the facts and let you decide.realtor_and_plato

Realtors go after blogger who says they lie

June 6th, 2011, 12:00 pm — Marilyn Kalfus, real estate reporter

The Orange County Association of Realtors has filed a grievance against an Irvine real estate broker who writes a blog that takes critical looks at the housing crash, homebuyers and real estate agents.
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Larry Roberts, who writes the IrvineHousingBlog.com, freely admits going “over the top” in his posts, which are particularly harsh on homeowners who default on loans. He frequently shows MLS photos of properties that have gone into foreclosure. He also has accused real estate agents, in general, of being dishonest.

I sometimes do go over the top. It’s part of my sense of humor, and It’s one of the reasons I don’t single out individuals. Sometimes it takes going over the top to draw attention to important issues and get people to think.bullshit_magnet

The grievance says Roberts and two other people have violated a code of ethics rule stating that “Realtors must not knowingly lie about competitors” as well as a general set of regulations governing how MLS information is used on the internet.

Roberts says OCAR is trying to impinge on his freedom of speech, and that the organization has no standing to keep him from posting in his blog.

This is clearly an attempt to silence my free speech because OCAR does not like the content of my speech. Why else would they bring this complaint?  The complaint filed by OCAR is “anonymous” — nobody at OCAR has the guts to stand up and publicly accuse me. To make it worse, OCAR has not even notified me of what specific actions I took which violate their rules.

They want to drag me before a biased kangaroo court made up of its own members and keep the hearing secret and non-public. Anonymous accusations, secret trials, and refusal to substantiate charges sound more like the political trials of the Soviet Union, Cuba or North Korea than American notions of due process. Joseph Stalin from the old Soviet Union would be proud of OCAR and their methods.

1949_Mao_and_Stalin

He has a broker’s license, he says, but he doesn’t run a brokerage or sell real estate, and he is not a Realtor or a member of OCAR.

The complaint, which Roberts furnished to the Register, was accompanied by a printed version of a post he ran saying that real estate agents lie.

“Realtors take advantage of their status as trusted experts to manipulate buyers, and they feel no responsibility when their statements are exposed as lies,” the statement said.

Roberts says he believes he wrote it as an introduction to an article in the blog by a University of Arizona law professor. The piece, entitled, “Trust, expert advice and Realtor responsibility,” was later removed from the blog at the professor’s request because it was going to be published elsewhere, Roberts said.

In an interview, Roberts elaborated, saying, ” …Many Realtors make representations about investment value and appreciation without regard to whether or not such statements are true. Most make these statements in ignorance, which technically isn’t lying, but some make these statements knowing better, which is lying.”

Roberts added that while he has been hard on real estate agents in general, ”I have never singled any Realtor out and called them a liar.”

I don’t focus on individuals. The behavior is the problem, not the person doing it. People make mistakes. I have. I don’t seek to shame people, I try to point out what people do whether it be borrowers or realtors so people can see the wisdom or the foolishness in the behavior for themselves. realtor_kangaroo_court

OCAR’s Rena Budesky, who signed the grievance, declined to answer questions from a reporter seeking specifics about what Roberts did to prompt the action.  “Everything that relates to grievance complaints, it’s all confidential,” she said.

OCAR president Jean Tietgen did not respond to a reporter’s call.

They want to call me in front of their Kangaroo court of realtors, keep me in the dark regarding their trumped up charges, find me guilty, then keep everything quiet.

Roberts’ attorney Scott H. Sims sent a letter to Budesky and OCAR demanding they withdraw their complaint, which he called “frivolous .. and a clear effort to interfere with Roberts’ right of free speech.”

“Even if Roberts had engaged in wrongdoing, which he has not, any disciplinary action taken by an OCAR grievance panel would carry no legal force and effect and OCAR would be exposing itself to liability for any and all damages to Roberts,” the letter read in part.

If OCAR or any of its members disagree with Roberts’ opinions they are free to dispute them in ‘the marketplace of ideas,’ ” the letter says, “and leave it up to the public to decide who is right .. We recognize that engaging in a civil debate about the health of the housing market may not blindly pad the pockets of OCAR’s members who are paid on commission — and thus have no incentive to tell their clients to do anything except to ‘buy,buy,’buy” — but such is the risk of doing business in a free market.”

Hallelujah! The IHB has always been an open forum. People are free to come here and put forward their ideas and opinions of the housing market. I have always encouraged differing points of view as evidenced in the daily astute observations. Ideas with merit are scrutinized, and the collective wisdom of the group separates the good ideas from nonsense. That’s how a healthy debate should work.

PDF of full attorney response letter

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What does OCAR think about free speech?

The allegations brought against me include (1) knowingly lying about competitors, and (2) violating MLS rules. Yet OCAR won’t tell me how I did either. Isn’t it obvious these are silly attempts to shut down one of the few truthful and accurate sources of real estate information and analysis in Orange County? They are pissed about my public comments, and they hope they can find some MLS violation to shut me down. In their complaint, they provided absolutely no evidence of any MLS violations. If there are any legitimate violations, they should tell me and give me the chance to correct them. Unfortunately, OCAR is more interested in keeping me in the dark, holding some secret proceeding and then trying to shut down the IHB and infringe on free speech.

Do any of you believe the information presented on the IHB is inaccurate or misleading in any way? Does OCAR need to sue the IHB to ensure the data presented is accurate and useful? Who do you believe is more concerned with accuracy, the IHB or OCAR?

This is really embarrassing for OCAR. I criticize the national association for knowingly providing inaccurate information to buyers — which they did and the local association accuses me of lying and providing bad information. Unbelievable! I cringe when I think of the thought process that was behind this complaint. OCAR should be asking itself what the hell is going on. They want to call a non-member in front of their secret panel, and then make up bogus charges designed solely to infringe on someone’s freedom of speech. Brilliant!

Isn’t this America? Perhaps OCAR might be more comfortable in Communist China? Oops, I better be careful. I wouldn’t want to get called in front of a disciplinary board in China for my statements….

ocar-china

What is wrong with the association of realtors?

I don’t like how this trade association operates. As I stated in More self-serving bullshit from the National Association of realtors,the_offer_you_cant_refuse

Since Barry Ritholtz post on How to Read National Association of Realtors News Release, I have been contemplating the utter disrespect the NAr demonstrates for its customers through its constant manipulation of data for the sole purpose of convincing buyers to act even if it isn’t in the buyers best interest to do so. It angers me that such a corrupt and self-serving philosophy of business is at the core of the NAr because their actions harm so many people.

How many buyers from the bubble rally were soothed by the comforting advice of their expert realtors who were telling them house prices only go up? How many of those buyers relied on their realtor’s statements and now find themselves financially destroyed by the purchase they made? Are realtors responsible for the financial ruin of those buyers who believed their representations of financial performance?

On 3-23-2011, I wrote the post As trusted experts realtors are responsible for their bad financial advice. That post was a reprint of Dr. Brent White’s paper, Trust, Expert Advice, and Realtor Responsibility. From the abstract:

Real estate agents benefit from the trust associated with portraying themselves as real estate experts, yet are generally not legally responsible for the advice that they give. This lack of legal responsibility is at odds with psychological propensity of individuals to trust perceived experts. It also creates a genuine moral hazard, fueled the housing market bubble and contributed to the suffering of homeowners whose real estate agents encouraged them to buy as the market began to burst. This article proposes that real estate agents be required to accept legal responsibility for their advice or be required to represent themselves as mere salespersons.

My post is no longer on the IHB. As mentioned in the OC Register’s article, I emailed Dr. White when my post came out, and he requested I take it down because the paper was about to be published in a major journal, and he didn’t want problems with his publisher. Since I was trying to help Dr. White by calling attention to his paper and not cause him grief, I took the post down per his request.

The post containing Dr. White’s paper is apparently part of  the the OCAR complaint against me — A post that was 90% someone else’s writing. I was drawn to Dr. White’s paper because he was making the same argument I was in The Great Housing Bubble and in many posts on the IHB: realtors should stop making representations of financial returns in real estate as an inducement to buy.

heretic

In The Great Housing Bubble, I wrote this:

Since one of the goals of regulatory reform is to inhibit the behavior of irrational exuberance, the sales tactics of the National Association of Realtors should be examined and potentially come under the same restrictions as securities brokers through the Securities and Exchange Commission. After the stock market crash which helped precipitate the Great Depression, Congress created the Securities and Exchange Commission to regulate the sales activities of securities brokers. There are strict regulations in place governing the representations made concerning the future performance of investment opportunities. These protections were put in place to protect the general public from the false promises made by stockbrokers in the 1920s which many naïve investors believed. The same analogy holds true for Realtors. The National Association of Realtors has launched numerous advertising campaigns suggesting erroneously that residential real estate is a great investment and appreciation will make home buyers wealthy.

Some people mistakenly believe that realtors are regulated by the SEC and need a securities license to make representations about returns in real estate. Not true. They say whatever they want, and if a buyer relies on that information, too bad for the buyer.

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In the complaint against me, the post with Dr. White’s paper is singled out as evidence that I “knowingly lied about my competitors.” In an amazing example of cognitive dissonance, OCAr is accusing me of lying.

I believe this is an attempt to silence my voice and undermine my business. What other explanation could there be?irvinerenter_money_magazine

OCAR should leave me alone

Is spending OCAR resources on this complaint in the best interest of the organization? If OCAR is trying to vault me to national attention through its frivolous lawsuit, they just might succeed if they don’t let their complaint drop. Dr. Brent White, the author of the paper that was the subject of the post they objected to, was on 60 minutes for his controversial stance on strategic default. My attorneys represented Tyler Hamilton on his recent 60 Minutes appearance. Producers at 60 Minutes are contacts of both Dr. White and my attorneys. Is attacking my freedom of speech on the issue of realtor responsibility newsworthy enough for 60 minutes? If they keep pushing, we might find out.

I am not looking for a fight. Personally, I would rather focus my energy on developing my own business and holding to a higher standard. If the people behind the complaint against me were to put a fraction of that energy toward raising their own standards and creating their own success, they might serve their clients better and make more sales.

Shevy is a personal friend and we speak regularly about the market and ways that real estate services can be improved. Shevy is a member of OCAr, NAr, and participates in LGrS through OCAr. He participates in these groups to bring perspective and hopes of influencing positive change for consumers through OCAr and NAr policy improvement. He was very surprised and disappointed that OCAr chose this path. Open forums like the IHB should be embraced by groups like OCAr and NAr as an opportunity to gain insight and address important real issues.

What is a lie?

First, let’s dispense with their allegations. In order to tell a lie, someone must know the facts of a situation and knowingly state something contrary to fact. Let’s look at my statements and contrast that with statements of some realtors and representatives of their association.

I have stated uncomfortable truths (see links above), but I have not lied about anything. Like Dr. White and Barry Ritholtz, I happen to believe that realtors do at times make misleading statements about house price appreciation to induce a buyer to act. My statement is my reality. If I am mistaken, and if no realtor has ever made an intentionally misleading statement as to future value of a house, then I am mistaken, not a liar. That being said, I don’t think I am mistaken:

In the video above featuring NAr representative Tom Adkins above from 2008, he is embarrassingly wrong, and as Peter Schiff points out, he was just as wrong the year before. But why does he keep saying it? Does he know better and chooses to lie? Is he ignorant to the truth and merely passing on his foolish opinion?

Not every instance of a realtor making representations of financial rewards is intentionally misleading. Sometimes they are merely delusional and genuinely believe what they are saying. The post The OC Register Says California had no real estate bubble documents that phenomenon rather clearly.

As I pointed out in Urgency Versus Reality: realtors Win, Buyers Lose,realtor_know_nothing

… it was fascinating to watch the realtor mind at work. The presentation included many “reasons to buy” realtors could use in their own manipulations consultations with customers. There was little or no regard for the veracity of the claims, it only mattered that realtors have something, anything to create urgency in buyers. Many realtors see their job as presenting buyers with reasons to buy, any reason, and hope the buyer is gullible enough to believe them.

The lack of concern for the truth is the defining characteristic of bullshit. When the bullshit is being offered to obtain a sales commission, the bullshit is self serving. How would you characterize the ad below from the peak of the housing bubble in 2006? It was the worst possible time to buy real estate as an investment. Everyone who did so lost money, yet the NAr claimed real estate was a great investment in 2006.

z_nar_propaganda_2006

How would you characterize the behavior of the NAr when they put out advertising like this? They were obviously totally wrong.

  1. Were they lying?
  2. Were they delusional?
  3. Or were they bullshitting showing an indifference to the truth?

And are any of those answers acceptable to you?

priceless_propaganda

So what does the general public think of OCAR’s complaint?

The following comments were culled from the many on Marilyn Kalfus’s post yesterday:

Who’s Dat says: It’s given that Realtors are liars. How many times have we been told “Now is the best time to buy…”?

NueeArdente says: All salesmen do their best to make a sale, yes that means manipulation… and while many might not lie outright.. I can see truth stretched like taffy quite a bit. Then theres a whole pack of them that knowingly sold homes to families that could not afford it while the banks enabled that behavior.

BigLandlord says: I will double the vote that 90% of Realtors LIE all the time! I know, I was a Realtor from 1976 to 2006. LEFT A VERY BITTER TASTE IN MY MOUTH Dealing with so many LIARS. That’s why Escrows are so complicated & take so long!

jules says: It’s true… Realtors do lie. And, it’s not just one life…it’s one lie after another. I have experienced it myself. Why do you think so many people fell for these overpriced homes over the last several years? I realize that realtors weren’t the only factor, but I experienced it myself. The realtor kept lying and lying. Inside I was thinking “Wow…” I can’t believe that anyone would behave this way… Amazing…

jon says: Realtors are getting DESPERATE. They can’t stand the truth. 6% is above God and morality. IHB is nice enough not to call them names, but I will. Realtors = Rodents.

The-Circle-of-Real-Estate

mojoj says: The statement in question about investment values of homes was exposed in the book Freakomics. In the book, they had a real life example of a real estate agent that urged the home buyer to purchase the home because it was a good investment. Shortly thereafter (with no measurable shift in the market, the buyer sought out the same agent to plan on selling the house to benefit from the “investment”. The agent then told him that it was a down market and that it wasn’t a good time to sell a home. The book also shows that real estate agents don’t have enough of an incentive to maximize the sale price of your home so they settle on what gets them the most amount of money with the least amount of effort without regard to your best interests. We all know this, but it looks like some local buffoons want to sue someone for blogging about it.

ocbear says: During the housing bubble, the National Association of Realtors were huge cheerleaders getting people in over their heads, and are a big cause of the whole mess. The post cards that I received from realtors during those years contained so many lies I couldn’t believe it!

And my favorite:

Surprised says: The only thing I am going to say is that there needs to be a new industry trade group.

I challenge the NAr to raise their standards

There is a simple reason the local realtor association wants to harm the IHB: Their customers prefer the higher standard we set, and we are taking their business. I offer a series of challenges to the association of realtors.duped

1. Stop presenting inaccurate data to suit your purposes.

Back in 2007, realtors changed their methods of data collection to get the data they wanted to present rather than be accurate to what really occurred in the market. I documented this in National Association of realtors caught lying about home sales. This behavior needs to stop.

2. Stop manipulating accurate data with spin and bullshit to influence buyers.

In the post, The future of IHB news and real estate analysis, I called out the NAr for their intentional manipulation of data to influence buyer psychology. I challenge them to stop.

Zillow’s Stan Humphries among other real estate economists, has demonstrated a willingness to tell a dark truth about home prices or sales regardless of how this will impact Zillow’s business in the short term. Telling potential customers the truth generates more sales in the long term than ceaseless bullshit.

3. Stop encouraging agents to create a false sense of urgency.

In Urgency Versus Reality: realtors Win, Buyers Lose, I documented what everyone already knows — realtors rely on creating false urgency to sell homes. Shouldn’t people be given accurate information and be encouraged to make their own decisions? I think so. And so do the customers we have served. realtors need to stop creating false urgency in buyers.

4. Place the needs of your clients above your own.

Since I announced the IHB would help people buy and sell real estate, I have remained truthful to my view of the housing market. The IHB has consistently advised caution, while realtors were consistently calling the bottom and telling people they have nothing to fear. Many people have chosen to rent because of our advice, and since prices are still falling five years after the peak, our advice has served clients well. The IHB could have generated more sales if we had “gone realtor” and put our own financial interests above our clients. We chose not to do that because we believe it is the right thing to do. I challenge realtors to do the same.

5. Admit the sales techniques encouraged by the organization hurt millions of customers — and apologize.

Some lenders feel bad about their role in the housing bubble and the millions of resulting foreclosures, but realtors don’t feel responsible. realtors encouraged millions of people to buy houses they couldn’t afford, and now those buyers are financially ruined. I haven’t read a remorseful confession from any realtors acknowledging their role in the bubble. Is that too much to ask?

realtors can serve their clients better

real-estate-agentMost realtors who read this — and they all will with the attention this issue is getting — will dismiss my challenges as the ravings of a hater. Nothing could be further from the truth. I would rather see everyone who buys real estate be treated the way IHB treats its clients. I rant and rave to foster change, not hate.

Many good agents don’t like how their trade association works, but they feel powerless against the machine. They aren’t powerless. Many secretly agree with me, but feel compelled by the pressure of the group to say nothing. Now is the time to stand up and be heard. Good agents need to raise their standards and demand the same of everyone else in the organization. Clients everywhere would benefit from that.

Better and more useful data

The property profile below is typical of an IHB post. It has two links to MLS sources for more information than is presented here. From the MLS data, which gets much of its information from the County Assessor’s office and other public records, I break down the cost of ownership and acquisition. It’s a shortened version of an IHB Fundamental Value Report. The data presented is accurate, and I provide more information that is useful to borrowers than other sites.

Learning what not to do

In addition to the basic property data, I provide purchase and loan information on the property from public records. Prior to the housing bubble, this information was dry data, but with the mass financial insanity that became common during the bubble, the public records now contain interesting stories of foolish borrowing that cost people their homes.

When I first began writing about this behavior, people didn’t believe me, and for the first several posts, most dismissed it as cherry picking. Over the last four years I have profiled hundreds of HELOC abuse cases to show how widespread this activity really was. And for the record, I don’t print the owner’s names. It is public record, but I want to expose the behavior, not the person caught up in it.

Understanding HELOC abuse is important. It’s a behavior that cost thousands of people their homes, hundreds here in Irvine alone. The desire for mortgage equity withdrawal was the primary motivator for buyers during the bubble. Borrowers who don’t understand this will repeat the mistakes of the past, and they may end up a foreclosure statistic themselves.