New Professional Standards Tool for You


 Tracy Rucka  |    June 05, 2015
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Complaints come to the WRA in many shapes and forms. Some complaints relate directly to potential violations of the Code of Ethics by REALTORS®; others are clearly a matter of commission disputes, many arising out of the application of procuring cause between REALTORS®. Then there are the less-readily definable calls, ones relating to business ethics, or transactional or procedural matters arising out of real estate dealings; while others are based on an actual, or a perceived, failure of a REALTOR® to communicate with a party in a timely or understandable way.

How does the association respond to these types of inquiries? Staff responds to the caller with information about professional standards services, such as offering information about ethics or arbitration hearings or mediation services. REALTOR® associations provide ethics hearings for allegations of Code of Ethics violations and arbitration hearings for contractual and certain non-contractual disputes between brokers of different firms. In addition, associations also offer free mediation services as a member benefit to attempt to resolve the matter.

Beginning in January 2016, the REALTOR® association will have another tool in the professional standards arsenal to resolve disputes: ombudsman services. This new technique gives a more rapid way to respond to inquiries and find resolution, and is intended to provide initial, informal problem-identifying and problem-solving by a local ombudsperson. The ombudsman services offer an opportunity to create connections in a way that resolves disputes before formal ethics or arbitration proceedings are initiated.

An “ombuds-what,” you ask? 

A definition and a bit of history may be in order.

Ombudsman: “Om-buds-man — one who investigates complaints, as from consumers, and mediates grievances and disputes,” from American Heritage Dictionary.

Since the inception of the Code of Ethics, REALTOR® arbitration has been a part of the REALTOR® culture. In the original 1913 version of the Code, members agreed: “An agent should invoke friendly arbitrations by the real estate board, rather than action through the courts of law, in settling differences between himself and other agents.” And for over 100 years, arbitration has been the longstanding efficient and economical way for brokers to resolve contractual disputes rather than using the court system. 

Although arbitration offers many advantages to litigation, concerns remain that the process is, by nature, adversarial because an award issued by a hearing panel results in a prevailing and a nonprevailing party. Although the matter is settled, after arbitration, a nonprevailing party may be dissatisfied with the outcome while the prevailing party may be frustrated they had to participate in the hearing to have their position vindicated. As a result of these concerns, the National Association of REALTORS® adopted mediation services in the 1990s as the preferred method of dispute resolution process. 

Mediation: “Me-di-a-tion — the intervention between conflicting parties to promote reconciliation, settlement or compromise,” from Merriam-Webster.

On the dispute resolution continuum, mediation is a more flexible, economical and informal way to resolve disputes than arbitration. Mediation takes into consideration the ongoing relationships between the parties who oftentimes continue to do business in the same marketplace. To promote the culture of mediation, local associations have been required since 2000 to provide free mediation services. 

Now enter the next generation of dispute resolution: ombudsman services. These services will be offered by every REALTOR® association in the country by January 1, 2016, at the latest. Professional Standards Policy Statement # 59 of the Code of Ethics and Arbitration Manual sets forth the policy: “Every local and state association of REALTORS® is required to offer, either directly or as part of a cooperative enforcement agreement (consistent with Professional Standards Statement #40, Cooperative Enforcement Agreements), ombudsman services to members, clients, and consumers on or before January 1, 2016.”

Ombudsman process

Once an association adopts ombudsman policies, when an inquiry about arbitration or ethics comes into the association, association staff may offer another alternative to assist the caller. When the goal is to open the lines of communication and avoid the potential for a formal ethics complaint or arbitration request, the use of ombuds services may be the way to go.

During the ombuds process, the association staff will transfer the inquiry to a trained ombudsman who will reach out to the person making an inquiry or complaint. An ombudsman will be a fair and credible voice for the association. The association’s ombudsman will be an impartial, yet knowledgeable, individual who can offer general information about real estate practice, license law, the Code of Ethics, and the ethics and arbitration hearing processes. The ombudsman can respond to general questions about real estate practice, transaction details, ethical practices and enforcement issues. These services essentially provide a no-cost method to engage in nonjudicial dispute resolution. Ombuds services may be offered for potential ethics or arbitration issues. Any inquiries or information obtained via the ombuds process are subject to confidentiality. 

Upon inquiry from a consumer or REALTOR®, the association can offer ombuds services. The inquiry is passed along to the ombudsman. The ombudsman contacts the individual, asks them to explain their situation, and may also inquire as to what the desired result may be. The ombudsman may then offer possible avenues that could help them reach that desired outcome. Furthermore, the ombudsman, with the caller’s permission, contacts the potential respondent to explain the individual’s concerns and desired outcome. The ombudsman attempts to find possible ways to resolve the issue and then reports back to the caller.

A call from an ombudsman may sound something like this: “I understand you have concerns regarding one of our members. If you would like to share your concerns with me, I might be able to suggest some avenues or options you may pursue to reach a resolution for your situation. This is an informal process to provide you with enhanced communication and an initial attempt to solve a problem, regardless of what the dispute is about.” 

After listening to the concerns, the ombudsman would request permission to discuss the issue with the other party, and then attempt resolution and reconciliation.

If the intervention is successful, the ombudsman reports to the association to close the file. In the event the parties are still at odds after the ombuds discussions, the potential complainant retains the right to file an ethics complaint or arbitration request. REALTOR® mediation is also still available as another option for resolution. Other avenues outside of the REALTOR® association are still available as well, such as filing a complaint with the DSPS, other regulatory agencies or litigation.

“Failure to communicate”

Are you a Cool Hand Luke fan? If so, you probably know the film’s memorable line: “what we’ve got here is a failure to communicate.” When communication is lacking, ombuds services can be the answer. When you or a consumer think no one is listening or no one calls back; or perhaps you just want your concern to be heard; when you want someone to help fix the problem; or you think the ethics process is too time-consuming or cumbersome or is associated with too much paperwork; or you have a concern that is not specific to a certain article of the Code of Ethics … ombudsman services may be for you. It is about opening the doors to generate conversation. 

While ombudsman services will be available to you soon, it’s important to note what you should not expect from the service. An ombudsman is not legal counsel, nor are they an arbiter who can compel a resolution if there is a question of compensation. An ombudsman is also not in the position to determine if there was a violation of the Code of Ethics or license law. Instead, an ombudsman listens to concerns, ascertains the party’s desired outcome, and communicates that to the other party. The ombuds service gives the complainant the benefit of being heard and to have someone who listens to the concern(s). The ombudsman can then offer options as to how the complainant may communicate with the REALTOR® to address the concern. 

The ombuds service is all about opening up the lines of communication. The ombudsman can serve as the intermediary to facilitate communication and conciliation between the parties. 

Ombudsman participation

Participation in ombudsman services is voluntary. Once the ombudsman explains the benefits of the services offered, the complainant may work with the ombudsman who then works with the member as an intermediary to fashion a solution. The potential solution could go beyond law and fact, and instead the ombudsman could offer creative solutions, such as apologies. The first step to resolution is to open the lines of communication.

The ombudsman is a neutral individual who can look at a situation without emotion to help resolve the matter through discussion about ways the party may reach the desired outcome.

Are there boundaries to the ombudsman services? Yes. For example, if during a conversation, the ombudsman discovers that the concerns arise out of a possible violation of the public trust, the ombudsman will end the conversation by providing the caller with information about possible alternatives. A violation of the public trust includes:

  • Willful discrimination.
  • Fraud resulting in substantial economic harm.
  • Misappropriation of client or customer funds. 

In such a situation, the ombudsman would have the authority to refer concerns about public trust violations to the association’s grievance committee. 

The ombudsman service — an informal mediation, working by telephone to resolve disputes between parties — will be another member benefit for you in the coming months. For a sample of what an ombudsman call looks like, a five-part video series about how a call is processed is available from National Association of REALTORS® at www.realtor.org/ae/manage-your-association/local-and-state-association-ombudsman-services/ombudsman-process-videos.

Tracy Rucka is Director of Professional Standards and Practices for the WRA.

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