The Start of Something Big

Two million dollars. It was a shocking sum, representing the hard work and hopes of dozens of unsuspecting people who had put their trust in a respected businessman.

May 1, 2008

Chicagoan Peter van Vlissingen had been known as a reputable businessman and generous philanthropist before his arrest on November 16, 1908. Charged with forging mortgage documents and title deeds, he confessed to swindling 25 people out of $700,000 over the course of 18 years.

Fearing for his own safety once the news of his arrest became public, he asked the court for a speedy trial, which he received: Arrested at 1:30 p.m., van Vlissingen was brought before the court, sentenced, and in prison by 5:15 that same afternoon. A few days later, the Illinois state’s attorney discovered that van Vlissingen had, in fact, defrauded more than 100 people through forgeries totaling nearly $2 million. Outrage spread rapidly as news of the scandal was publicized in front-page headlines across the country.

Van Vlissingen’s case brings into sharp focus the challenges facing honest real estate practitioners at the beginning of the 20th century. Land had become a major commodity as the rapidly growing middle class began to aspire to homeownership. Although real estate was full of trustworthy, respectable men who wanted to help their fellow citizens, sharks like van Vlissingen were difficult to avoid. Almost anyone could declare himself a dealer in real estate, and opportunities for fraud were rampant. Apart from outright fraud, there was misrepresentation.

A typical lure was for a “free” lot in exchange for a small sum of money, typically less than $100. Unfortunately, there was a catch. The lot might be too small to erect a home — unless the buyer also purchased an adjoining lot at a higher price.

Just a few months before van Vlissingen’s arrest — and five blocks from his offices — 120 men from around the country gathered to organize what would later become known as the NATIONAL ASSOCIATION OF REALTORS®. Their aim was to advocate for their industry and stamp out the van Vlissingens of the world.

As Edward A. Halsey, chair of the national organization committee, put it: “We propose, if we can, to wipe out the riffraff that brings this business into disrepute.” It would become standard rhetoric at association meetings as the organizers worked to establish themselves as the standard bearers of the “square deal.”

A Half Century in the Making

The movement to organize had been building for more than 50 years. From the colonial era through much of the 19th century, the buying and selling of real estate was a relatively simple process, with land usually sold at auction, given away by the government, or transferred through some agreement between owner and buyer. As the population grew, so did demand for land. Larger tracts were divided into smaller parcels by investors and speculators, and land granted by the government to settlers or as compensation to former soldiers eventually needed to be resold.

The transfer of land from one owner to another became more complex, creating a need for someone familiar with local real estate practices and available properties in the area. In cities where real estate activity was high, practitioners began to form local organizations as a means of sharing information about properties for sale and becoming acquainted with other practitioners who could be trusted.

The first such organization was the New York Real Estate Exchange, formed in 1847 but dissolved a year later. A decade later, in 1858, came the Baltimore Board of Real Estate Brokers and Property Agents, still in existence today as the Greater Baltimore Board of REALTORS®. The Baltimore board was formed for the purpose of “regulating the business of the real estate broker,” according to its constitution. Members were obliged to respect their fellow brokers and follow the board’s rules of ethics and were able to enjoy a convenient central marketplace for properties. Those who violated the rules were expelled from the board and had their name and reason for expulsion publicized in local newspapers.

Recognizing the advantages a local exchange could offer to both real estate brokers and the public, other rapidly growing cities followed in Baltimore’s footsteps.

Practitioners who had organized locally soon recognized the need to do so on a national level. Architects, bankers, doctors, educators, lawyers, and other professions already had national organizations in place, and real estate practitioners wanted to take their place among the professions.

Several early attempts were made to establish a national organization. The most successful of these was the short-lived National Real Estate Association, formed in Birmingham, Ala., in 1891. By March 1892 the National Real Estate Association had 266 dues-paying members, primarily from Atlanta, Chicago, Duluth, Minnesota, and other fast-growing cities. At its 1892 meeting in Buffalo, N.Y., 1,500 real estate men from almost every state and Canada attended. Speeches were given, committees were formed, and roundtables were held on such topics as the importance of ethics, property taxes, and model appraisal forms.

Although much was accomplished in Buffalo, the National Real Estate Association soon began to unravel. The association had no means of collecting dues and no paid executive or staff to coordinate activities between meetings, so little could be done before the delegates reconvened at their next session, planned for St. Paul in October 1893. By that time, the United States was experiencing one of the worst economic downturns in its history.

Brought on by a series of bank failures and devalued currency, the Panic of 1893 caused high unemployment for years and virtually stopped the country's urban expansion. In July, the National Real Estate Association sponsored an international real estate congress in Chicago at the World’s Columbian Exposition of 1893. By October, however, membership was dwindling. The St. Paul meeting was abruptly cancelled for lack of financing, and efforts to revive the association at a gathering in Milwaukee in early 1894 failed.

An attempted revival came 10 years later in the summer of 1904, when a local exchange in upstate New York called for a meeting in St. Louis to form a national association. The 100 delegates formed a new organization, also called the National Real Estate Association, with the objective of providing business services such as a national listing exchange and a low-interest loan bureau. Officers were elected and dues were set at $6 per year. The delegates met again in February and formed one of the oldest state associations still in existence today, the Real Estate Association of New York State. But after February 1905 the second national association disappeared from view.

Please Come to Chicago

In July 1907 the Portland (Maine) Real Estate Association issued an invitation to other local boards to gather in Maine for the purpose of forming a national real estate board. Most boards declined because Maine was too far for many of the delegates to travel, but the desire to form a national union wasn’t going to be squelched. At a meeting of seven Midwestern real estate boards hosted in Duluth, Minn., on Aug. 3, 1907, Edward Sanderson Judd of Chicago made the statement that ultimately launched the NATIONAL ASSOCIATION OF REALTORS®.

“I wish to call to your attention,” said Judd, “the possible desirability of the formation of state, interstate, and national organizations of real estate men. If the idea of a national organization — or even a Central West organization — should meet with the approval of the seven associations here represented and of other such organizations as might care to join the movement, it may be possible to have a gathering at, say, Chicago [in] another year.”

Chicago, besides being centrally located, was already of considerable importance in the real estate world. The city had risen from the ashes of the Great Fire of 1871. The Chicago Real Estate Board — forerunner to the Chicago Association of REALTORS® — had been in existence for more than 20 years. Judd’s proposal was immediately accepted by the other six boards meeting in Duluth. On March 15, 1908, the Chicago board sent invitations to the 45 real estate boards known to be active at the time.

Organizing nationally meant reshaping the real estate business, and the 120 delegates who came to Chicago in May 1908 set out to build an organization that would achieve that end. “An outcome of the gathering is to be a national organization of real estate men,” explained an editorial in the Chicago Tribune shortly before the meeting began. “Such an association has been contemplated for a long time. It is strongly urged in the general interest of a business whose importance and influence have steadily increased during recent years.”

Halsey told those assembled that the primary duties of the new organization would be to adopt a uniform method of doing business, make every effort to establish a unified system of real estate laws throughout the country, and of course eliminate the poorly qualified “curbstoners”, who operated without a bricks-and-mortar office, and the untrustworthy sharks.

Delegates adopted the name National Association of Real Estate Exchanges. The membership base came from the state and local real estate exchanges, but individual real estate brokers from areas not covered by exchanges were also allowed to join. Members came from both the United States and Canada (Canadian boards went on to create their own national body, the Canadian Real Estate Association, in 1943). Dues were set at $1 per year, with a membership fee of $50.

The new association was to be run by an executive committee made up of one representative from each member board, a board of managers that would act between meetings of the Executive Committee, and a paid executive. Halsey was selected as the national association’s first executive secretary and given a stipend of $200 for the first four months to cover expenses.

Among other provisions outlined in the constitution were the formation of standing committees on financing and auditing, taxation, state and municipal legislation, organization of new local boards, and a code of ethics. In other sessions, the men discussed the burdens of taxation and the concept of municipal bonds, conservation of the nation’s natural resources, liberalizing immigration laws, and ways to show the benefits of the organization to real estate brokers and the public.

Early Priorities

The National Association of Real Estate Exchanges was officially incorporated on July 2, 1908, with an initial association membership of 1,646. Halsey immediately undertook a campaign to recruit new members. During his tenure as executive secretary, which ended in June 1909, he also worked on a list of goals that the association might accomplish in the future, a list that included such ideas as the widespread use of exclusive agency and making available a sign that could be displayed on members’ office walls.

The association’s annual conventions became one of its most important vehicles for exchanging ideas. Discussions of city planning, building restrictions, and subdivision layout dominated the convention held in Detroit in June 1909. Taxation was the major issue discussed in 1910, and uniform state property laws and model housing codes were on the minds of attendees in 1911.

Meanwhile, the foundation was being laid for the association’s federated structure. Executive Committee members, meeting in July, considered the subject of “a proper basis upon which to admit state organizations” and the question of “accepting individual members from cities which had a local board. . . .” It was the first step in forming what is known today as the three-way agreement.

By 1912, the national association had begun in earnest to tackle the problems that faced the real estate profession. Under the leadership of Samuel Skidmore Thorpe, the association’s president in 1911, the organization took steps to strengthen itself. Thomas Ingersoll, who, like Thorpe, hailed from Minneapolis, was hired as the first full-time executive secretary in 1912, and the headquarters was moved from its temporary quarters at the Chicago Real Estate Board to a space at Thorpe’s office in Minneapolis.

With Ingersoll working full-time to coordinate the association’s activities, it was in a better position to act between meetings. It began to issue news statements to the press and could communicate more frequently with members through the National Real Estate Journal, the association’s magazine, which began publishing in 1910.

Over the course of the next few years, the national association took several steps in developing the real estate profession and becoming the organization we know today. In addition to educating members, it began making its positions known to the nation’s lawmakers. Of more direct importance to individual real estate practitioners was the adoption of the association’s Code of Ethics in 1913 (See “The Golden Thread”) and the term REALTOR® in 1916.

In the same year, the association name was changed to the National Association of Real Estate Boards, reflecting the changing nature of the local member organizations from simple exchanges of listing information to more service-oriented professional boards. (The organization wouldn’t become known as the NATIONAL ASSOCIATION OF REALTORS® until 1973.)

The number of people who chose to accept the association’s Code of Ethics and become REALTORS® grew rapidly. William W. Hannan, president in 1909, had declared at the founding meeting that the ultimate membership goal of the association should be 4,000 to 5,000 members, but that goal was surpassed just three years later in 1912.

As the association grew, it took steps to define its members’ business practices and specialties and to advocate for a uniform system of license laws to ensure baseline qualifications. The association officially endorsed the licensing of real estate brokers in 1916.

With the end of World War I, demand for real estate services grew — and more brokers sought to set themselves apart as professionals. NAR’s membership expanded from 6,700 in 1918 to more than 24,000 in 1926.

That year, the housing boom that began after World War I was losing steam. Increasingly unaffordable homes and the instability of the mortgage market contributed to declines in the ranks of REALTORS® for the first time since 1908. By the time the Great Depression was in full swing in the 1930s, membership hovered near 12,000.

NAR worked closely with the federal government in formulating a series of measures that would help revive and strengthen the real estate market. As the nation began to climb toward economic recovery in the late 1930s, membership rose. NAR was on its way to becoming the nation’s largest professional association and The Voice for Real Estate®.

Frederik Heller

Frederik Heller is Director of Library Operations and Information Strategy at the National Association of REALTORS®. He can be reached at fheller@realtors.org or 312-329-8361.

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