Ethics in Real Estate
Corrections or additions?
These articles by Bart Jackson and Barbara Fox were prepared for
the March 27, 2002 edition of U.S. 1 Newspaper. All rights
reserved.
Non-Profit Disclosure: Rewards for Honesty
Giving makes us feel good, but being suckered makes
us feel angry, mighty angry. Today, both the corporate and individual
donor scrutinizes charities with the eye of a frugal homemaker sorting
through pricey cuts of meat. The non-profit sector must and does
compete
as hard for every dollar as does the market sector. And the real
winners
are those who best display donation-effectiveness.
On Thursday, March 28, at 4:30 p.m. Cliff Landesman speaks on
“The Need for Non-Profit Transparency and Accountability”
in Robertson Hall at Princeton University’s Woodrow Wilson School.
Free. Call 609-258-0157.
Landesman, who began developing nonprofit solutions as a Princeton
doctoral candidate, will explain how current technology can become
an ideal tool for creating donor relationships.
“The real problem is that non-profits inherently lack the
accountability
found in the market sector,” says Landesman. He explains that
in the profit-driven market, the buyer and consumer are the same
person.
A man buys and brings home meat, his wife cooks it and they both
consume
it. If it’s poor meat, they shop elsewhere. But when the couple give
$10 to the local soup kitchen, they don’t eat the soup, and have no
way of knowing if it of good quality, or if its ingredients were
wisely
purchased.
Those few fortunate exemptions from this accountability dilemma have
recently become the darlings of corporate giving. Public radio,
libraries,
the arts, and certain regional open space land purchasing charities
all allow the donor to see, hear, or feel the final product. But even
these organizations must convince the giver that his dollar has been
prudently employed.
For the past eight years, Landesman has labored to create a series
of methods that not only streamline non-profit organizations, but
also make their functions more visible to the giving public.
Originally
from St. Louis, Landesman spent most of his childhood in New York
City. After earning a bachelor’s at the University of Michigan and
a master’s degree in philosophy from Oxford, he came to Princeton.
In l993, while writing on volunteering and the public good, he created
a database that allowed the public to view IRS 990-form information
on non-profit organizations. Form 990 is an annual document filed
by approximately one-third of public charities to report information
about their finances and operations to the federal government.
The overwhelming response by both donors and charities to this site
led him to founding Internet Nonprofit Center (INC), a Seattle-based
organization with a website, www.nonprofits.org, full of information
on every aspect of non-profit management. Thought currently the
director
of electronic media for publishing company W.W. Norton, Landesman
continues to keep his hand in the charitable sector, working for
everything
from Vermont Public Radio to the Fund for the City of New York.
“More avenues to a clear, bright vision of non-profits exist than
ever before,” says Landesman. “Personalized explanations once
reserved for the $50,000-and-up donor are now available to the general
public.” First, and most important for the corporate donor, is
the full, instant, electronic availability of the charity’s 990 IRS
form. The annual report and other brochures can also be provided
individually
and quickly. Thirdly, virtual reality can take the giver to Korea,
where she can observe the rice being distributed, or to Tanzania,
where she can see the bicycle she donated being put to use by a needy
carpenter.
But Internet images not withstanding, nothing beats
bringing the people inside your organization. Landesman says of a
multi-layered volunteer corps still remains the best method of
establishing
donor relationships. People who give time tend to invest funds. You
can borrow especially skilled employees from donor corporations,
providing
the worker a welcome sabbatical, and the donor a substantial tax
credit.
Typically, a non-profit’s best salaried employees are those who began
as enthusiastic volunteers — particularly in the organization’s
lobbying sector.
Despite some notable exceptions, Landesman says that the vast majority
of nonprofit organizations work hard to disclose their operations
to the public. The problem lies in the fact that donors seldom know
what to examine, and the charity doesn’t always know what to show.
A good guide to these questions — and answers — is found at
www.guidestar.org. And Landesman provides his own checklist:
Fund-raising percentage ratio. While among the mostpopularmethods of judging a donated-dollar’s effectiveness, Landesman saysthat the percent of a non-profit’s gross spent on fund raising isseldom the litmus test we might think. “Frequently, it isnecessaryto spend half as much in getting a new donor as she will currentlygive,” he explains. “This is not egregious skimming, it isa wise investment.” Typically the new donor will continue todonateseveral times beyond the initial gift. And since all charitiescontinuallylose patrons by natural attrition, they must aggressively seek newmembers merely to stay even. Better to examine, he says, how thosefunds are spent once they enter the charity’s hands.Who contributes how much? Do you want to be the onlycorporategiver to a charity receiving its primary funding from individuals?Maybe. In addition to checking out the percentages given by majorcategories of government, individuals, and corporate donors, thepotentialdonor will want to know whether the current contributors are youngor old, a lot of folks giving a little, or a few giving a lot. Dothese patrons also buy your firm’s product? To be effective fundraisers,non-profits should provide break downs of their contributors to makegiving seem worthwhile to a whole array of possible donors.How old is the charity? Old established non-profits arecheaper to support via planned giving, such as bequeathed estates.New charities face high start up costs, frequently with less goingto the actual non-profit work. However, the newer organizations canoften offer greater donor visibility aimed at a more specific target.The non-profit, warns Landesman, while striving to present itselfas a rewarding recipient, should not be afraid to give staff costsfor office staff as well as for those who work with clients. Thecarefuldonor will be looking at what changes have occurred in an organizationand why. Answering these questions before they get asked removes anyuneasiness.How flexible is the charity? Donating your old car wasa brilliant stroke invented by the Salvation Army. It rapidly becamea bandwagon onto which hundreds of non-profits have gleefully piled.It displayed the ideal of painless giving. Today charities arecompetitivelyseeking new methods of creative dollar extraction. Most are willingto work with donors offering funds over extended periods. “Thereis a basic conflict here,” says Landesman. “Virtuallyeverybodywants to earmark his particular funds for direct benefits — buyingrice, medical research, whatever. No charity can exist on that alone.There’s got to be someone there, working however unglamorously, toanswer the phone.” Non-profits see expanded staff and officesas a direct expansion in benefits. Their donors only want to see thesacks of food or field doctors. Both entities will have to compromiseon this issue.Donors are now able swiftly to search not just one, but a wholearray of potential recipients right down to their naked IRSstatements.Not just the glossy brochure photos, but the inner working of thecharity are open and available. For the clever non-profit — whichknows how to display its operation enticingly — this transparencycan prove a powerfully magnetic tool in its solicitation arsenal.A little honesty can bring you a lot of friends.— Bart JacksonTop Of PageThe State of TelecomThe telecommunications industry wasalmost as exciting to be in during the last few years as the dot.comworld,” says Gerhard A. Franz. “Similarly to the dot.comimplosion, telecom is in a state of decline today.”Franz predicts that the older companies are the most likely tosurvive,and that American firms will soon consolidate wireless standards forbetter service.Franz will discuss “The State of Telecommunications in the WorldToday” on Thursday, March 28, at 6:30 p.m. in Room 131 ofPrincetonUniversity’s Friend Center on Olden Street. The free seminar issponsoredby the Princeton/Central Jersey Communications and ConsumerElectronicsChapter of the Institute of Electrical and Electronics Engineers.Call 609-584-8424.Another free telecommunications seminar, this one pitched to a lesstechnically oriented audience, will be at the Princeton Public Libraryin the Princeton Shopping Center on Tuesday, April 2, at 7 p.m.GeorgeFaigen, co-author of “Wireless Data for the Enterprise,”will speak on “Wireless Data: Manifest Destiny or TechnologyChasm?”Until last month, Faigen was the chief marketing and strategy officerfor Broadbeam Corporation on College Road (U.S. 1, January 23). Call609-924-9529.The holder of two patents, Gerhard Franz grew up in Vienna, wherehis parents were pharmacists. He has a PhD in Electrical Engineering(semiconductors) from the Technical University of Vienna, Austriaand an executive MBA from Rutgers University, Newark. He came to theUnited States in 1985, at age 28, to do electrical engineeringresearchfor General Electric in Schenectady and then moved to Lockheed Martin.His most recent job at Lockheed was as director of marketing and salesfor Europe and central Asia for the space and telecommunicationsdivisions.Europe, especially Eastern Europe, is a good market for wirelessservices,Franz says. Wireless is growing at a more rapid rate there than inthe United States, “because in Eastern Europe a lot of basicinfrastructureis still not there. People are jumping a generation and going directlyto mobile services. You don’t have to have as big an investment.”When Lockheed divested this business at the end of last year, Franzopened a consulting business, A.G. Franz Associates LLC at 5 StantonCourt in Plainsboro (609-936-1919, www.agfranz.com). He also chairsthe Princeton section of the IEEE. He makes these predictions:The roll-out of third-generation mobile systems willenablemuch higher data rates, which will enable web access on cell phones,maybe even video. “With the third generation will come aconsolidationof standards in the United States,” says Franz. In contrast toEurope, where unified standards were set up early in the wirelessgame, Americans must contend with a half-dozen incompatible systems:Cingular, AT&T Wireless, Nextel, Verizon, VoiceStream, and Sprint.Switching coverage means getting equipment.Franz says that Verizon and Sprint are combining to adapt CodeDivisionMultiple Access (CDMA 2000) standards, and they will roll outthird-generationequipment that adheres to these new standards this year. MeanwhileAT&T Wireless will move toward joining VoiceStream/Deutsche Telekomin the third-generation evolution of the Global System for MobileCommunication (GSM) standard (which is also the European standard).The name for this will be wideband CDMA.A proliferation of fixed wireless services will allowlaptop users to “hook up wirelessly” in homes, offices, andairports — just about any place other than moving vehicles.”Thiswill change the way we are connected, when, with your laptop, youcan connect in familiar places,” says Franz.Further consolidation of telecommunications businesseswill give the advantage to existing companies, such as Verizon.”GlobalCrossings, Tyco, and other companies that sprang up — they builtnetworks rapidly, and those networks are not profitable. When facedwith a lot of bandwidth and a downturn, they went under,” he says.”The existing companies will benefit, because they have the cashbusiness in their local service to sustain them.”These local phone companies will always do fine, says Franz.”Becausepeople will always talk.”— Barbara FoxEthics in Real EstateAnyone who has ever closed on a piece of property ora building knows that no matter how niggling the real estate lawsmay be, they never quite seem to apply to your case. Vague cloudsof “discretion” invariably swirl around the sharper pointsof ethics. If you think that lawyers groping their way through thesemisty gray areas never concern themselves with ethics, think again.The Mercer County Bar Association, in an attempt to help ferret outwhere right lies in those far fields beyond the law, offers aroundtablediscussion “Everyday Ethics in Real Estate Closings: The IssuesNobody Talks About,” on Thursday, April 4, at 12:30 p.m. at thePalmer Inn. Cost: $37. Call 609-585-6200. Attendees will break upinto groups and considering a series of real estate situations. Eachtable’s solution to each question are brought forth and discussedbefore the group.The questions will be proposed by Lee A. Gronikowski, a thebar’s Department of Ethics Council, and by Grace Dennigan, anattorney in private practice at 5 Independence Way who is a memberof the bar’s Real Estate Section. The moderators tailor the programto cover situations involving bankers, real estate agents, surveyors,and title insurance professionals, as well as attorneys.”Real estate trends fluctuate,” says Dennigan. “Theattorney,banker, and most of the professionals involved, however, are heldto very inflexible standards. Situations forever arise testing justhow far from our rules we ethically may stray.” She proffers afew examples of topics that will be covered, with much greaterspecificity,in the roundtable:How full is full disclosure? Two months after purchase,the basement of a building leaks, flooding the brand new buildingjust purchased. It was, after all, the biggest rainfall in threeyears.Inventory now lies soaked in soggy boxes. Can you seek redress fromthe seller for failure to disclose a pre-existing problem? Was ithis legal or ethical duty to inform you that this rare deluge mightcause problems? Can you prove that he was aware of the condition?All of these questions fall generally under the ever-tightening rulesof full disclosure. What used to be a sales brochure for a buildingnow need to be a confession. Dennigan insists you can no longer justclose the deal and walk away. But the question remains, exactly howfar down the road does the law reach? If you live on a street thatswells with traffic every rush hour, do you have to inform thosetouringyour house Saturday morning of this probability? Maybe. Dennigan saysthe trend now tilts increasingly toward disclosing the ridiculouslyobvious.Who bounced the check? Irving is selling his old houseand plans to move into his newly purchased one across town all withina single Friday. He closes on the old house in the morning and handsthe check to his attorney, Ghengis, who plans to deposit it in escrowin his bank, The Farmer’s Megatentacle. The money will go toward thepurchase of Irv’s new house that afternoon. At the afternoon closing,Irv writes a new check for the new house, which the seller, SwiftyGreyhound, runs and deposits in his own bank, The Seaman’s Harpoon.Attorney Ghengis, alas, did not make it to Megatentacle beforeFriday’sclosing and simply deposited the closing check first thing on Monday.But it is too late. Seaman’s has already rushed Greyhound’s checkto Megatentacle. Megatentacle has stamped the check “Insufficientfunds,” and Seaman’s refuses to simply reissue the check. Irvingand Swifty were last seen at in front of the new house threateningto “settle this like men,” while their wives warned them toremember their hernia and prostate conditions respectively. Now, whoethically and who legally is responsible, and more important whatis the simplest way of settling this situation (without a doublehernia)?Sellers’ need to know. An attorney is retained to adviseon and handle the sale of a major piece of property by multiplesellers.Since three of them live out of town, the attorney deals strictlywith the one local client. Throughout all negotiations and the finalclosing, the lawyer dutifully sends copies of all papers to eachseller.The deal closes, but scarcely before the ink is dry, the three silentsellers come to town complaining about several aspects of the deal,and seeking redress against the lawyer.The other owners of the property were sent papers for review, butnot specifically phoned and polled for agreement on the several issuesof sale. Where do all the sellers, the attorney, and the final dealstand? Such a situation becomes particularly sticky when spouses areforced to divide and sell property in a divorce settlement.Several additional smaller, yet equally tricky, ethicalquandarieswill be brought to light. If a New Jersey lawyer negotiates a salewith an attorney from Pennsylvania who is not a member of the NewJersey Bar, is the Garden State attorney duty bound to report him?If the closing depends on a short list of small repair items for whicha simply-negotiated repair credit could offer a smooth solution, howclosely do sellers and buyers have to stick to the H.U.D. regulations?Truly the world of real estate and its regulations is filled witha host of tangled questions. Says Dennigan: “Want the answers?Come to the roundtable.”— Bart JacksonNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
