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Hillary Clinton and Rotarian Socialism: What’s wrong with the NAR?

Business Week’s Hot Property wrote yesterday about the NAR’s having gotten into bed with Hillary Clinton — who is “sponsoring a bill that bars commercial banks from hiring real estate brokers/agents” — but that’s just the tip of the iceberg. The National Association of Realtor is routinely, habitually, congenitally anti-free market.

I’m doing the prep work to defend the traditional practice of real estate, but this is my radical yelp: The original and on-going purpose of the NAR is anti-capitalist. The organization was formed to limit entry into the residential real estate business — to push Chester the Barber and others out of the business. The NAR wrote the original state real estate laws to achieve this goal — however poorly. This on-going legislative campaign against banks competing for real estate transactions is just more of the same: “Protecting” mediocrities from fair competition.

It seems never to end. If you’re a member of the NAR, you get hit with spam about once a month about some vitally important piece of anti-free market legislation: Coerced health insurance for real estate brokerages, keep WalMart out of banking, keep banks out of real estate. The NAR is hardly alone in making appeals for legislation, so it is perhaps easy to forget that legislation is imposed by force of arms. What the NAR is doing is taking control of the massive firepower of the Federal government and deploying it to hijack potential competitors.

It’s a protection racket — vicious, awful, evil crime — dressed up in Brooks Brothers suits.

We are apt to think of Communism as being Capitalism’s natural enemy, but there is another, perhaps more insidious foe to unfettered laissez faire. I call it Rotarian Socialism, just to give it a name. Rotarian Socialism is legislation written by and for the membership of a politically-powerful elite. Most of the criticisms you hear about Capitalism are in fact criticisms of Rotarian Socialism.

Truly free markets require freedom, not laws. I have argued before for getting rid of the real estate licensing laws — or, at a minimum, eliminating the broker level of licensing — and for eliminating the real estate brokerage safe harbor exclusion from IRS wage-withholding rules (although eliminating the IRS altogether would be even better). The NAR is already hijacking entirely too much of the American economy. The solution to its problems — and to ours as members — is not more Rotarian Socialism but less, ideally none.

To the extent that American consumers have any common interest, it is to be able to purchase the best quality goods and services, at will, at the best price. The NAR is actually a piss-poor cartel. Chester the Barber got the shiv, but his sub-literate ethically-challenged brother operates under the cover of a state-issued license and a candy-striper’s Code of Ethics. Meanwhile, alternatives to Chester’s idiot brother are forbidden — ultimately — by gunmen and prison wardens. This is obviously contrary to the interests of American consumers.

Don’t hold our breath waiting for any law to be repealed, anywhere. But you don’t have to wake up next to Hillary Clinton to know that the National Association of Realtors is infested with fleas…

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28 comments

28 Comments so far

  1. Ed Rybczynski February 13th, 2007 12:36 pm

    Greg
    You are my hero and twin philosophically. The NAR is the physical embodiment of a monopoly. The association’s argument against banks entering the market is analogous to carriage makers baring the introduction of railroads, automobiles, planes, etc. Great post!

  2. Michael Cook February 13th, 2007 12:46 pm

    Ok, now I really dont want to beat a dead horse. But when I made this argument last week, people called for my head on a platter, is it because I am not part of the Realtor club?

  3. Greg Swann February 13th, 2007 1:21 pm

    > But when I made this argument last week, people called for my head on a platter, is it because I am not part of the Realtor club?

    It’s easy to overestimate the acrimony in comments, but, in any case, you didn’t make this argument. Realtors are not a monopoly in the same way that attorneys and physicians are because, as much as it might like to be, the NAR is not as powerful, politically, as the ABA and the AMA. Even so, my opinion is that the NAR is a pernicious evil much of the time, to the benifit of the worst kind of Realtors and to the detriment of the best. Most NAR member would probably disagree with this evaluation.

  4. Cathleen Collins February 13th, 2007 3:19 pm

    The day is young, Michael. Someone might yet take exception with Greg’s post and decide to write about it. I’m admittedly surprised that after six hours there aren’t any posts from people who are annoyed with Greg’s article. As for the “Realtor club,” there is no “good ol’ boy network” on RE’s web 2.0. We even invited some of Arizona’s establishment, to add that point of view to the mix, but got no response. I think that most bloggers, at least on the national scene, are the industry’s “fresh thinkers.” This is why the conversations are so interesting, and why it would have been tragic had you not been involved.

    Adding to Greg’s explanation of why you and he are arguing two different issues, is your proof that there’s a monopoly dealt with commissions. And the reason that doesn’t hold water is because there are so many different structures by which real estate agents earn commissions. Depending upon the real estate broker, compensation might be a flat fee, or a sliding fee or a percentage, or a combination of these. Greg has explained to me that the reason the consumer typically thinks about a 6% or 7% commission is because lenders have set a cap of 7% toward sales commissions that they’re willing to wrap into conforming loans.

  5. Todd Tarson February 13th, 2007 5:12 pm

    ehhh… mmmm… How do I do this??

    Okay, with my leadership hat on I feel as if I should disagree with some of what you are saying. I’m just getting a taste of my responsibilities at the state level of AAR after four years on the local level (Wait ’til they get a load of me in 08 and 09 when I’m regional VP on the executive panel). AAR cheer leads for NAR, it is an automatic response for the most part. NAR is going to do what it feels is in the best interest of the Members, and that happens to mean protection from outside interests and competition. It is why we are all asked to donate funds to the political action committee and whatnot. I’ve seen the process on the national level but at this point do not have a full grasp of things. I can tell you that I probably have a different agenda than many on the national level at NAR, and perhaps someday I’ll get to rabble-rouse with the so called establishment.

    If I’m not wearing my leadership hat I’m more inclined to agree with what you’ve written in your post. My motto sort of is ‘only the strong survive’. I question the wisdom of being a paying member of any Association (national – state – or local) on any given day (especially after serving for the length of time I have to this point).

    I’ve come to realize that the only way to affect change, though, in this entire organization is to be a leader and lead the charge for the kinds of change you are speaking about. Cathleen has hit the nail on the head as well with her ‘fresh thinkers’ comment. Could NAR and other Associations be due for a little revolution?? Could it survive one?? I think the national bloggers are a good place to start identifying the ones that could carry the ‘revolution’ banner… but will they?? I can’t answer that as most seem to be more interested in technology and widgets for their blogs than anything else (and I’m a little bit guilty of this as well).

    Of all the RE blogs I read with regularity, only Jim Duncan appears to be someone that is filling the volunteer leadership role. I’m sure there are more but I haven’t found them. I’ll be the first to say that it quite a feat to work for clients, work a blog, and still somehow volunteer the extra time that is hard to come by to be in a leadership position to perhaps affect ‘needed’ changes.

    It’s time for some of the ‘fresh thinkers’ to be more involved. I can’t challenge the broker/agent relationship on my own. For now I’m the cute little kid in the room full of big time brokers that share a common interest. I’m one of a very few that is working solely for myself as an agent (not a broker), meaning I have no staff back in my office running my business while I’m at the many meetings I attend on an annual basis. I don’t have any automatic pay checks waiting for me when I get back to my office and have to return all the calls I’ve missed and pray that my clients are still my clients. For now I appear to be harmless to the establishment. I’ll be in the minority and the lone voice of dissent until they finally excommunicate me for being what amounts to the bastard step-child rocking the boat.

    I’d love the chance to lead the charge to affect the kinds of changes that you’d like to see, my question is when I give the order to ‘CHARGE’ — who will be with me??

  6. Kevin Boer February 13th, 2007 8:00 pm

    While agreeing with much of this post, the obvious question to ask you, Greg, is (similar to here) whether or not you’re a NAR member. If so, why? If not, why not?

  7. Greg Swann February 13th, 2007 8:30 pm

    > whether or not you’re a NAR member. If so, why? If not, why not?

    I am a member, of course. I worked profitably for about six months doing leasing before I joined the MLS/PAR/AAR/NAR all at once. The reason is that I wanted to start selling, and one cannot work efficiently in residential real estate sales in Phoenix without joining the NAR. I obey every rule I have agreed to obey, FWIW, even if I don’t like them.

  8. Greg Swann February 13th, 2007 8:53 pm

    Sorry, Todd, but I don’t think you’re going to recruit any volunteers. When Cameron was in the third grade, I was invited to be on his school’s Site Council. I sat through a half-hour of one meeting and told Cameron he was on his own.

    The NAR will change when it gets beat up enough, not before.

    Here’s something that should give everyone pause: Zillow.com is willing to undertake the sine qua non act of real estate brokerage for free. The work they’re doing is not enough to get the house sold, but nothing can happen without the job they’re willing to do for no compensation.

  9. Brian Brady February 13th, 2007 9:23 pm

    GREG SAID: “I have argued before for getting rid of the real estate licensing laws — or, at a minimum, eliminating the broker level of licensing”

    I argued the opposite; get rid of the agent level of licensing to put the onus of supervision on the broker. Either way, the states just don’t enforce the licensing laws so do away with it. It really is a shark with no teeth (READ: big, harmless fish)

  10. Todd Tarson February 14th, 2007 7:38 am

    Please excuse me Greg, I get carried away about these things. We’ve talked before and I know that you have no interest in doing the leadership stuff… I really wasn’t trying to recruit you per se.

    The NAR is already getting beat up, in my opinion. The DOJ, the media, and even the rascally bubble heads are delivering the blows for right now… with the Zillows and others on deck for their shot.

    Personally I have already too much time invested not to try and help in my own way in the organization. I’m willing to take that on.

    At every leadership meeting I attend I do make it a point to get on the record and say that there are a number of issues that are a direct threat to the various organizations (MLS and Associations). I even say that if we aren’t doing enough to address the issues then it will undoubtedly make me question the value of remaining a paying member of said organizations. I think it is that serious.

    Your points that you brought up are 100% valid, and I agree to a certain degree… as long as I’m not wearing my leadership hat.

  11. Jim Gatos February 14th, 2007 1:02 pm

    Hello…

    Here is my solution..

    1. Require a minimum 2 year College degree (Associate is fine).. for BSRE (Bachelor’s specializing in Real Estate)…

    2. No licenses of any kind will be handed out to anyone. First stage of becoming a “Real Estate Practicioner” will be to actually work as a real estate agent in a Brokerage office for a minimum of 2 years. Performance reviews and so forth will be held.

    3. At the end of 2 years, MINIMUM REQUIREMENTS WILL BE MET, and then the agent will be given a license to practice real estate. He or she can still work where they are, or open up their own.

    4. It’s harder to get a license to become a hairstylist in some states, (Thank God!) than it is to be a real estate agent…What will the above do?

    1. Knock out A LOT OF PEOPLE who were “thinking” of real estate.

    2. Bring real professionalism in the field.

    3. Change the public’s perception that real estate is an “industry” to that of a “profession”…

    4. Knock over 30% of the present “Realtors” out …

    However, I do think there should be a Grandfather clause, to allow those agents in now to stay.

    The NAR is a fine group, and I have been a member for over 20 years. However, I had to become one. Would I if I had a choice? Probably not.. The profession is changing no matter how much resistance is from NAR. Howver, is it changing for the better?

  12. Greg Tracy February 16th, 2007 12:27 am

    It would be completely insane to rid the industry of licensing requirements. That sort of drive-thru approach would eliminate any resemblance the industry has of a being a true profession and cause people to jump into the business in the same fashion that people get married in Vegas- from drunken bets, late-night boredom, and as a joke.

    The profession needs to be entered into with preparation, education and mentorship. This is how great brokers bring new agents into the industry already, the problem is that there are too few great brokers out there and by putting the responsibility completely onto brokers to educate and ready new agents you are doing exactly what hasn’t been working and expecting things to change- hence the insanity in the theory.

    To become a professional Realtor, a person should be required to get a college-level education about agency, contracts, the history of brokerages and case law that is relevant. And there should be mentorship as a major part of it.

    I posted about this here:

    http://blueroof.wordpress.com/2007/01/25/real-estates-revolving-door/

    Jim brings up some good points about how it would affect the industry. Less people would jump in because, “why not” and there would be an actual level of dedication to the profession in the same way that you can’t just fall into being an attorney or a doctor. We are dealing with a lot of money for people and acting as legal agents for our clients and everyone in the industry, whether blessed with choosing a good broker to associate with or not, should be required to know what that means.

  13. Greg Swann February 16th, 2007 6:33 am

    Greg, I don’t think you read the linked article about getting rid of real estate licensing, so I’ll save us both some time by quoting from it:

    In reality, every minimum standard becomes the de facto maximum standard — and the minimum standard in real estate is outrageously low. Yet consumers are convinced that licensing and license enforcement are sufficient protections — Captain America with a clipboard — for the biggest asset they own.

    This is a mistake, and, arguably, it is also the root cause of all the problems affecting the real estate industry. The NAR campaigned state-by-state for licensing laws not to protect the consumer but to protect its own membership from “unfair” competition. The NAR is a cartel in the sense that real estate licensing laws exist to limit competition, thus to sustain artificially high prices. In naked essence, the laws consumers think are protecting them exist to fleece them instead. This is true of every sort of commercial regulation — and this is why regulation is sought by the established firms in a particular line of business in the first place.

    An obvious first place for the Department of Justice and the Federal Trade Commission to start, in attempting to fix what ails the real estate industry, would be to deregulate everything. If Chester the Barber wants to tape pocket listings to the mirror behind his chair, let him. If Sellsius° wants to do more than advertise other people’s listings, let them. Caveat emptor, of course, but let the buyer beware in full cognizance that due diligence and care are all the protection an emptor or venditor can ever have in any commercial transaction. The courts might make you whole after you are injured, but your beer-bellied Batman is always scarfing donuts when you need him the most.

    But: This won’t happen. Real estate licensing requires so little training that almost anyone can pass the state test to get a license. Real estate practice requires so much knowledge, experience and luck that almost no one can succeed in this business. If we got rid of the licensing laws and just let people sink or swim, almost everyone would sink. The survivors would compete on reputation, which is the best protection consumers can obtain. But this makes way too much sense, so we know it will never fly among a people irredeemably addicted to compassionate lies.

    More laws are not the answer. These stupid laws are what got us into this mess in the first place.

  14. Jim Gatos February 16th, 2007 6:52 am

    I have to agree with Gregg.. even though I am also for tighter education in real estate.

    The problem however, is the fact that that 90% that fails is the 90% that gives us a bad name. Out of that 10%, it becomes even rarer when a Truly Great Star, A “Russell Shaw” comes out. That’s why I think the industry needs a shakedown. In my market area, I’ve noticed most of the Truly Great Agents are professionals, they were professionals in other fields, and only one I know became a top producing agent who never went to college. I also know a couple of college graduates who couldn’t hack it in real estate for over a year. Maybe, by and large, the present way is the best way…

  15. Brett February 16th, 2007 8:53 am

    Loan decisions are based on the merits of the loan. Borrowers are required to meet the banks underwriting guidelines in order to qualify. These guidelines are based on the risk factors and the profitability of the loan. The loan is then pooled together with other similar loans and sold on the secondary market. Banks make loan decisions based on profit and risk. Higher the risk, higher the rate. What if the bank started to also consider the real estate commissions in their loans? What if the perceived risk was drastically reduced to the bank itself because of their profit from the real estate side of the business? The large pools of mortgages would be tainted with higher risk loans. In Europe they discontinued this practice because it devastated their mortgage system. Even banks that did not also sell real estate were affected by higher interest rates in order to cover the losses caused by the banks who were writing high risk “A” paper loans. Ultimately, the consumers lost. Under no circumstances should banks be allowed to sell real estate. This would ultimately hurt the “A” paper market and would devastate our mortgage banking system. We have enough problems with our sub-prime system…why screw up the rest of it?

  16. Greg Swann February 16th, 2007 9:02 am

    Brett, the argument behind every law is the one you make here: Something might go wrong, so let’s push innocent people around at gunpoint. Sooner or later everyone wakes up to the idea that pushing innocent people around at gunpoint is by far the worse fate. For too many of us, this epiphany occurs in the instant just before the gun is fired. Think what a jump you could get on the rest of humanity by renouncing the use of force against innocents today!

    I’m just tweaking you. Obviously if banks cuase injuries, they are subject to civil judgments. The last thing we need is more laws.

  17. Greg Tracy February 16th, 2007 11:23 pm

    I agree, more laws aren’t a solution.

    A shakedown can only happen when the 90% of bad agents are driven out by the 10% that are good. Part of the solution is to ensure those who enter into the profession in the future fit into the “good” category and this can only be accomplished with education, training and mentorship.

    Dropping your drawers will only lead to your pants around your ankles- ridding the entrants of any and all requirements does nothing to help anyone.

    I don’t think a shakedown will, or even could, happen, but I do think that replacing the get-rich-quick new agent mentality with that of a professional setting out on a career could help us move in the right direction.

  18. Brett February 17th, 2007 9:49 am

    Greg T., I agree that higher quality agents will only help our industry.

    Greg S., I do not agree that we should sacrifice our entire mortgage banking system because of some utopian view on free market capitalism. The laws to keep banks out of real estate are there to patch a problem. I too have a free market view similar to those of Rand or Freedman but we should not martyr our banking system because of our ideology. The NAR understands this, and while I do not agree with a lot of their views, in this matter they are protecting the public.

  19. […] I learned about S413 from Hot Property and BloodhoundBlog, which lead to articles on Realtown and the NAR Web site. The articles referred to a letter that Clinton and Senator Wayne Allard, who joined her in introducing the bill, had “circulated” in which Clinton and Allard allegedly stated that “allowing banks into real estate hurts competition and consumers.” […]

  20. Edyn Real Estate May 15th, 2007 10:42 pm

    I want to bring this topic back to the post. NAR. NAR is the leadership. The comments started talking about fixing the agents. It doesn’t matter what kind of players you have if the coach keeps calling the wrong plays.

  21. […] I’ve never understood why a business sector like real estate, which is so essential to our economic stability, can let situations like this persist. Buying a home should not be such a pressure-cooker transaction, fueled by shady and unscrupulous brokers and agents who engage in collusive, monopolistic business practices that distort the market and take advantage of people’s fears. […]

  22. […] estate is a vendorslut industry, after all, built by Babbits and parlor-pink progressives who preferred pushing innocent people around at gunpoint to free enterprise. Inman.com and Realtor magazine are vendorslut enterprises, after all — the advertising is […]

  23. […] new model should not rely on industry advantaged tax laws, specious employment relationships and Rotarian Socialism for its existence.  The idea of a churning work force must be the antithesis of our new […]

  24. […] new model should not rely on industry advantaged tax laws, specious employment relationships and Rotarian Socialism for its existence.  The idea of a churning work force must be the antithesis of our new […]

  25. […] new model should not rely on industry advantaged tax laws, specious employment relationships and Rotarian Socialism for its existence.  The idea of a churning work force must be the antithesis of our new […]

  26. […] end game.  Greg Swann recently reposted a very intelligent treatise on something he likes to call Rotarian Socialism and how each “fix” only begets a greater problem down the road.  As a matter of fact, […]

  27. SJ Doc October 7th, 2008 4:36 am


    The encapsulized summation of Rotarian socialism with which I’m most familiar (the basis of it found in the Designer’s Notes of Greg Costikyan’s wargame *Pax Britannica* [1985]) has always run something along the lines of:

    “Three cheers for free enterprise, and keep them government grants, subsidies, parities, sweetheart deals, quotas, set-asides, tariffs, trade agreements, regulations, no-bid contracts, and bailouts a-coming!”

    The majority of your readers not being wargamers (or old SPI grognards, at any rate), I think it helpful to provide this handy appreciation.

  28. […] end game.  Greg Swann recently reposted a very intelligent treatise on something he likes to call Rotarian Socialism and how each “fix” only begets a greater problem down the road.  As a matter of fact, Mr. […]