Complaint Review: Inland Valleys Association Of Realtors - Riverside California

We contacted the California Attorney General's Office to complain about a realtor and were referred to that state's Department of Real Estate. That web site states,

We investigate complaints against real estate brokers and salespersons accused of misleading or defrauding consumers. Investigations are made by the Department of Real Estate's Enforcement Section on the basis of written complaints received from the public.

If we can prove a violation of the Real Estate Licensing Law, a formal hearing may be held which could result in the revocation or suspension of the agent's license.

But the so-called Real Estate Enforcement Section, in our case, turned out to be a regional real estate board.

We filed a written complaint with the in Los Angeles DER Office against two realtors (Respondents) who listed a

house we bought that was full of toxic mold, made us sick, and hospitalized one of us. Our complaint was then forwarded to a DRE office in San Diego and eventually referred to the Inland Valleys Association of Realtors, which investigated and scheduled a disciplinary hearing.

Our case was heard by a three-member panel of realtors. Two were licensed as sales persons; the third was a real estate broker. We did not get a fair hearing. The Hearing Panel willfully disregarded and distorted evidence, used evidence introduced during the meeting which we did not have a reasonable opportunity to review, denied our right to pursue lines of inquiry vital to our case, and recklessly violated due process.

The panel members were clearly not committed to enforcing the Realtors Code of Ethics. In fact, they seemed to care less about that code than lecturing us about how realtors work. With the exception of a minor comment from one of the other panel members, the Presiding Officer (the broker), totally dominated the proceedings. The other two panel members seemed to be there as tokens.

The Presiding Officer stated at least three different times during the proceedings that she is a realtor, in emphatic demonstration that her sympathies lie with the realtors we complained about. It was clear from the start that she had arrived at her conclusions before the meeting and was not interested in what we had to say.

She prevented us from presenting a 17 minute opening statement, which we had taken weeks to prepare, on grounds that we would be here all day. There was no advance notice of this arbitrary time limit. After listening to a few of our remarks, she turned the meeting over to a lawyer hired by the Respondents.

Under cover of delegated authority, the Presiding Officer capriciously abused her discretion for the purpose of aggressively undermining our case. Throughout the hearing, she condescendingly trampled our rights, arrogantly demonstrated contempt for the code of ethics she was entrusted with enforcing, and expressed intolerant prejudice favoring the realtors.

The hearing clearly shows that the Professional Codes are selectively enforced or not enforced at all by the very realtors who have been entrusted to enforce them. These allegations are documented in Exhibit 1, attached. To summarize them briefly here, the panel:

Refused to sanction the Respondents for violating code 14-2, which protects complainants from legal retaliation.

We filed a complaint in good faith on the basis of this code, trusting that we would be protected by the state of California and the Inland Valleys Realtors Association, but instead we were threatened with a law suit and intimidated during the hearing.

When we told the panel that we did not realize that we would be sued for filing a complaint, the Hearing Officer told us to see a lawyer. She was not interested in the issue. The public should be warned that realtors are not sincere about enforcing the Code of Ethics. Filing a complaint accomplishes nothing except subjecting the complainant to law suits from Respondents.

Permitted the Respondent to introduce into evidence during the hearing one copy of a stack of files that would have taken us an hour or more to read and analyze; the ploy left us with no reasonable opportunity to review evidence that was nevertheless favorably cited in the panel's Report;

Disregarded a provision in the Code of Ethics requiring realtors to cooperate with one another;

Ludicrously claimed that realtors add conditions to Counter Offers at random and without reason, that realtors cannot be expected to explain why they did and did not add conditions to Counter Offers, and that conditions included in a Counter Offer can be ignored without jeopardizing a sale;

Casually dismissed the fact that the Respondent made an affirmative representation about the absence of mold on the property in order to persuade us to sign a mold inspection waiver;

Prevented us from pursuing lines of inquiry with the Respondent which were critical to our case;

Declined to enforce the legal and ethical obligation of a realtor to conduct competent and diligent visual inspections.

Our experience makes it obvious that California's procedure for filing complaints against realtors is ineffectual and unfair to complainants. We are writing to explain why and to ask support to get the procedure changed.

An article published May 4, 1998 states: Indeed, the DRE [California Department of Real Estate] could do a better job generally of attacking the problem of real estate fraud. The article goes on to note that the DRE is a state bureaucracy that spends significant resources helping agents obtain and keep their real estate licenses. But, it is not an aggressive consumer watchdog.

This criticism was underscored in a report issued in October, 2005 by The California Association of Realtor's Business Practices Task Force:

"The current Code of Ethics structure to promote professionalism is not reaching its objective due to lack of reporting and effective enforcementWhile the Code itself adequately addresses most activities, the process for enforcement needs to be improved."

A survey of the CAR membership found that the vast majority of the realtors surveyed had experienced unacceptable professional conduct from the cooperating agent or broker in the past two years. However, only 4 percent filed an ethics complaint. The others thought the process is not worth the time involved (40 %) or the complaint probably would not stick (24 %).

Furthermore, most of the staff professionals who conduct the business operations of the local Associations of Realtors (59%) also said that they were aware of conduct within the past two years that should have resulted in ethics complaints. However, few actually complained because they feared retaliation or thought the complaint process is too cumbersome and time-consuming.

We have concluded from our experience that, although the excessive time required to file an ethics complaint against a realtor is an irritant, the primary stumbling blocks are embedded in the composition of hearing panels and other obstacles within the complaint process. We have identified four problems with the enforcement process.

First, all members of disciplinary hearing panels are realtors, who are free to use their positions to impose their personal biases, which tend to favor associates from nearby offices, fellow members of civic organizations, and former or prospective clients. Non realtors are not included anywhere in the grievance or hearing process.

An accusation against a realtor opens the entire industry to scrutiny and thereby can threaten realtors sitting on disciplinary panels. It also creates potential conflicts of interest and puts realtors in the position of policing their peers. How fair can an enforcement system really be when those who pass judgment are protective of their occupation and must continue to conduct business with the accused after the hearing is over?

Second, there is no external oversight or systematic review of a Disciplinary Hearing Panel's actions and therefore in most cases, members of these autonomous panels are accountable to no one. Even if a Complainant files an appeal, it is heard colleagues. Thus, panel members are accountable to no one outside their closed society.

There is no way for a member of the public to appeal decisions to neutral panels not dominated and controlled by realtors. And, just as important, there is no way for the public, or apparently anyone else, to discover what happens in these panels. This is far too much discretion for a quasi-profession whose members have minimal professional training.

More training is required to become a barber (1500 hours) than a real estate sales person. While physicians and lawyers conduct their own disciplinary hearings, those professions have far more extensive, rigorous formal training requirements than do realtors, who can qualify for a salesperson's license with only three 3-hour courses, and become a broker with only seven or eight 3-hour courses.

The 21-24 semester hours required for a broker's license can be completed in about one and one half semesters at any college, and moreover all required courses can be completed at home through various on-line sites of unknown academic merit. There is no justification for giving this occupation complete autonomy to enforce ethics standards.

Third, the complaint process is a thinly disguised vehicle to cover up the mistakes of errant realtors and silence their critics. With the exception of realtors who have been suspended or expelled from an association, the public has no way to identify realtors who have been the subject of complaintseven realtors who have been reprimanded or fined. Once they have been let off by their comrades, all evidence of the complaint is expunged from the record.

Moreover, except in the extreme cases involving suspension or expulsion, all findings, recommendations and decisions related to a disciplinary hearing are hidden behind confidential agreements. This code of secrecy extends to all parties to the proceedings.

Thus unless a wrong-doer has been suspended or expelled, he or she actually stands to benefit from the disciplinary process, since it serves to silence critics who otherwise would remain free to express their complaints.

Unsuspecting Complainants may be surprised to learn that their good-faith pledge to secrecy is a scam. Since there is no oversight, the Hearing Panel is free to violate due process and its own procedural rules and ethical codes without reprisal, whereas silenced Complainants become inadvertent participants in covering up a broken system.

While an individual who has been wrongly accused may deserve some protection, it is inexcusable to shield the insidious workings of this procedure itself from the public behind unjustifiable secrecy rules. Until the public is informed about the flawed process, it cannot be improved.

A fairer way to handle complaints is to (1) require mandatory reviews of all disciplinary proceedings by independent panels that include non realtors and (2) maintain a public record of all complaints, along with the disposition of eachas is the practice of Better Business Bureaus. Realtors should be treated no differently than other businesses with complaints against them.

Fourth, the $500 fee that a complainant must pay for the right to request a review by the Board of Directors also serves to protect potentially unethical conduct. This filing fee can be prohibitive, and at least will discourage many citizens from exercising their rights. Recall that complainants are prohibited from obtaining money from an ethics complaint, and yet they are expected to pay for their right to enforce the Realtors Code of Ethics. A review should be mandatory in all cases, whether requested or not. However, the review panel should NOT be monopolized by realtors.

We submit that the entire real estate ethics enforcement process is a charade. We have spoken with lawyers familiar with real estate disciplinary hearings who tell us that it is common knowledge that realtors are typically excused, or at most barely sanctioned.

We have been told that one lawyer who was interviewed on a recent Sunday morning TV talk show said that short of a severe crime like murder, realtors are seldom punished. Before our hearing, one of the Respondents in the case said she was totally confident that nothing would happen to her. It is inexcusable that the state of California continues to violate the basic rights of its citizens by passing off this procedure as a legitimate way to file complaints against realtors.

We are hereby requesting you, and the authority you represent, to find a fairer way for citizens of California to file complaints against realtors who blatantly violate their own code of ethics. We urge you to do whatever is necessary to produce basic changes in the composition of hearing panels, in the oversight of proceedings, and in the appeals process so that citizens seeking to complain about unethical realtors can get a fair and impartial hearing from outside the real estate profession and can obtain information about realtors with complaints against them.

EXHIBIT 1: Examples of Prejudice and Discrimination During Our Recent Disciplinary Hearing

1.After we filed a complaint against the listing realtors (Respondents), their attorney wrote a letter to the law firm responsible for coordinating the disciplinary hearing to inform all parties that the Respondents are currently investigating numerous reports of defamatory comments made by Mrs. Corwin and are prepared to seek civil damages if appropriate. This threat was meant to intimidate us at the hearing, and it did in fact intimidate us, influencing what we did and did not say at the hearing. Making such a threat is a clear violation of the Realtors Code of Ethics 14-2 which states that:

Realtors shall not obstruct the Board's investigative or professional standards proceedings by instituting or threatening to institute actions for libel, slander or defamation against any party to a professional standards proceeding or their witnesses based on the filling of an arbitration request, an ethics complaint, or testimony given before any tribunal.

Then the Respondent's lawyer sought again to intimidate during the hearing, asking us for additional information that would be pertinent only to a defamation suit. And yet, the Officer who presided over our hearing allowed him to ask these questions but adamantly refused to let us bring up the issue of intimidation under Code 14-2, loudly declaring that this has nothing to do with this hearing! You cannot discuss it here.

When we tried to explain its relevance, she called a recess. This was a blatant breach of ethics by the Respondents, and yet it was willfully ignored by the Hearing Panel. We would not have filed a complaint had we known that Code 14-2 would not be enforced. We learned during the hearing that other codes are not enforced either.

2.The Respondents had required us to initial a Mold Disclosure Form as a condition of sale in the Counter Offer. The Disciplinary Panel Report mocked us, sardonically commenting that, The Complainants believed that in order to get the home they had to sign the Disclosure. There was no testimony provided to indicate why the Complainants believed that.

It also says, The Respondents testified that they never informed the Complainants that they were required to sign the Disclosure in order for the Sellers to accept their offer. The Panel also cites with approval a statement from Respondents that some potential buyers who did not sign it got their houses anyway (which is of course unsubstantiated insider information that we were not privy to).

These statements by the Panel make a mockery of legal contracts. If it was not intended that we should initial the Mold Disclosure, it would not have been included a condition in the Counter Offer. At the bottom of each page, the Respondents had used a pen to draw two lines, beside which they had written buyer to designate exactly where each of us was expected to place our initials. The Respondents did not notify us that it was NOT contractually necessary to initial it.

Nevertheless, the Presiding Officer falsely maintained that we did not need to sign the mold disclosure in order to get the house. Not needed? This form was inserted in the Counter Offer as a condition for getting the house, as follows: TERMS: The terms and conditions of the above referenced document are accepted subject to the following: D. the following attached supplements are incorporated in this counter offer, Disclosure Regarding Mold The term, subject to clearly indicates a necessary condition.

3.However, the central issue was not whether we needed to sign the Mold Disclosure, but why it was included in the first place. It goes directly to the issue of the realtors' suspicion about the existence of mold in this house. Respondents testified it was company policy to include Mold Disclosures in counter offers, but we have talked with other realtors and buyers they have worked who did not have this document in Counter Offers. Moreover, our selling realtor stated in writing that she had never witnessed them use it in her many recent dealings with them.

Why did the panel accept the Respondents' testimony and not the testimony of the other realtor (who was present at the hearing)? We maintain that by including this form in the Counter Offer as a condition for getting the property, when it was not routinely included in all sales, Respondents were tipping their hand that they suspected a problem with mold in the house from the start of the sale.

However, the Presiding Officer speciously asserted that this form had no bearing on the case. She also absurdly maintained that realtors randomly put all sorts of things in counter offers without reason and cannot be held accountable for why they choose to add or not add something to a counter offer. However, we think it is obvious that professional realtors should be able to account for what they put in legal documents, especially when an included condition casts suspicion on their knowledge and intent.

In any case, that line of inquiry was critical to our case, and we were not permitted to ask the Respondents to explain why (in the time interval when we bought the house and prior to our complaint) they seldom if ever chose to make the Mold Disclosure part of the Counter Offer, while (allegedly) they sometimes did include it.

4.Paragraph 10 of the Outline of Hearing Procedures states that every effort should be made to exchange evidence before the hearing meeting, but if additional evidence is brought on the day of the hearing, six copies must be provided.

Yet, in the course of the meeting Respondents introduced one copy each of a huge stack of sales files into evidence. There is no valid reason that the Respondents could not get these documents to us before the meeting so we could have taken the time needed to thoroughly analyze each agreement. It was not feasible to do so during the meeting without requesting an extended one-hour recess, which we were sure would not have been granted (since we were not even allowed the time we requested to make an opening statement).

Because these materials were not introduced earlier, we had no reasonable opportunity to review them. But that did not stop the Panel from stating in its Report that They (Respondents) brought to the hearing copies of several other transactions they were engaged in wherein the Mold Disclosure from was signed as part of the condition of the purchaseAdditionally, the Respondentsoffered as evidence several other transactions they had been involved in where the Mold Disclosure was part of the Counter Offer.

We had no opportunity to ask the Respondent questions about when the transactions occurred (although we suspected that most of the transaction occurred either after we filed the complaint or several years earlier when they sold property in an area of the state that had been hit by an earthquake). Nor were we given an opportunity to ask why mold disclosures were selectively included in only some transactions and not others, how many were not signed by successful buyers, and other details about the files. Nor did the Panel ask any questions, even though it thought this evidence important enough to emphasize it in the Report.

5.The Presiding Officer also concluded that, notwithstanding Article 3 of the Realtors Code (which requires realtors to cooperate), the Respondents had no obligation to work with our realtor. The Respondents were aware that this Seller had committed fraud by not disclosing a proven water intrusion, and yet they protected him and refused to reply to written requests from our realtor urgently asking for help communicating with the Seller.

The Panel Report distorted the nature and intent of our requests for assistance, stating only that we asked for the Seller's address. That is not the case. The correspondence clearly indicates that we wanted the Respondents to help us obtain information about the undisclosed flooding that had occurred before the Sellers sold us the house. We also wanted to know if they could file an insurance claim. We were only asking the realtors to act informally as intermediaries with the Seller in order to obtain information about the extent and locations of flooding that had occurred, because this information was needed by the mold remediation company. We did not ask them to represent the Seller.

Our realtor's requests for cooperation were communicated while the Respondents were still representing the sellers and also after their agency with the sellers had been terminated.

6.The Hearing Panel also dismissed the significance of the fact that the Respondents had made an affirmative misrepresentation about mold when one of them stated to us before witnesses that the house had no mold. He made this statement as he handed us a Mold Inspection Waiver in the middle of a home inspection and before the inspector had finished the inspection. Since this waiver holds realtors harmless if mold is discovered, it was another indication that the realtors suspected a problem with mold in this house.

In a simple application of hornbook agency theory, once the real estate agent represented, as a matter of fact, that there was no mold on the property, liability is inescapable. (Payne v. Clow, 1931).

7.The Panel Report concludes that Respondents did the inspections they were required to do in the manner they were required to do them. It thereby excused the Respondents for failing to observe profusely leaking and corroded washing machine shut off valves that were in plain sight above the washer in the laundry room.

The Report also accepted the Respondents' explanation about an odor that had been detected in the house. Respondents said the sellers told them it was coming from an air filtering machine. Since our realtor had expressed concern about the odor, a prudent and responsible realtor would have asked the sellers to turn off the machine to find out if the odor disappeared.

We maintained that the realtors conducted a superficial inspection because they suspected water-related issues due to water stains in the kitchen and odd odors throughout the house. They did not want to be in the position of finding evidence related to water problems. A California Appellant Court has observed that in residential sales transactions, the seller's broker is most frequently the best situated to obtain and provide the most reliable information on the property and is ordinarily counted on to do so. [Easton v. Straussburger]

The court explicitly observed that:

If a broker were required to disclose only known defects, but not also those that are reasonably discoverable, he would be shielded by his ignorance of that which he holds himself out to knowSuch a construction would not only reward the unskilled broker for his own incompetence, but might provide the unscrupulous broker the unilateral ability to protect himself at the expense of the inexperienced and unwary who rely upon him. [Easton v. Straussburger].

Under the California code enacted in the wake of Easton v. Straussburger, a broker or agent must conduct a competent and diligent visual inspection of the property offered for sale and disclose all facts that would affect the value or desirability of the property. [CA Code, Sec 2079].

Moreover, the duty to disclose encompasses factual matters not readily discoverable by the buyers. The shut off valves in this house were in plain sight above the washer.

Furthermore, the combination of facts relating to the odor and water stains on the kitchen island that had been reported obligated realtors acting with the required diligence and care, to investigate further and obtain more credible information from the buyer. As the Appellant Court in Easton v. Strussburger said: if given legal force, the theory that a seller's broker cannot be held accountable for what he does not know but could discover without great difficulty would inevitably produce a disincentive for a seller's broker to make a diligent inspection.

Ronald

Banning, California
U.S.A.