Real Estate Agents on HOA Boards

What are your opinions on having real estate agents or brokers on an HOA Board of Directors, irregardless of whether they at any point in time have been involved in the transaction of real property in the HOA in which they are members? I view having real estate agents on a Board as a conflict of interest.

Under what basis would you deny them a seat if they have been voted on?

NpB,
I will give you my reasons for not liking them on my Boards in the past.

1) They tend to want superficial fixes that Sells homes like flowers and ornamental things.
2) I have yet to me one that has not looked out for their own best interest ahead of everything else.
3) Personally I feel like they have an advantage knowing who is behind in dues.
4) They all end up Farming in the Community they are supposed to be leading. Conflict of Interest yes.
5) I have not met many Board Members that do not have a reason why they want on the board. Selling homes is not a good one in my opinion.
6) They usually do not make good teammates.

OK so I guess you could say that I am not a fan of Realtors even though I have a few that I have used multiple times over the years. I will just say that if I could buy most for what they are worth and sell them for what they think they are worth I could make a lot of money.

If they are voted in by the Community they can only be voted out by the Community.

Np,

Professions of individuals serving on the board should not be considered as a reason to keep that individual off.

For example: I've had individuals who were attorneys who I served with on the the board. Their personalities ranged from one end of the spectrum to the other and places in between. That doesn't want me to include or exclude attorneys from serving on our board.

Take each individual and judge them on their merits.
Each one can bring a unique perspective to issues a board faces.
Some individuals can be complete jerks and still provide a great service to the community.

Wow.

You can say the same things about many board members who are not realtors. I think that most board members are serving out of self interest: they want to protect their investment. Doesn't make 'em lousy directors.

If homeowners want to give their votes to folks who are not realtors, that's their business. But you can't prohibit them from serving - that's discriminatory.

I see no reason to exclude realtors. I've never been on a board with one, though they've owned property in my HOA. Literally everyone who serves on an HOA board is doing so out of self-interest. Plus, realtors are going to be more knowledgeable about issues than the majority of people who serve on boards anyway.

I'm fine with CC&rs having language about conflicts of interest, especially if it is not already addressed by relevant laws, but it shouldn't specify individual professions.

I say you cannot ban an owner from running for the BOD based on their profession. I have no problems with realtors on my BOD unless they try to play lawyer which many of them do. Not to generalize, but the two PIA professions I have served with are lawyers and school teachers. The lawyers always wanted to get legal opinions. The school teachers wanted to treat owners like school children as in punish all based on the behaviour of a few and they were not use to making big decisions. The worst was one I served with had a law school degree, but never took/passed the Boards to practice law. He was scared to death of making decisions.

I do agree many get on the BOD as they have an agenda (as I did in my first HOA) and quite often when the agenda is met or refused, they become useless.

If they're homeowners, they're "protected" by the CC&Rs and one of their rights is serving on the board (unless excluded for some other reason, such as not being current in their assessments).

I agree that the best boards have people with different skills who can play different positions.

Speaking of doctors, one of the odd little truisms we kicked around while I worked at an investment firm was that doctors as a group are terrible investors. No clue why. As with university professors, the only thing I could come up with is that they had been educated within an inch of their lives and they truly didn't understand that there was any more to learn. (My experience with grad school was just the opposite: it taught me how little I did know.)

"Correct, but homeowners can amend the CC&Rs to prohibit real estate agents and brokers from serving on the Board, or the state legislature can pass a law enacting such statewide for planned communities and condo associations."

Maybe while you're modifying the CC&R's to exclude an entire profession you can also exclude anyone from the Board that is narrow minded and unable to make decisions on a case by case basis. After all, people that make wide sweeping generalizations are likely to take the same approach on many other topics that affect the Board.

I can only speak from personal experience. The longest serving member of my BOD is a realtor. He's an OK guy, but he's high maintenance.

I remember when I first got on my BOD. I decided that I would go talk to any homeowner who had a complaint. But I didn't want to go alone. So I asked him to go with me. At the first visit to an owner's house, he handed the owner several of his business cards. After we left, I told him never to do that again. And that's the key distinction. I was there for HOA business only. He was there for something more. On later visits to other owners, he didn't hand out his card, but only because he knew I would confront him about it. He saw nothing wrong with handing out his card. Nothing I ever said has convinced him that it was inappropriate.

I've had lawyers and insurance brokers on my BOD. Some attempted to solicit business. I made noise about it, and they stopped. But somehow, my realtor/BOD member thinks this is his private hunting grounds.

Around 75% of the time, the BOD learns that an owner is thinking about selling before the house gets listed. Some ask if we know of anyone in the market to buy. Some specifically say they would like to do a private sale to avoid broker fees. When the BOD learns that someone is thinking about selling, I consider this to be privileged information. Does he? No. He starts soliciting to get the listing. He's only 1 of 6 realtors living in my community. Why should he get 100% of the leads? And why should the BOD have to be careful about what they say in front of him?

A couple of years ago, a tenant was thinking about buying the house he was renting. But the tenant knew that the HOA had some major tree projects in the works (removals and plantings). What we did or didn't do might affect what the tenant was willing to pay. It also might affect whether the tenant used our realtor/BOD member as his agent on the purchase. I saw this as a huge conflict. He didn't. I even got an opinion letter from the HOA lawyer - I asked around half a dozen questions on which conversations and which BOD votes the realtor should participate in. Also, what information could our realtor/BOD member share with the tenant. A key distinction between the lawyers' answer and the realtor/BOD member's perspective was on whether a conflict existed when a potential client was involved. The lawyers said yes. He said no. In the end, it didn't matter because most of the other BOD members got pissed at me for making a fuss. Wasn't a big enough issue in their eyes to get worked up about.

Many more stories I could tell, but I'll end on a discussion of fiduciary responsibility. The Association of Realtors hammers into every realtor's head that they have a fiduciary duty AS A REALTOR - TO THEIR CLIENT. It's a liability issue. Get the best deal you can for the client. But really - How often does the best interest of the Buyer or Seller align with the best interest of the HOA. Best deal for the client might mean that the client should try to pay less to the HOA, wouldn't it? Or get the HOA to agree that less work is needed to bring the house up to HOA standards? How can you be a fiduciary for both the client and the HOA?

With all the "training" he gets from the Association of Realtors about being a fiduciary to his client, I don't think he can deal with anything that comes from a contrary point of view. His realtor fiduciary responsibility is bouncing around in his head every waking hour. Personally, I think he's clueless about any other "fiduciary" responsibility.

In the end, nothing will change. We struggle to get anyone to run for the BOD. He'll never step down. Board member attitudes are split. The passive ones don't want any conflict. The assertive one will push back, but the effect will only be short term. He'll be at it again as soon as there's another real estate opportunity.

Dang tablet - I meant to say realtor aren't the only ones who can have conflicts of interests sometimes those conflicts are even worse.

I agree. I believe I have seen case law where a HOA tried to prohibit a certain "class" of members from being able to run for the board. The court said, nope, not allowed.

Just because, say, 75% of the members vote to change the CC&Rs to xyz does not mean xyz will pass the "fair and reasonable" test the courts have to apply from time to time. Property rights, such as eligibility to serve on a HOA board and so have more control over one's property, may not be removed casually.

Oops left the word "NOT" selling or buying Real Estate....

A job title or profession is not a legally protected class under federal or state statute.

Any HOA board member can do that. AHOA does NOT keep home values. Their purpose is to keep homes ATTRACTIVE to potential buyers so they will pay the desired prices. Having a Realtor skillset for doing this is beneficial.

Realtor is a job like anyone else. The do NOT work for the HOA nor do they spend more dues than any other member. They may sell home in the HOA because it is available to do so.

Do not get why Realtor is such an issue. They are just like any other member. Just may have the professional skills for knowing importance of selling property effects the HOA bottom line.

As I believe CathyA3 indicated, it's not about "discrimination" in the sense you mean it. It's about removing the contractual rights delineated in the governing documents (and possibly state statute). Your HOA's governing documents (and possibly state statute) are clear about what rights a member has. To amend the contract to remove certain people's rights (but not others), because of their profession, is arbitrary, capricious and a fundamental breach of the contract. It would never pass the "fair and reasonable" test for amending a Declaration.

Thanks for your thoughts Cathy.

Like you and others, I don't believe you could or should attempt to restrict a particular profession from serving on the BOD. But I do believe that, depending on the circumstances, BOD members with a perceived conflict of interest should have only limited participation in (1) BOD discussions prior to a vote, and (2) that BOD vote. In my request to our HOA lawyers for an professional opinion, I laid out half a dozen scenarios and asked (1) should realtor be part of the BOD discussion (able to influence the outcome), (2) should realtor vote (able to affect the outcome directly), and (3) should realtor discuss certain aspects of the issues with the potential client. These are the fine-tune distinctions that I don't think the other BOD members understood - So for me, it was important to have those questions and answers spelled out.

That said, I don't think this is just about one person's behavior. Nor is it about everyone in a profession. But the question I have is - Why to realtors tend to cross the line more often than other professionals?

One reason is access to privileged information. A BOD doesn't typically know when a homeowner is going to be in the market to buy insurance. But a BOD often gets advance knowledge that an owner will be selling soon. So the insurance salesman BOD member doesn't have any special advantage by being on the BOD. But the real estate salesman certainly does. Taking action that is personally advantageous based on privileged information is IMO the essence of a fiduciary breach.

Lastly, there's that training by the Association of Realtors. In training, my realtor BOD member learns that he has no fiduciary responsibility to a potential client - only to a signed client. But in the HOA attorney's letter, our lawyers explained that there is a potential conflict of interest (breach of fiduciary responsibility) even when the realtor BOD member is dealing with a potential client. Are those opposing points of view? And if what I just wrote seems a bit confusing, then you see the dilemma. When someone's been brainwashed a certain way, conversion to a way of thinking that can deal with two competing fiduciary responsibilities is very difficult -- In my case, near impossible. And not worth the effort. As I said in the prior post, he is high maintenance.

I don't know that they do. I think it's more that you're in a position to find out about realtors' bad behavior and maybe not so much about other professional groups.

Unfortunately large amounts of money tend to encourage people to "forget" about proper conduct, and the rewards for doing so generally outweigh the negative consequences when someone is caught. Not sure what we can do about it other than changing that risk-reward ratior somehow.

FWIW, I've had the same issues. My take is, if your on the board you need to steer clear of conflict of interest.

Advertising your firm as part of your HOA duties. Over the line. Buying and selling houses for investments in the community you are on the board for, as a realtor doing transactions in that community etc. same thing.

Common occurrence 1 = Homeowner tells a BOD member that they're looking into selling and asks if BOD knows anyone in the market to buy.
Common occurrence 2 = BOD discusses and provided feedback to potential seller.
Common occurrence 3 = Realtor BOD member solicits the listing by mail. Doesn't tell BOD.

Thoughts?

I had been managing HOA's for a number of years and have never run into issues that NpS brought up.

As for professionals getting their name out in their community, there are a number of communities that have websites or distribute newsletters that have paid advertising.

I think that's an unavoidable byproduct of having any professionals on the board who could benefit from getting their names out there, even if they don't actively try to solicit business. Homeowners tend to go to folks they know when they need something. The only way to stop it is to not allow the professionals to serve on boards at all, which we've already said is a non-starter.

And you'll always have board members who are afraid to make hard decisions because they don't want their neighbors to be angry at them. "I gotta live with these folks" is a common refrain. And I understand their point while acknowledging that it creates problems.

(Just as an aside, I ended my board service with some spiffy additions to my resume and a portfolio of work - web sites, newsletters, and the like - that I could use to earn money. So you could say that I'm now in a position to benefit financially from my board service. But again it's an unavoidable byproduct of doing the work. I suspect that many former board members are in similar positions since employers often look favorably on skills that people develop while doing volunteer work.)

Did ANY money go to the vendor or real estate agent from the HOA itself? If not, what is the conflict?