By Michael Repka, ESQ | CEO & General Counsel
Over the years, a number of fantastic teachers and professors have inspired me to push myself, explore varied interests, and maintain a thirst for knowledge. To this day, I owe a debt of gratitude to all of them for the time they devoted to helping me learn and, more importantly, for helping me appreciate the process of learning.
That is why I was both humbled and honored when Menlo College asked me to be an adjunct professor teaching a course on real estate economics and taxation. When I was a young law student, I found some of my classes with adjunct professors particularly interesting because of the “real-life” experience brought into the classroom. Seeing the same excitement in my students’ eyes was truly remarkable.
As the semester progressed, the students seemed to transform from young people looking to fulfil a requirement of the real estate program into professionals intent on building foundations for careers in real estate.
More recently, Dr. Leslie Sekerka, the director of the Ethics in Action Research and Education Center at Menlo College, was searching for a Realtor® to present three classes on ethics in real estate. Once again, I was honored that Professor Harold Justman, a real estate attorney and expert witness on the subject of real estate broker ethics and the standard of care for whom I have tremendous respect, recommended that Dr. Sekerka interview me. After a couple of conversations, she asked me to address this important topic.
The time that I spent with Dr. Sekerka’s students was every bit as exciting as the time I spent with my own class. In fact, there were some aspects that I found even more rewarding—most notably, the subject matter. All too often, people view ethics as rules that interfere with their ability to make money, whereas Ken DeLeon and I have found the exact opposite to be true. The rules of ethics, be they those that apply to Realtors® or the more stringent rules that apply to attorneys, are really just enumerated lists of the ways clients and fellow professionals want to be treated. It is no surprise that treating clients the way they want—and deserve—to be treated actually attracts more clients. In fact, I believe that the very strict policies we follow with regard to conflicts of interest and transparency directly contribute to the phenomenal growth we have experienced over the five years since forming DeLeon Realty.
Before introducing me to her class, Dr. Sekerka shared some of her past experiences with Realtors® which were less than favorable. Her encounters left her with the sense that certain Realtors® thought of the rules of ethics as an impediment that needed to be “gotten around.” While these types of stories always make me cringe, I am comforted to know there are many good people out there in real estate. Unfortunately, I believe the system is flawed, and key elements of the business model commonly followed do little to discourage unethical behavior. In fact, the commission-based one-man-band model creates incentive for some agents to push past the rules of ethics in an effort to close the deal.
My presentation started with a description of the way we have structured our business: why we divided the company into a listing division and a buyer division to prevent conflicts of interest, how we eliminated commission, and what we have done to transform the traditional real estate model into one with better aligned incentives.
After laying this foundation, I explained why I don’t think it is enough for office managers to tell agents that they have to behave ethically. Rather, as leaders in the industry, we have to eliminate the systemic flaws that encourage bad behavior. If salespeople only get paid if their deals close, and they need the commissions to pay their bills or feed their families, then there will be always be temptation. Similarly, if agents get paid twice as much if their buyers get the house, irrespective of whether this payment comes in the form of commission or a referral fee from someone in his or her office, can we really expect them to be unbiased?
While these were rhetorical questions, I could see students perk up. Once I explained how well buyers and sellers have responded to our model, and how this interest directly contributes to our bottom line, they were hooked. It turns out that treating clients and other agents fairly and ethically is really good for business. While I was dying to tell them about our most significant innovation to date, we decided to hold the announcement about waiving the buyer-side commission when DeLeon Realty is on both sides of the transaction until April 28th. (see “DeLeon Realty’s Most Significant Innovation Yet!”)
Menlo College has a fantastic program for people interested in developing a strong foundation for a career in real estate. Like much of the business curriculum, this program is made considerably stronger from Dr. Sekerka’s pragmatic and compelling approach to interweaving ethics into the curriculum.
My first foray into academia was so rewarding that Ken DeLeon decided to follow suit. He is now Professor Kenneth DeLeon!