Real Estate Ethics In Practical Applications
Published by THE COUNSELORS OF REAL ESTATE Ethics: At the Core ofReal Estate Education and PracticeReal Estate Ethics inPractical ApplicationsVolume 44, Number 2February 18, 2020By Hugh F. Kelly, Ph.D., CRE;Desmond F. McGowan, CFA, CIPM;and Steven R. Norris, MAI, CREPhoto: Jon Bilous/Shutterstock.comThe first part of this paper spoke to the subject ofethics as a core element of the body of knowledge, anelement that should be – but largely is not – treated asa systematic element in academic real estate programs.The argument stressed that professional and industryassociations in the real estate field require not onlyknowledge of the subject of ethics, but also requiremembers to subscribe to written codes of ethics andto shape business practice to conform with the tenetsof those codes. Beyond that, private firms informtheir employees that mere compliance with specifiedminimum standards does not sufficiently demonstratecorporate expectations in ethical matters. “The letterof the law is not sufficient to attain the highest ethicalstandards” (Apollo Commercial Real Estate Finance).ABOUT THE AUTHORSHugh F. Kelly, Ph.D., CRE isChair of Fordham UniversityReal Estate Institute’s MastersDegree curriculum committee. Heserved as Chair of the Counselorsof Real Estate organization in2014, and was Chair of the CRE’sEthics Committee 2008 – 2009. He is principal of theconsultancy Hugh Kelly Real Estate Economics.Desmond F. McGowan, CFA,CIPM, Managing Directorof Oceanview Advisors, is anAdjunct Instructor at the FordhamUniversity Real Estate Institute.He holds a B.A. in Economicsfrom Yale College and an M.A.in Theology from Seminary of the ImmaculateConception, is a CFA Charterholder, a CIPM certificantand a Licensed Real Estate Broker in New York State.The example of other fields of study, such as medicineand law, provide examples of academic disciplinesrequiring in depth study of ethics as applied to thepractice of accredited professionals in those fields. Realestate should be no different. Real estate education’sattention to matters of technical skill, as important as itis, should not justify the omission of training in ethicsat a level of sophistication equal to that provided inother endeavors. After all, decision-making in real estaterequires prudential judgment, adherence to principles,attention to duties, responsibility for consequences,and sensitivity to the interests of others that cannot becre.org/reiSteven R. Norris, MAI, CREis principal of Norris RealtyAdvisors. He is an instructorwith UCLA Extension and theAnderson School. He has servedon the CRE Ethics Committeeand is a member of the StandardsSetting Committee of the International Ethics StandardsCoalition (IESC).1Volume 44, Number 2
Real Estate Ethics in Practical Applicationssimply reduced to mathematical calculation, howeversophisticated.prescriptions such as the “thou shalt nots” of the TenCommandments), or care (perhaps the morality ofthe Sermon on the Mount or Buddhism’s Bodhisattvapath of compassion for all sentient beings2). If theseapproaches initially seem remote from day-to-day realestate decisions, it might be worth reflecting a bit more.Are not the kinds of impact statements – environmentalor economic – that routinely accompany developmentpermitting or financing deliberations an expressionof the ethics of consequences? Is not the concept offiduciary responsibility grounded in duty? Isn’t thegrowing ESG3 movement precisely an attempt toconsider the care of stakeholders, both immediate andeven at some distance in space and time, as pertinent topractical business decisions?4Now, in the second part of this paper, we will turn tosome of those practice matters. In some we will findpositive examples of ethical behavior in action; in others,examples of shortfalls. We will see real estate leadersreflecting on moral reasoning, reflections valuable notonly for young persons entering the field, but veteransfor whom ethical consideration is a life-long matter ofconcern. Examples will be drawn from the disciplinesof development, finance, management, and consulting,among other specialties. The real estate discussionswill, in turn, examine the philosophical, cultural, andpsychological foundations upon which ethical reasoningrests.The point is not merely that such considerations do, infact, enter into the framework of real estate executives.It is that without a command of the ethical vocabularythat is being presumed in the discussion, without athoughtful study of the concepts expressed in thatvocabulary, and without the ability to make a criticaljudgment about the applicability of such concepts, suchan executive is ill-equipped to make, explain, and carryout basic leadership functions. Is this not a key elementin the financial crises of recent history? If universityand professional real estate educational programs failto provide the words and concepts needed, and thetools to test their efficacy, then there is a vacuum and asubstantial educational disservice is being foisted uponstudents and young professionals.DRAWING ON PROFESSIONAL EXPERIENCEBased upon decades of our experience with real estatedecision-makers, we not only consider a serious look atethics in real estate as educationally essential, but a topicthat has daily application in the business world.Consider just a sampling of the basic ethical vocabulary:responsibility, trust, integrity, fairness, truthfulness.Consider, then, how the values expressed in these termscome into play in the development process, in mortgagefinancing, in deal negotiation, in the management ofstaff, in equity capital raising and deployment, in thecrafting of enterprise strategy. Let’s presume that, withthe assistance of legal counsel, a real estate decisionmaker is confident that a course of action is entirelydefensible from a legal standpoint. In that case, can suchan action be justified as ethically sound on the basis ofself-interest alone? How would you know? Why shouldyou care? And crucially, what impact will the chosencourse of action have on those involved, both initiallyand thereafter.AREN’T ETHICS JUST A ‘PRIVATE MATTER’?The notion that ethics is a private matter, of course, failson its face. The very concept of ethics is a concept ofengagement. The term “ethics” comes from the Greek,and as Aristotle explained in his Nicomachean Ethics, itis not merely a meditation on good living but intendsto bring about good living. For the Greeks, that was notabout an individual living in isolation but about livingin community; more precisely, it was about living in thepolis, the city of free persons.5 Character is not expressedin good thoughts but in good actions (pragmata).6Ethicists sometimes parse such questions in terms ofconsequences (e.g., utilitarians might say “Do whatbrings the greatest good to the greatest number”; theHippocratic oath says, “First, do no harm”), duties1(such as the Kantian approach noted in Part I orcre.org/rei2Volume 44, Number 2
Real Estate Ethics in Practical ApplicationsCenturies later, Kant titled his discourse on ethicsThe Critique of Practical Reason, contrasting the normsof practice with the exercise of “pure reason,” whichKant understood to be “purely analytic, knowledgeindependent of all experience.” Kant proposed that casestudies are particularly germane to the investigation ofmoral issues. He observed that even those with littlepatience for abstract argument reason acutely and ingreat detail when examining moral behavior. In hisview, we should all be given the experience of weighingmotivations as well as behaviors and, in discussionand debate, examine the basis for their approval ordisapproval of practical examples.insure ethical behavior and the seller is disciplinedagainst unethical acts since they cannot transfer thetitle without the approval of the title agent. The recent Great Recession shows how imperfect theseremedies are. It is unlikely that Kant would have beensurprised at the failure of “reasonable” remedies toprevent all abuses. This underscores the importance ofpreparing and presenting case studies from the real estatefield as professional education material. This would bea demonstration that we have learned lessons and aremaking changes based upon the experience of the GlobalFinancial Crisis.7Business transactions – including real estate transactions– are certainly subject to moral examination. Despitethe fact that most business transactions result fromthe private interaction of just two agents, the timing,number and pattern of most consumer markettransactions allow observers to infer a great deal ofinformation about the decision-making process andthe behavior of market participants in general. In termsof Kant’s proposal, there are abundant case studies toexamine.While the concept of “private property” might seemto lie at the very heart of the business of real estate,the physical nature of real estate makes the public orcommunal dimension an indispensable correlative. Themarketplace of Athens, the Agora, was not only thecommercial center of the polis, it was also the cultural,administrative, and religious center of the community. Itis worth remembering that the Parthenon, the dominantstructure on the Areopagus, was both the cult centerof this city’s goddess Athena Parthenos, but also thegovernment Treasury.8By comparison, real estate transactions may beinformationally opaque even for the participants in thetransaction. The uniqueness of each property leavesthe buyer at an informational disadvantage to the seller.Long holding periods leading to infrequent trades meanthat any given buyer and seller rarely (if ever) do anyrepeat business.Privately-held real estate is subject to the police powerof the state, the right of government to enact lawsand regulations for the safety, health, and welfare ofthe community. This is expressed in many ways, fromzoning, to licensure requirements, to the requiredpermitting of construction or reconstruction activity, toenvironmental considerations and beyond.In this environment, it is difficult for market participantsto gather information about the moral standards of theircounterparts, and nearly impossible for individuals toimpose moral sanctions. In response, the real estatemarket has developed some conventions which protectinfrequent buyers from some of the worst types ofunethical behaviors. These include: Ethical codes often prescribe courses of action which, bydesign, satisfy such legal requirements. This has the veryuseful effect of pointing adherents of such codes awayfrom behaviors that would lead to jail, or alternativelyto significant financial penalties. But such de minimisethics are incomplete, and many industry codes of ethicsexplicitly recognize this.Title Insurance, which effectively outsources theexamination of the quality of an ownership claimand couples that examination with a guarantee ofthat analysis. The buyer effectively pays a fee tocre.org/reiRegulations, which cover nearly every aspect of thereal estate industry from land use, construction,property rentals, mortgage lending, physicalinspections and title transfers.3Volume 44, Number 2
Real Estate Ethics in Practical Applicationsopponents to the deal. In arguing against the economicdevelopment agreement as announced, opponents(at least some of them) sought modifications tospecific terms relating to mitigation of transportationcongestion, targeting of employment opportunities forcommunity residents, and some shield against soaringhousing costs. (New York has already seen candidatesrun on a ballot line held by The Rent Is Too Damn HighParty!).THE PUBLIC AND REAL ESTATEPRACTITIONERS READILY ENGAGE WITHMORAL DISCOURSEOne very recent case illustrating the practical complexityin ethics is Amazon’s decision to locate a largemanagement operation (HQ2) in Long Island City,Queens (across the East River from Manhattan) andthen, when faced with evidence of political oppositionreflecting objections from some community groups,rescinding that decision. Apart from the typical forces ofopposition that such projects often face, many observersare more troubled by the mechanism of the decisionmaking than the decision itself. Among these are: Among the ethical issues to be considered may be:Concerns regarding governmental and shareholdertransparency. On the face of it, the decision waseffectively taken by three men (the Governor of NewYork State, the Mayor of New York City and theCEO of Amazon), each of whom is only one agentin a multi-part system of decision-making. In thecase of the governor and the mayor, a significantdecision was taken without the approval (or evenconsultation) of their respective legislative partnersin government. Concerns about the fairness of transferring a largesum of public money to one of the world’s mostvaluable commercial enterprises. Concerns that such a transfer was not necessaryto attract Amazon in the first place. One argumentis that if New York City is the best place for Amazonto do business, shouldn’t it go there without whatamounts to a bribe. If it is not, should it go thereat all? Concerns that the terms of the deal would (or evencould) be enforced in the future.Some have argued for stronger laws to protect againstthis type of “back room” dealing, even if laws cannotprevent unethical behavior without motivated (andethical) enforcement agents.Others have countered that, perhaps, the moralhigh ground cannot be unambiguously claimed bycre.org/rei4 Should complex issues like the Amazon project bereduced to binary choices: Deal or No Deal? The very real stresses on urban systems transportation congestion, high housing costs,and gentrification - have existed for years, and theAmazon project could not justly be blamed forthem. New York's leaders have the responsibility ofaddressing those problems, with or without Amazon- and the base conditions are far more problematicthan the marginal impacts of the Amazon project. The essence of cost/benefit analysis is to look at bothsides of the equation. Isolating the incentive packageas a sole "talking point" is sheer dishonesty, if thebenefits of the project are ignored. This is not justabout the 25,000 jobs and secondary employmenteffects (the multiplier, estimated at 82,000 jobs)including the boost of blue collar employmentduring construction and in servicing the campusthereafter. The overall tax revenue from the projectwas estimated at 27 billion over 25 years. That'sa pretty good nine-times return on the incentivesprovided, the alleged “corporate bribe.” Depicting Amazon as a corporate villain is the"You've Got Mail" rom-com argument writlarge. Bookstores, record stores, video stores, andcountless other small retailers have undoubtedlybeen impacted by the Amazon model. Nevertheless,Amazon could not have succeeded in its enterprisewithout the whole-hearted endorsement of theAmerican consumer. It is reasonable to expect thatmany of those protesting the project did most ofVolume 44, Number 2
Real Estate Ethics in Practical Applicationstheir Christmas shopping online! In driving thisproject out of New York, there is no economic orreal estate benefit derived that lessens the disruptivefeatures of ecommerce. There is only the effect ofturning the City's back on its benefits to the localeconomy, including the strategic advantage of beingat the heart of 21st century technology - a status forwhich Savills recently ranked New York NumberOne in the world.9that might itself be ethically suspect. Further, mistrustmight have been engendered by the withdrawal ofthe nomination of Long Island City’s State SenatorMichael Gianaris (an opponent of the development)to the state’s Public Authorities Control Board, a bodywith veto power over the 505 million state grantthat was part of the incentive package. As an exampleof political hardball, both the initial nomination andthen its withdrawal struck observers as evidence thataccountability and transparency remain lesser valuesthan getting the deal done, whatever it might take.Advocates of the project cited a December 2018Quinnipiac poll showing New York City voters approvedof the development agreement by a 57 to 26 percentmargin, including 60 to 26 percent among Queensvoters. Such results were largely confirmed in February2019, as a Siena College Research Institute poll revealed56 percent of voters in the state backing the project,while 36 percent disapproved. City residents supportedthe deal even more, with 58 percent approving. Butthe way the agreement was arrived at was roundlyquestioned, and both Governor Andrew Cuomo andMayor Bill de Blasio found their roles sharply criticizedin the same polling, with their approval ratings below 38percent in the Quinnipiac study.10The Amazon case provoked lively discussion, on and offuniversity campuses, which might have (and shouldhave) provided a “teachable moment” for the ethics ofsuch large real estate deals across the national educationallandscape, especially concerning projects with wideranging effects in the community. Such cases can andshould be shaped so that the discussion isn’t dependenton temporary public outcries, but helps to shape the waycurrent and future real estate leaders think systematicallyabout the ethical responsibilities incumbent on bothsides of the question.12 What does this case, and otherslike it, have to teach us about weighing consequences,ascertaining duties, and exercising care when a 3.7billion, eight million square foot development programis contemplated over a fifteen year period?Local proponents of the deal, seeking to revivediscussions with the company, did acknowledgeshortcomings. In an “open letter” published as a fullpage ad in the New York Times on March 1, 2019,more than 80 signatories – representing a cross-sectionof politics, business (including real estate), unions,education, non-profits, community groups, and the arts– urged a reconsideration by Amazon. However, withcharacteristic (and perhaps unhelpful) New York Citychutzpah, the letter spun the controversy this way: “Weknow the public debate that followed the announcementof the Long Island City project was rough and notvery welcoming. Opinions are strong in New York –sometimes strident. We consider it part of the New Yorkcharm!”11Such a discussion naturally must examine thecompetitive dialogue that is part and parcel of thenegotiation process, where the desire to gain advantagein argument may militate against ethical dealing. Inmany ways, the view that negotiation is a zero-sumgame exacerbates the temptation to set ethics aside.The perspective that negotiation can generate positivesum outcomes may sidestep that moral trap. Whateverone’s position, it is clear in retrospect that the Amazoncase in New York fell right into the “I Win/You Lose”abyss.13 While each participant could claim they were“acting within their rights,” the result very well couldbe construed as “and so everyone lost.” That is certainlythe spin placed on the situation by New York’s manydetractors.The ad did not suggest that the behaviors that promptedthe unwelcoming reaction were questionable, a posturecre.org/rei5Volume 44, Number 2
Real Estate Ethics in Practical Applicationsspiritual principles that have guided his thinking, andthe philanthropic responses that such reflection hasengendered. As with McCoy, it is useful for practitionersas well as students to hear that highly successful realestate professionals see ethical concerns as integral, notperipheral, to careers in this field.REAL ESTATE PRACTITIONERS ENGAGEIN MORAL REASONING (AND STUDENTSSHOULD KNOW THIS)Why should legal sufficiency not be the criterion forethical sufficiency in the field of real estate? Perhaps oneof the best answers to this serious question has beenarticulated by Bowen H. “Buzz” McCoy, in Living intoLeadership, “How do we ever get better if we always seekthe lowest common denominator?”14 McCoy proposes aseries of filters to evaluate our ethical questions. Our personal intuitive sense of right and wro
Feb 18, 2020 · on the CRE Ethics Committee and is a member of the Standards Setting Committee of the International Ethics Standards Coalition (IESC). ABOUT THE AUTHORS Ethics: At the Core of Real Estate Education and Practice Real Estate Ethics in Practical Applications Volume 44,
real estate investing 3 8 17 26 37 45 53 63 72 introduction by shelly roberson and david s. roberson, esq. the world of real estate investing educating yourself in real estate niches and strategies for real estate investment creating an effective business plan locating investment properties financing real estate investments real estate .
REAL ESTATE TERMINOLOGY A Course Companion for Studying for The Real Estate Exam, for Real Estate Home Study Courses, for Real Estate Continuing Education Courses, for Real Estate Statutory Courses, and for Any Form of College Real Estate Course. PAGE 1 A ABANDONMENT Failure
Invested 50bn in real estate equity and debt strategies1 since 2012. o MBD Real Estate Stats: 38bn in AUM across real estate . o Real Estate Private Equity: Core, Income and Value-Oriented, Opportunistic, Development o Real Estate Private Credit: Senior Credit, Mezzanine Loans, Non-Performing Loans Goldman Sachs MBD Real Estate Overview.
A profile of today's real estate investor Investors favor real estate for its growth potential. Today's real estate investor remains optimistic about their real estate investments. Investors hold on average 2.2 types of real estate investments, with the two most popular choices being direct purchase and owning real estate
Trust account handboo for real estate agents and real estate business agents. 2. Introduction. All real estate agents and real estate business agents who hold or receive money on behalf of others relating to a real estate transaction in Western Australia are required to open and maintain trust . accounts. T
A real estate search platform to research neighborhoods and builders. A real estate site for Japan. A United States real estate search tool to help domestic and international home buyers nd United States properties. A nationwide real estate online directory. HarmonHomes.com A real estate
Real Estate Finance. BACKGROUND . Finance is the lifeblood of the real estate industry. Developers, contractors, real estate brokers (REBs) and mortgage loan brokers (MLBs) should each understand how real estate is financed. Traditional sources of loan funds are the financial depository institutions (depository institutions), including
phases attained more algae for future oil extraction (Day 32 was in growing phase). After ultrasonication, the lipids were extracted by the Folchs method. The lipid content was 8.6% by weight. 0 0.05 0.1 0.15 0.2 0.25 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 Algae Mass (grams) Time (days) Haematococcus Growth in Bolds Basal .
