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real estate agent on boardApr 12, 2012

What are the issues and ethics concerning a real estate agent sitting on the Board of Directors of a co-op who does business in that co-op? He does recuse himself from interviews with his own clients, and is willing to forgo any activity (reviewing applications, interviews) having to do with any sale in the building.

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real estate agent on board - Dianne Stromfeld Apr 13, 2012

It seems as though the agent is doing all the right things and, the board will no doubt benefit from his serving. The agent understands real estate, at least hopefully and should be able to guide and assist in many areas covered by board activities. Fair Housing laws are often at issue in screening and a well versed licensee should be able to spot an action that might cause the board problems in the future. I am always amazed at how few real estate professionals serve on boards. There must be transparency in their own transactions and recusal when called for. It sounds as though this is taking place.

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real estate agent on board - Dianne Stromfeld Apr 13, 2012

It seems as though the agent is doing all the right things and, the board will no doubt benefit from his serving. The agent understands real estate, at least hopefully and should be able to guide and assist in many areas covered by board activities. Fair Housing laws are often at issue in screening and a well versed licensee should be able to spot an action that might cause the board problems in the future. I am always amazed at how few real estate professionals serve on boards. There must be transparency in their own transactions and recusal when called for. It sounds as though this is taking place.

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Real Estate Agent serving - Steve-Inwood Apr 13, 2012

We had one serving for one meeting and then I asked them to resign (we are friends). And he did. Our situation is made complex since we own the former Sponsor’s units and are renovating them for sale. This same Real Estate Agent also sells the units for us on a non-exclusive basis.

The Board’s concern is not just actual conflict of interest but perceived conflict of interest from the perspective of someone outside the Board looking in.

That being said, we very much value the input of the real estate agent. In fact, we have sold three units at record high prices in the last two years after we had renovated the units. The Real Estate agent still attends meetings (as any shareholder can) and is asked for input at appropriate moments however he is excluded from all private discussions (as any other non Board member) including all selling/approving proceedings.

Steve

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Re: Real estate agent on board - Carl Tait (CDT) Apr 16, 2012

It's fine for a real estate agent to serve on the board, but I agree with Steve that it's very important to avoid any "perceived conflict of interest." When we updated our By-Laws a few years ago, we included a new section on conflicts of interest on the advice of our attorney. Here's an excerpt:

"Real estate brokers or salespersons, who are members of the Board, shall refrain from engaging in selling apartments in the building or participating in such sales, either directly or indirectly, as listing broker, co-broker or otherwise as an economic participant in such sales. ... No member of the Board shall vote on any matter, or participate in the discussion of any matter, in which the member has a financial interest, other than a general interest as a shareholder or proprietary lessee of the Corporation."

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Real Estate Agent Onboard - dsi Apr 15, 2012

Fine if they do not handle or represent any transactions/sales in the property.definitely not fine otherwise, its inherently a conflict of interest. Additionally, like any other profession there are all types. The danger is: are they objectively, truly knowledgeable and experienced industry experts with sound, arms-distance advice, or of the typical lot who confuse their opinions with actual facts? The danger is that you can consider them to be 'the resident expert' and fail to search for other opinions.
Unfortunately over many years of sales, I have found the majority of Agents to be lacking professionally. The one's who are on top of their game, experienced, knowledgeable and do their homework have been extremely helpful, sometimes invaluable advisers; too many the rest have been a problem. The pro's have been decidedly in very short supply. With Coops, it is a problem as we are all 'difficult' as they prefer the ease of private home and Condo sales. Many do not like the extra effort it takes to do a proper match with a Coop corporation. Not every prospect is appropriate for a Coop purchase, many do not seem to understand this, and are negatively reactive. The problem is that the shareholder who is trying to sell suffers and is upset. Our problem is not bending over backwards to meet the sellers needs for a fast sale, it is meeting the fiduciary and appropriate needs of the Coop and it's remaining shareholders.
I would also be concerned about the perception issue as other Agents/Agencies might assume that he has an inside track and be less willing to sell into the building thinking they are disadvantaged. Before too long you will be underrepresented, I wonder how long this agent will remain on the Board if a pre-condition was that they couldn't work the building while on the Board? That would be no different than any other Board member not being allowed to be a building vendor while serving or affiliated with the Board. Why are they on the Board, to help the Coop, or themselves? There is only one correct answer.

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agent on board - Dianne Stromfeld Apr 15, 2012

This reply is too cynical to be accurate. No doubt there are agents who do not do a good job, but many are well trained, professional and fair. I have been in this business for four decades and can attest to this. If an agent wants to serve on a board, the criteria must be well defined and, of course, must recuse themselves from anything that might benefit themself. As to all members not being permitted to serve as vendors for their own building, this is not true. In many cases as long as there is full disclosure, the director might be in a position to help the community based on their own business experience. Again, the key to success is transparency. It is up to the board to act fairly in screening purchasers in order to dispell the myth that the board member is favored. This can be done and a well trained knowledgable agent willing to do the job properly can be an exceptional asset. I am always reluctant to agree with any statement that includes "all, or every". We really need to make a decision based on an individual set of circumstances, not some experienced by another that might or might not mirror our own situation.

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Agent on Board - dsi Apr 18, 2012

Not cynical at all, after 24+ years of review, interview and refinement of process we have found that the average agent is very average. However, the real issue here is perception. If you have to start creating caveats, recusal and conditions in order to try and make it appear 'correct' then you are ignoring the perception issue that you are in the middle of engineering. Transparency is part of it, but transparency loses out to perception every time. As I stated before, a well trained and knowledgeable Agent is a tremendous asset and assistance. We have found that there are many more who consider themselves to be than they actually are in practice. Selling Coops is a lot more than just listing and showing. There are potential problems with Agents that sell in the buildings they live in, so far we have run into shareholder resentment, pressure, door-stuffers (especially after a shareholder death), social issues, Agent resentment, non-resident agent assumptions and resentments, competing Agents who live in the same building. The Board can't rule out an Agent's right to work a building, that is interference in free trade etc. We just get hit with the problems 'in house' can create,e specially of the Agent is fluffing up in attempt to give the appearance of an 'unofficial exclusive right/privilege, even though none exist. There are some buildings that have given exclusive representation and listing rights to particular Agents or agencies as well. So, cynical? nope, realistic based on actual experiences over a couple of decades plus on Boards, yes.

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agent on board - dianne stromfeld Apr 19, 2012

If you prohibit a real estate licensee from serving, who else do you prohibit? Do you make a list of acceptable and unacceptable professions for board service? This is a big red flag for discrimination lawsuits. It seems much more workable to have guidelines on actions of the board, confidentiality and disclosure agreements that are signed by all members and not determine which professions are acceptable. Are you aware that "lawful occupation" is a covered class under fair housing and might be somehow the basis for legal action against a board. It might be far fetched and then again it might not.

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RE Agents - dsi Apr 20, 2012

You've missed the point completely. You don't prohibit people from serving, you prohibit people from doing business with the corporation while they are serving. An Agent representing shareholders is, for all intents and purposes doing business with the building thru the shareholders, and profits by the approval of their work efforts. That can be viewed as collusion, self-dealing, using the friendship and working relationships with other Board members for unfair advantage in the review process, etc. There is no arm's distance relationship, no barrier, no wall. Recusal is nonsense really, as it obviates the existence of the personal relationships, and won't withstand the inherent skepticism of any affected party or the court. They can serve on a committee maybe, but on the Board while actively doing business in the Building, and inherently giving the impression, by virtue of their being a Board member that a shareholder selling will do better by using them, is an unfair, unspoken advantage. This isn't brain surgery. Appearances are a form of reality, and it automatically colors the other Board members in the process whether you like to admit it or not. Perception is always it's own special reality. There's a whole world of apt. buildings out there to make a living from, you don't need to be on a Board and do business in the same building. You can advise and consult without that. Your advice might be invaluable, but being on the Board undermines the legitimacy of the service rendered. It leaves the Board and the Agent open to a level of questioning that is both unnecessary and destructive to the level of trust the work requires from everyone. No matter how small the Coop, there will always be a few who will question it. IT's the sad side of human nature, but too often isn't off the mark either. There are enough articles on self-dealing each year in Habitat to prove that otherwise. Regardless of the pride you have in your professionalism, integrity and character, it doesn't mean that someone, wrongly, will still question it anyway, just because of perception issues. Unless there aren't enough decent, qualified people to even fill the seats, one shouldn't undermine oneself that way. It diminishes the value of your contribution, and that would be a shame and a loss to the building.

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agent on board - Dianne Stromfeld Apr 20, 2012

You make a good argument, but I don't agree simply because there can be rules of recusal as well as sanctions for misuse of authority, etc. Being familiar with the difficulty in finding good board members, it seems unbusiness like to have knowledgable people on the board and not allow them to do business therin with full disclosure and recusal. We are just not going to agree on this matter and I do not want to discourage willing people from serving. Going back to something I mentioned earlier though, if your community needed to buy millions of dollars worth of widgets and a board member, being in the widget business, could save the community a great deal of money, would you refuse to do business with her also? How would you handle that situation and why would it be any different from a real estate agent?

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