Brokerage best practices

Is your CRE software creating a conflict of interest?

April 27, 2022

As an experienced CRE pro making decisions for clients who will be impacted by your choices, you know you have to remain objective and aligned with your clients’ best interests. If you make a choice based on your own interests or the interests of a third party, then you’re entering into a conflict of interest — which can jeopardize the deal, create legal issues, break client’s trust, and negatively impact your brand. 

You also know that commercial real estate brokers and their teams have an obligation, both legally and ethically, to avoid any situation that can be perceived as a conflict of interest. That’s why many CRE professionals subscribe to the Certified Commercial Investment Member’s (CCIM) code of standards and ethics.

But what about when you inadvertently break these rules?

It seems impossible to unknowingly engage in a conflict of interest, but that’s precisely what can happen with the wrong commercial real estate software. In this post, we look at what that means and how you can avoid it.

How can commercial real estate software present a conflict of interest?

A conflict of interest involves any relationship or activity that impairs your ability to act objectively and in your client’s  best interest. For example, a tenant or buyer agent accepting an incentive from the developer or property owner, thereby prioritizing the lessor’s or seller’s interest ahead of their client’s. 

Unfortunately, though, conflicts aren’t always that obvious or straightforward, especially when leveraging commercial real estate software from certain vendors. 

For example, CRM software works by storing and exchanging information, including details about your market, clients, properties, prospect inquiries, leases, bids, and other sensitive data. Having easy access to this highly valuable information helps you make better-informed decisions. But, depending on the vendor you choose, you can’t always be assured that data won’t fall into the wrong hands — which is how you may be breaching your code of ethics and standards of practice without even realizing it.

A conflict of interest arises when your software vendors' other business relationships undermine you and your client’s negotiating position. And while many third-party business relationships are capable of causing conflict, your CRE software poses a threat through the vendor's other business interests, such as data-sharing or data monetization without clients knowledge and consent and data monetization strategies. (It’s worth noting that data sharing and monetization aren’t inherently bad, but when companies begin sharing data without clients’ knowledge or monetizing without providing them value, that’s when it becomes a conflict of interest.)

After all, there’s no centralized MLS for commercial real estate, and brokers keep their information close to the vest. As you can imagine, plenty of unscrupulous organizations are willing to pay for access to broker data. And some software vendors are eager to sell it.

Fortunately, you can do a few things to ensure your software isn’t leading you into a conflict.

What to look for in a software vendor to avoid a conflict of interest

Your software vendor is the link to your potential for conflict of interest, which is why it’s crucial you choose wisely. Here are a few things to look for when considering a CRE software provider

  • Strong, transparent data privacy policies. Opt for a vendor that clarifies why they’re collecting user data, how it’s collected, and how it’s stored. There should be zero confusion or grey areas when it comes to your data privacy.
  • Terms of Use or Service Agreement. In addition to choosing a vendor with a strong, transparent data privacy policy, we also recommend opting for vendors whose Terms of Use and/or Service Agreement doesn’t claim unrestricted right to use your information for any purpose. Some vendors retain the right to use information or content submitted to it for any reason and without limitation. This potentially opens the door to using your private information for purposes that aren’t aligned with the interests of your clients.
  • The ability to opt-out of data sharing or review data sharing use cases. Opt-out processes are often lengthy and confusing to dissuade people from choosing not to share their data. But we believe users should retain ownership and only share data as they see fit. If an opt-out process isn’t allowed  or communicated, that’s a red flag.
  • A business model not dependent on data monetization. Companies that rely on a data-driven business model use your data to find new business opportunities and new customers or may even share or sell it to third-parties. That means you have no say in who may access the data and could quickly create a conflict.
  • Data anonymization and encryption. A privacy protection is vital to avoiding a conflict due to your CRE software. Data anonymization protects your sensitive information by erasing or encrypting identifiers that connect the data to an individual or company.
  • Business relationships or business ownership interests. Software companies may have business relationships or are owned by or have an ownership stake in a business that may provide services to your clients’ competitors, such as an investment advisory services firm. That means the data you’re storing in their systems could be used to undermine your client.

Successful CRE brokerages are founded on integrity and exist because clients trust they’re in good hands. But as we’ve become more dependent on technology, we don’t always consider how CRE software can create conflicts of interest – which has led even the most ethical organizations into questionable territory. However, by considering the above before choosing a CRE software provider, you can make sure you’re not putting your brokerage in jeopardy.

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