As I’ve mentioned in many other things I’ve written, I am a Certified Public Accountant. I worked as a CPA for nearly a decade before getting into real estate nearly 20 years ago.

In the profession of public accounting, the sheer quantity and specificity of rules, guidelines and promulgations is truly amazing.

For every possible situation you might ever encounter, there is a definitive, authoritative “rule” – or, for complex issues, an entire RULE BOOK – for that situation.

In total, the rules for public accounting are contained in a series of volumes that would stretch the width of a desk – and that was nearly 20 years ago. We’re talking THOUSANDS of pages of detailed rules. During my years in public accounting, I probably didn’t come close to reading even 1% of this massive body of information.

These rules are referred to as “GAAP,” which stands for “generally accepted accounting principles.” Ask any CPA any question, and their response should be, “Well, according to GAAP, Rule XYZ says that in that situation you must do 123.”

Now let’s compare that to real estate.

What do we have in real estate?

We have the National Association of Realtors’ “Code of Ethics.” And here they are, in their ENTIRETY:

National Association of Realtors 2010 Code of Ethics

Here’s the first thing you should note: the Code of Ethics is eight – EIGHT! – pages.

EIGHT PAGES!

For the massive real estate industry? With all its complexities? With the huge range of issues that real estate professionals have to deal with every day?

That’s it?

Yep.

That’s it.

This is a major reason why there is so much confusion and inconsistency, and such a lack of uniformity in practice, in real estate: There is no “GAAP” for real estate.

There is a “GAAP gap.”

If you read the Code of Ethics, you’ll see that they are a series of broad, platitudinal suggestions (as opposed to detailed, issue-specific instructions).

Let me give you a real life example: let’s assume that you, as a licensed Realtor, receive multiple offers on a particular home you have listed. What do you do? What are your obligations, and to whom? Do you entertain both offers, or only one? Do you tell each agent that there is another offer? What if one of the offers is from an agent from your company? Does that impact your behavior in any way? What if one of the offers is from one of YOUR clients? How does that impact your actions?

Ask 10 agents, and you’ll get 10 different answers, I will surmise.

There are no clear, concise, precise, definitive instructions on this situation.

If this were accounting, there would be an exhaustive, detailed rule about the protocol of dealing with multiple offers, including all the possible subvariations within this topic.

How is it possible that such a “multiple offer” rule does not exist, given that Realtors deal with this on a fairly recurring basis?

This is a CLASSIC example of a fairly routine situation in real estate where not a single word of detailed instruction has been written by the industry itself.

I look at this, and I think, “How on earth can this be? How can such a huge, important industry with so many recurring situations and issues NOT HAVE a detailed rulebook?”

And I have not one clue how this can possibly be true.

And yet…it is…

Real estate needs to close this “GAAP gap.”

And the sooner, the better.