Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, recently contributed to Forbes' "Great Speculations" blog, posting "Five Things Real Estate Agents Won't Tell You."
If you follow the above link to the blog post, take note that it references an archived snapshot of the unedited article, captured on September 3, 2016. The current (live) article on Forbes' website omits content Gerber initially included, which resulted in immediate backlash and correction requests from informed readers.
WHAT DID HE SAY?
The overall tone of Gerber's content generally paints Realtors® in a negative light. The presiding insinuation is that real estate agents are self-serving… It is easy to intuit Gerber's bias is chiefly against real estate as an investment vehicle. However, instead of making a case for why he personally perceives real estate to be a weaker investment than the portfolio products he peddles, he attacks the Realtor profession, and attempts to directly compare Realtors® with registered investment advisors (RIAs) in an effort to discredit them -- as if Realtors® are his business competitors.
WHAT WAS DELETED?
Gerber wrote, "Unlike the regulatory requirements in my world, however, real estate agents have no legal obligation to do what is best for their clients. They are not fiduciaries."
SETTING THE RECORD (AND ROSS GERBER) STRAIGHT
Concerning the fiduciary responsibility of Realtors®, agency relationships, by definition, create fiduciary responsibility. This is commonly described as the "Law of Agency", and the fiduciary duties of Realtors® include Loyalty, Confidentiality, Disclosure, Obedience, Reasonable care and diligence, and Accounting. A complete description of these duties can be referenced as part of the information set publicly shared through NAR's website, and referenced in the Realtor® Code of Ethics. In case Mr. Gerber or his associates have any doubts, Investopedia also offers a very informative article on the matter, titled "Why Realtors Have Fiduciary Responsibilities." Alternately, Google can provide a healthy list of additional reading resources.
Gerber's article sandwiches a few other tasty misdirects in the five points offered as persuasive reasoning against real estate for investment purposes. Positioned as "lies" real estate agents purportedly repeat to intentionally misinform a client -- or information that is maliciously manipulated or omitted to a customer's detriment, Gerber offers mixed advice on protective measures consumers should consider when purchasing and selling real estate.
Mr. Gerber should consider that his advice would go much further without the elements of character assassination intertwined. And we have a few choice words to offer relative to Mr. Gerber's additional points.
TO ROSS GERBER
- Your home is not an investment.
Response: Owner Occupants and Investors are distinctively different clientele, with very different purchase strategies and objectives. Realtors® are not the culprits pandering get rich quick schemes on late night television. Late night informercial hacks are.
On the contrary, we are voice of reason and reality, helping Home Buyers achieve the dream of ownership, and helping Investor clients acquire and liquidate assets that align with the business models that they have adopted. And, contrary to what is suggested, there are thriving business models that prove real estate to be a highly desirable choice for investors. Let's dispel this false construct as the sleight of hand gimmick you used to try to woo sleepy readers into agreement with not moving your cheese.
- Sale contracts do not offer ironclad protections.
Response: Realtors® (in most cases) are not attorneys, and this is precisely why we dutifully use promulgated forms and advise our clients to seek legal advice for all contractual concerns and legal matters. That being said, can you produce a prospectus for any of your products that come with ironclad guarantees, Mr. Gerber? Was that the point you meant to make?
- Home inspectors are not always impartial.
Response: Mr. Gerber, did you really have the audacity to write, "That’s why real estate agents use home inspectors who are incentivized not to make their jobs more challenging?"
Really? Did you ever stop to think about how you are publicly slandering and maligning not one profession, but TWO? Texas home inspectors are licensed, governed by TREC, and held to standards of practice -- just as real estate agents AND registered investment advisors are. Sure, there are evil and deviant people in every profession, and as you so eloquently stated in your paragraph touting ironclad protections, "at some point, the concept of caveat emptor has to reign." For the record, it is completely inappropriate and irresponsible for you to position your comment as fact, insinuating that licensed real estate professionals collude to deceive consumers -- and imply that SOPs for licensees in the real estate industry are meaningless.
- Commissions are negotiable.
Response: It's very clear you hold real estate agents in low regard, and don't value the services Realtors® provide. That's ok… I liquidated my stock portfolio in 2007, put everything into real estate, and never looked back. So, Mr. Gerber, I don't have much use for your services either. And if I ever did, I would most certainly ask for a substantial discount -- because as a consumer, I'm entitled to completely minimize and belittle your specialized knowledge, added-value processes, and operational costs. It's perfectly ok that I subscribe to my beliefs that all RIAs are nothing short of mercenaries, while I remain ignorant and oblivious to all of the fires you put out behind the scenes in efforts to protect those you serve from unnecessary harm or drama (while handing your fiduciary responsibility). In fact, this topic should probably be the subject of a blog post to Forbes. Sounds like good consumer advice, as I'm sure your profession is tremendously overpaid for what I personally perceive to be prima donna busy fluff. We must warn people!
- You may hate your neighbors.
Response: Mr. Gerber, your personal experiences do not get to define real estate practice as a whole. While the precaution to "vet the neighborhood" happens to be good advice (and one that the vast majority of real estate agents do encourage Buyers to perform as part of a Buyer's due diligence) Realtors® are strictly prohibited from steering, and the topic of "neighbors" can be a sensitive subject.
Further, let's address the logic of this postulate. What is true for today, may not be true for tomorrow. The "perfect" neighborhood composition today can change with the advent of future sales & rentals, commercial development, and day-to-day life. I'll even give you the big controversial concern of crime rates and/or presence of registered sex offenders as support for your argument… Again, what's true for today may not be true for tomorrow for both positive and negative scenarios.
That being said, is your point geared to frighten consumers away from ever buying a house for either owner occupant OR investment objectives, on the premise buyers may subsequently hate their neighbors? Wouldn't the same hold true for a rental? Is your argument for liquidity? To what end? How, Mr. Gerber, should people live? And why is any of it your business, other than the obvious reason that a consumer's monetary decision for real estate purchases affects your pocket in a way you would like it not to?
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