Forest for the Trees: the NAR Expenses Edition


I’ve been really, really busy with a project I’m getting ready to announce/roll out (speaking of which, if you’re an Association Executive or Association Leadership, I’d like to chat with you 🙂 ) but I couldn’t help but chime in on a minor storm in a teapot that Inman News brewed up recently.

I speak of the article called “Where NAR Spends Its Money: Employee Compensation” in which Inman dug through the Form 990 that NAR has to file as a non-profit organization. Predictably, Inman found large, large numbers, and just as predictably, the real estate commentariat on Facebook and elsewhere went semi-berserk.

Thing is, I have no real problems with NAR’s compensation schemes. But I do think quite a lot of folks are missing the forest for the trees. There are legitimate questions to be raised from digging through NAR’s Form 990 but how much NAR pays its executives and some of its volunteers is not one of them.

Let me explain, as briefly as possible, as I have to get back to work.

Employee and Volunteer Compensation

It’s natural that people’s attention get focused on the salaries and compensation that NAR employees and some of the past Presidents are collecting. Envy is one of the Seven Deadly Sins, after all, and learning what someone earns is the key activator of Envy. Just look at how we treat some of the multimillionaire athletes, while sort of glossing over the fact that they’re getting paid $25 million a year because their employer (i.e., the team and the owner) will likely make $200 million a year because of that superstar.

But it’s infographics like this that really draw one’s attention:

Infographic: Inman News

Sure, some of those numbers are very large for not a lot of hours worked. Maybe Steve Brown’s filing was an error, and it’s 18 hrs/week not 1.8 hrs/week. And predictably, some of the commentariat went apeshit talking all kinds of smack about these compensation packages.

In fact, it even devolved into a bizarre feminist SJW type rant bemoaning how so many women work so hard to pay so few men. It’s bizarre since every one of those people are elected by the membership (or by their representatives, who are elected by the membership), which is largely made up of women. If female REALTORS don’t want to vote for another female REALTOR running to be President, that’s the fault of Gary Thomas and Chris Polychron… how?

In any event, the reason I have zero problems with these compensation packages — or that of the senior executives like Dale Stinton — is that they’re the result of a fairly detailed process. NAR employs outside compensation consulting firms to go look at what leaders at other nonprofits and for-profit companies are making, and said consultant makes recommendations to a compensation committee which none of the above people can be on, etc. etc.

Criticisms like, “They’re overpaid!” is sort of nonsensical. Either the staff and/or volunteer leadership are providing a valuable service for NAR and its members, or they’re not. If they are, then the compensation committee goes through a whole set of protocols to determine what’s reasonable. If they’re not providing valuable service, then it’s not the amount of compensation that’s the problem; it’s that they have a job at all that’s the problem.

Since NAR’s Board and various governance groups believe that these individuals do provide value, it’s awfully hard to stand outside all of their decision making processes and throw stones.

I realize some of you think that I was going to go off on NAR or some such; I have no idea why you thought that. I don’t dislike NAR — in fact, the exact opposite. I think NAR does some seriously wonderful stuff, and while I don’t hesitate to call NAR out when it deserves it, I’m going to be fair to everyone as best as I can be.

Having said that… there is a far, far bigger issue if you do care about things like the Form 990. And no one seems to even care remotely about that. Hence, forest for the trees, etc….

Forest For the Trees: Real Head-scratcher Expenses

Let’s put it this way. The four volunteer leaders above got paid a total of $1.1 million in 2014. The senior executive staff at NAR got paid a total of $6.86 million in 2014. Altogether, that’s about $8 million. Not chump change, but not that big a deal for an organization whose total revenues for 2014 was $162 million. And as I said above, if those individuals delivered value to the organization in the view of the Board of Directors and the Compensation Committee, then they earned what they deserved.

Sorry, the real head-scratcher are two major items that are somewhat buried in Form 990.

Advertising and Promotion

First, you have $38.3 million in “Advertising and Promotion” in 2014. That’s 23% of total revenues of $162 million. It’s also five times larger than the senior executive and volunteer leadership compensation. It is, in fact, the single largest expense line item in the 2014 Form 990, with Salaries and Wages coming in second at $36 million.

There are two reasons why this line item is a headscratcher:

  1. NAR was created first and foremost as a lobbying organization, to represent the voice of the real estate industry to Washington DC. Yet, Public Policy Expenses for 2014 totaled $19 million. Shouldn’t those two numbers be flipped?
  2. What exactly is NAR “advertising and promoting” for $38 million a year? The “Use A REALTOR” campaigns? Given that in most markets in the U.S., everyone who is engaged in real estate brokerage is a REALTOR… what exactly is being advertised here? Sure, you might have a few non-REALTOR licensees doing new home sales or apartment leasing in most markets (yes, I know there are a few markets like the Seattle area where the existence of a private MLS means many agents are not REALTORS), but for the most part, every single consumer who lists his home or buys one is automatically using a REALTOR.

In fact, study after study, panel after panel, firsthand experience after firsthand experience show time and again that consumers have NO idea what REALTOR means, how a REALTOR is different from a mere licensee (even assuming a non-REALTOR licensee could be found in their local area), etc. etc. and so on. So what exactly is NAR spending $38 million a year to do?

This is kind of like a local MLS having a Director of Marketing, despite the fact that the MLS is an organic monopoly with 100% market share. What the hell is that Director of Marketing actually marketing? And to whom? Every single person who could buy that service has already bought it!

This line-item might make sense if becoming a REALTOR actually required something really above and beyond having a real estate license from the state authorities, such that only 20% or 30% of practitioners in a given market were REALTORS. But as we’ve discussed many times on these pages, that simply ain’t the reality today. So what gives?

National Association of REALTOR Business Activities Corporation

The other headscratcher is this entity: National Association of REALTOR Business Activities Corporation, or NARBAC. What is this company?

It’s a Delaware corporation, created in 2005. According to this page, it only has two officers: Dale Stinton, as President, and John Pierpont as Secretary. Mr. Pierpont, of course, is the VP of Finance and Comptroller of NAR. The URL from that page suggests that this is Sentrilock: “” but is it?

Here’s why I’m wondering if NARBAC is Sentrilock: Schedule R of Form 990.


It’s a bit hard to understand, but you have to reference the “Transaction Type”. For our purposes, the relevant Types are these:

  • A = Receipt of interest, annuities, royalties, or rent FROM the entity
  • B = Gift, Grant or Capital Contribution TO the entity
  • C = Gift, Grant or Capital Contribution FROM the entity
  • D = Loans or loan guarantees TO the entity
  • L = Performances of Services or membership or fundraising FOR the entity
  • S = Other transfer of cash or property FROM the entity

So what we have here is this company, NARBAC, a wholly-owned corporate subsidiary of NAR which received $21.9 million in 2014 as a “Gift, Grant or Capital Contribution”, as well as $1 million in loan/loan guarantees from NAR, and some $90,000 in “performance of services” from NAR. That’s a total of $23 million from NAR to NARBAC.

In turn, NARBAC paid NAR $457,343 as “interest, annuities, royalties or rent”. It also gave $150,000 as a Gift, Grant or Capital Contribution to NAR, and a total of $1.3 million in cash as “Other transfer” and $9.3 million of something which wasn’t cash but was “estimated fair value”.

The net to NAR is that it gave $11.7 million to NARBAC in 2014, taking into account this $9.3 million in whatever-it-got-at-estimated-fair-value. Absent that and looking at just cash, NAR gave NARBAC $21 million in 2014.

If NARBAC is Sentrilock, a company that’s been around since 2003 and is one of two major electronic lockbox providers to the real estate industry, I’d have to think really hard about spinning it off already. I mean, a net drain of $11.7 million (and net cash drain of $21 million) in 2014 for a company that’s been around that long with a mature product that every REALTOR needs and wants suggests that maybe it isn’t all that competitive with the likes of Supra.

Or is NARBAC all of NAR’s subsidiaries, including Sentrilock, and of course, RPR. And that $21 million in Gift, Grant or Capital Contribution is remarkably close to the $18.5 million that was in NAR’s 2013 budget for RPR plus the $3.4 million adjustment to the 2014 budget for RPR.

Now, I might have some issues with Upstream-as-currently-conceived as you all know, but I like RPR. I did work for RPR back in the day, and think they’ve got some really sharp people there. But if you’re going to raise any eyebrows about NAR’s expenses, shouldn’t the $21 million spent/given/invested into NARBAC be one of those line-items? Especially since it’s more than “Public Policy Expenses” by $2 million or so.

Wrapping Up

Taken together, those two headscratcher items total about $60 million in 2014. That’s 40% of the total revenues of $162 million. The salaries and wages thing that people are jumping up and down about is about $8 million (the rest are the hundreds of staffers at NAR).

Forest. Trees.

Might be more interesting to ask more useful questions about NAR’s spending priorities given its core mission and core values than to rant about part-time jobs making $300K a year. But then, going on about “overpaid” executives is probably more entertaining and takes less critical thinking so… I assume that will be the new sport in the industry over the next couple of weeks. Except for readers of this blog, who are far better informed than the average Jack and Diane REALTOR… or so I hope.

OK, back to work…


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Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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14 thoughts on “Forest for the Trees: the NAR Expenses Edition”

  1. You points are valid but my question is does this represent the true picture of expenses? They Inman article you referred to only takes into account the 990s. What about all the other corps set up. What does the total compensation and expenses being when you factor those in? I am not insinuating anything is right or wrong. I believe the members are entitled to an accurate accounting that would include all entities of NAR which would include the for profit and not for profit.

      • The corporation that they have the agreement with Move in is another big ?????.
        When they updated core standards, they should have included full disclosure for all entities for all boards, including NAR. My understanding is there are boards where members can go into the board’s website and see everything for all entities including all receipts, expenditures, etc….
        I had an expensive lesson that the 990s don’t tell the whole story.

  2. So agree with the salary comments, the time and hours spent by volunteers in our industry is amazing. Being compensated for the hours they give, as well as time away from home/family and their business, travel time/delays, along with the many years of time spent prior to this with no compensation to get to the NAR level is not discussed any where. Some have commented, get rid of NAR and hire our own people to run things, these NAR salaries would be low compared to hiring individuals for each area to handle the many facets of our industry in the manner they are handled today.

    • It also occurs to me that I know real estate agents and brokers who make well over $1m per year working on their business. 20 hrs/week is half time; is it ridiculous to think that someone like Chris Polychron wouldn’t have made more than $260K if he had spent that time working on his business? Not to me it isn’t.

  3. Great commentary and analysis Rob. It does leave you head scratching for more clarity.

  4. The need for outside compensation consulting firms is a lot less when the organization that contracts with them is gone. Someday, someone will wake-up and realize that the REALTOR brand will exist with or without the NAR. Today, largely due to its 1.2MM members, the brand is much like the brand Kleenex. “Is your nose running? Please give me a Kleenex.” “Need to buy or sell a home? Call a REALTOR.” It is that simple. With a budget of about $195MM less in dues, $7MM buys a whole lot of lobbying on the Hill. And there is one thing for sure, REALTORS do not need $30MM in advertising to reaffirm the brand. But that advertising does go along way I would imagine to do one thing very well, to sell NAR memberships!

    • Ken, if the $40m in REALTOR advertising led to more licensees deciding to become REALTORS, then I could see the value. But it seems to me that more than any kind of advertising, it’s the MLS and the mandatory rules of brokerages (“If you work for us, you must join the Association”) that account for people joining NAR.

      So once again, I’d really like to know what the $40m actually accomplishes.

  5. Rob, NARBAC is an umbrella corporation for tax reasons that houses all of our for-profit entities – SentriLock, Second Century Ventures, RIN, RPR (you are correct, the contributions to which you referred to were mostly for RPR), and a few other very small entities. Regarding the Advertising Campaign, recent member surveys indicate 87% of our members rate the program as excellent and would like to see us do more.

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