Robert Freedman is the former director of multimedia communications at NAR.
Time for Congress to Vote
NAR president says there’s little demand for bank-owned brokerages
August 1, 2005
NAR president says there’s little demand for bank-owned brokerages.
Bipartisan supporters of the effort by the NATIONAL ASSOCIATION OF REALTORS® to keep banking conglomerates out of real estate have called for an up or down vote on the Community Choice in Real Estate Act, H.R. 111, which would prohibit nationally chartered banks from brokering or managing real estate.
“Something this important should be heard in Congress,” Rep. Spencer Bachus, R-Ala., said at a U.S. House of Representatives Financial Services Committee hearing this summer.
In testimony at the hearing, NAR President Al Mansell also asked Congress to put the matter to rest by taking the legislation to the floor of the U.S. House and the Senate for a vote.
As in past years, a majority of House lawmakers—242 members as of late June—are cosponsors of the NAR-backed bill to keep banks out of real estate; a quarter of the Senate is also cosponsoring the bill. But the legislation has never been brought to the floor of either chamber for a vote.
Critics of the Community Choice bill say the NAR-backed effort would undo a compromise that led to passage of landmark banking reform legislation in 1999. That bill, the Gramm-Leach-Bliley Act, gave federal regulators discretion to identify services that are financial in nature so that banks could provide them. This law prohibits banks from engaging in some services, including real estate development, where they could face conflicts of interest as both owner of and lender on property. But the law is silent on other services, among them real estate brokerage and management.
That silence was intentional, says one of the law’s coauthors, Rep. Jim Leach, R-Iowa. That’s because lawmakers who negotiated the compromise thought it was important that regulators, who are closer to banking trends than Congress, determine what services should be deemed financial.
Rep. Michael Oxley, R-Ohio, House Financial Services Committee chair and a key supporter of letting banks into real estate, has been critical of NAR for trying to get Congress to take a fresh look at the compromise. “Is it appropriate to reopen Gramm-Leach-Bliley?” he asked at the hearing.
It’s clear that, for many members of the House Financial Services Committee, the answer is yes. On a broad, bipartisan basis, committee members at the hearing favored revisiting the compromise to keep banks out of brokerage.
“I don’t care if the Gramm-Leach-Bliley compromise is careful; [I can’t support it] if it’s not correct,” said Rep. Steve Pearce, R-N.M., at the hearing.
As it is, a bill introduced in late May by Oxley and House Financial Services Committee Ranking Minority Member Rep. Barney Frank, D-Mass., would expressly allow banks into real estate brokerage. That in itself is an attempt to revisit debate over the compromise, lawmakers said.
“The Oxley-Frank bill defines what banks should be allowed to do rather than leaving it to regulators,” said Rep. Paul Kanjorski, D-Pa., one of the coauthors of the NAR-supported bill.
The Oxley-Frank bill, called the Fair Choice and Competition in Real Estate Act, H.R. 2660, hadn’t attracted any cosponsors by late June.
In the absence of congressional action on the NAR-backed bill, Mansell said the Federal Reserve and U.S. Department of the Treasury should stop their efforts to publish rules that would allow banks into real estate. In fact, proposed rules to let banks into real estate published by those two regulators at the end of 2002 prompted NAR to seek the introduction of the Community Choice in Real Estate Act.
That joint Fed-DOT rulemaking effort, stymied for three years in a row by annual prohibitions enacted by Congress in appropriations legislation, makes little sense since there appears to be scant market demand for banks in real estate, Mansell said. As of late June, Congress was set to pass another prohibition on finalizing the joint rules—its fourth—as part of fiscal year 2006 appropriations legislation.
Now, in states where state-chartered banks are allowed into brokerage, few banks have moved into that business because they don’t see any reason to do so, Mansell said in his testimony.
Resources coming in wake of property rights decision
The NATIONAL ASSOCIATION OF REALTORS® is developing resources to help members concerned about the impact of the U.S. Supreme Court’s eminent domain ruling this summer. The ruling takes a weaker view of “public use” in condemnation cases than some state laws.
The high-profile case, Kelo vs. the City of New London, raises key property rights issues. The court sided with New London, Conn., city officials whose economic development plan calls for taking homes in a working class neighborhood to make way for private developers. The Supreme Court’s decision only reaffirms New London’s right to act based on its economic development plan. The opinion doesn’t preclude states from maintaining public use requirements that are more strict than the one involved in the case.
Typically, cities have exercised their eminent domain rights for projects with a direct public purpose, such as schools and bridges, or to remediate blight. In this case, the neighborhood isn’t blighted, and the property is to be turned over for development on the assumption that new commercial property that includes a research facility and a hotel, among other pieces of a planned “urban village,” will boost investment and increase tax dollars.
NAR had filed a friend-of-the-court brief jointly with the National Association of Home Builders, arguing for a stricter standard on the public use question. The court rejected NAR’s position, determining that it was inappropriate for others to second-guess the city’s comprehensive economic development plan.
NAR is identifying states, including Arizona and Michigan, that have a more restrictive definition of public use than the federal definition delineated in the New London case. The list is expected to be ready this fall. That information, along with other resources, will be made available to state Realtor® associations to enable them, if they choose, to seek adoption of a stronger public use definition in their laws. Meanwhile, associations can tap existing NAR resources, including public policy advocacy help under the Land Use Initiative.
Kendra Todd, 27, a partner in My House Real Estate Inc., a real estate marketing company in Boynton Beach, Fla., won a new job in May as Donald Trump’s “apprentice.” She beat out 17 other applicants during the reality show’s third season. Shortly after her win, she took time to talk to REALTOR® Magazine about the experience and what’s next for her.
What’s your title?
“The Apprentice.” I don’t actually have a title, nor do I need one. I’m going to be overseeing the $100 million renovation of a mansion on Palm Beach Island. I’ve been spending the summer in Westchester County, N.Y., with Carolyn Kepcher, executive vice president of the Trump Organization, learning the ins and outs of its golfing operations. I’m not sure whether Carolyn asked for it or if it’s something Trump thought would be good for me to do, but I’m absolutely thrilled.
What motivated you to choose the Palm Beach mansion renovation over the Miss Universe Pageant job?
Real estate is the bread and butter of the Trump Organization. If I want to get the most out of this experience, real estate is the right direction to take. Everything I can learn from Trump will help me in my career.
What happens to your real estate business now that you’re working for Trump?
It will continue to expand. My business partner, Charles Andrews, and I will add brokerage services to the company and soon recruit sales associates.
What was the hardest part of being on The Apprentice? The lack of privacy. You don’t have one moment to yourself. I like to reflect on the day and the decisions I’ve made and learn from the experience. But there are 17 other people with you all the time; there are always cameras on you.
What’s The Donald really like?
He’s fantastic—a dynamic individual with a wonderful sense of humor. He’s very respectful. He gives credit where credit is due. He’s a genius when it comes to branding; he uses the media to the best of his ability to maximize his company’s potential.
What do you think his gilded penthouse is worth?
It would be hard to put a price on it. I haven’t the slightest clue, honestly. He’s got so much art, gold-plated trim—I think it’s priceless.
Do you think the show portrayed you and your competitors fairly?
We knew when we signed on that there would be editing, which could manipulate the circumstances and the story. But you have to be confident in yourself. For the most part, I was treated accurately and fairly.
Have you always been a fan of Trump’s?
I’ve always been a fan of the spectacular real estate deals he’s organized. He really is the most incredible negotiator. I admire entrepreneurship. I’ve studied some of the things the Trump Organization has done to be successful.
Is this your final reality show appearance?
Most likely. I went on this show only because it was business. And I want to grow as a businessperson. I’m all business.
Earnings on the upswing
Your income went up in 2004 along with the boom in home sales, data from the 2005 National Association of REALTORS® Member Profile Report show. Median gross personal income last year for all REALTORS® was up an average of 7.2 percent from the last year that the data was tracked, in 2002. Existing-home sales rose 20.5 percent during the same period.
Within the average income increase are big disparities, however.
Brokerage managers saw the largest gains—those who manage and don’t sell saw their incomes reach a median of $86,000, a 26 percent increase over 2002, and those who manage and sell saw their incomes rise to $82,200, a 19 percent increase over 2002. Broker-owners who sell saw a solid 13 percent increase to $89,100 from 2002. Broker-associates saw a 1 percent gain to $67,900 from 2002.
But the median income of sales associates declined about 8 percent to $38,300 in the same period, largely because of the influx of new licensees who typically take years to get up to speed in their earning potential, say NAR research analysts.
For sales associates who’ve been in the business between six and 10 years, the median income in 2004 was $57,100, up 40 percent since 2002, and for associates with more than 26 years in the business, the median was $83,400, up 47 percent.
The lion’s share of real estate professionals continue to split commissions with their brokerage—69 percent of all practitioners, down slightly from 73 percent in 2002. The median year-end commission split agreement was 71 percent, 8 percentage points higher than in 2002.
The percentage of practitioners working under a 100 percent commission plan dropped a bit, too, to about 17 percent from 20 percent in 2002, while alternative types of arrangements saw a small increase. For example, practitioners earning a salary plus share of the profits doubled from 2 percent to 4 percent.
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Updated: September 30, 2022