service is denied me. I think that in addition to that, the term "realist” does in no way assist me in becoming a member-me or anyone else in becoming a member of the American Institute of Real Estate Appraisers, and this, as I stated before, is an objective that most of the fellows in real estate have in order to better themselves, to do a better job in the community. Thank you very much.

Mr. MCMILLAN. Thank you. Is Mr. Harrington in the room? Mr. Harrington, you represent the State real estate commission? Have you anything you would like to add at this time?

Mr. G. E. HARRINGTON. Mr. Chairman, my name is G. E. Harrington, assistant real estate commissioner. I would like to clarify the exact wording of one of the sections of our law which has been talked about this morning. I'd like to read verbatim the actual section, and it is 10177E and it gives the grounds for suspension or revocation of a real estate license, and it says: "One who willfully uses the term 'realtor' or any trade name or insigne of membership in any real estate organization of which the licensee is not a member." Of course we are concerned only, that any licensee will not use some term which is misleading or false when he is not actually in membership of any organization, and not only a realtor.

Mr. MCMILLAN. Any questions? You want to ask Mr. Harrington? Mr. Knox. Mr. KNOX. Now, as I understand it, does the real estate commission assume that there are any special qualifications or special degrees of trustworthiness attached to membership in the real estate association Mr. Pontius represents? Mr. HARRINGTON. No. sir. We are only concerned, as I said, if a person belongs to any particular organization, he may use that term of course, and put himself up to the public as a member of that organization. But if he is not a member we don't want him using any term. We do not attach any particular significance as far as our licensing laws are concerned, Mr. Knox, to the California Real Estate Association or any other association. They are all real estate brokers as far as we are concerned.

Mr. KNOX. In other words, your examination and your other methods of determining competency are enough for you, and principally you want to see that your people maintain an ethical attitude in their dealings and that they go along with the other laws and regulations. Why is it then, that it should be a cause for suspension of license simply if it was a question of using somebody's private trade name that has nothing to do with the qualifications as a real estate person?

Mr. HARRINGTON. Well, because whenever they are using a trade name of any kind they are representing to the public that they are a member of some organization of which they are not actually a member. We think that that is, or would be, false or misleading.

Mr. KNOX. But it has nothing to do with the competency of the individual as a real estate person, which is really the only thing the commission is interested in.

Mr. HARRINGTON. I believe it goes further than just his competency-it goes to his actual actions of representing himself to the public in a capacity of which he he is not actually a member of an organization. By the way, this lawI did a little research on it this morning-it was enacted in 1933 and it has been on the statutes since that time.

Mr. KNOX. Have you ever suspended someone for using the term "realtor" or disciplined them?

Mr. HARRINGTON. Yes, we have. I can think personally of two occasions. Mr. KNOX. Was their license actually suspended or do you recall what the disposition of the case was?

Mr. HARRINGTON. In one case the license was actually suspended for a short period. Of course in that particular case there were some other allegations also, so it is difficult to determine, but as I recall the findings did say that one of the grounds for suspension was the use of the term realtor when the person was not actually a member.

Mr. KNOX. And the board would actually discipline someone for doing something that has absolutely no relationship to his honesty or his capabilities or competence as a real estate person.

Mr. HARRINGTON. Well, as I said, we take the position that because the law is on the statutes that it was their

Mr. KNOX. I understand you are simply enforcing what the law is, but I am just reflecting as to what its effect is.

Mr. MCMILLAN. Well, thank you, Mr. Harrington. Now I would like to introduce another member of the committee who just arrived-Mr. John O'Connell from San Francisco, the second from the end. John, we are glad to have you with us. The committee will now recess until the hour of 2 p.m.

TESTIMONY OF MRS. VAINO H. SPENCER AND REPRESENTATIVES OF THE

ASSEMBLY INTERIM COMMITTEE ON GOVERNMENTAL EFFICIENCY AND ECONOMY HEARING IN LOS ANGELES, SEPTEMBER 28-29, 1961

Assemblyman LESTER A. MCMILLAN (chairman). Mrs. Vaino Spencer, on the consolidated realty board. Do you want to bring up the other people who are with you today from the consolidated realty board? Go right ahead.

Mrs. VAINO HASSAN SPENCER. My name is Vaino Spencer. I am an attorney and I have been the attorney for 9 years for the consolidated realty board as an entity as well as attorney for a number of the broker members of that board.

Mr. MCMILLAN. Could you tell us, what is the consolidated realty board, and introduce the other people with you-will you?

Mrs. SPENCER. Fine. To my left is Mr. Wesley J. Fairchild, former president of consolidated realty board, a gentleman who has been active with the real estate brokers for a number of years in Los Angeles and whose office is in the southwest section of the city; and to my right is Mr. Victor Nickerson, also a member and former president of consolidated realty board, who has had a long experience as a broker and also as a real estate appraiser, formerly associated with the Golden State Mutual Life Insurance Co. With reference to the board, this organization was created in 1949, founded principally because the founding members had for some years endeavored to join the Los Angeles Realty Board and the affiliate associations of the Los Angeles Realty Board and had been systematically denied membership. The group concluded that they were going to continue to be denied, and that the denial was based upon race. They desired to associate themselves together to get some of the benefits of a real estate association. The association has grown and is comprised predominantly of Negro real estate brokers operating in the Los Angeles area.

Mr. MCMILLAN. Is this part of a national association? Or is this independent?

Mrs. SPENCER. Yes, and this is affiliated with a State association known as the California Association of Real Estate Brokers, and also with the National Association of Real Estate Brokers. The national body was founded for the same reason, because throughout the Nation Negro real estate brokers have found over the years that they were systematically being denied membership in the local of the National Association of Real Estate Boards. And the various counterparts of consolidated realty board exist throughout the Nation in most all of the major cities, and these are affiliated with the national association I just referred to.

Mr. MCMILLAN. How many members do you have?

Mrs. SPENCER. At this time? There are approximately 100 real estate offices that are affiliated, and the staffs of these offices vary from 5, I would say would be the average some of them have as many as 15 staff members-who are also members of the board.

Mr. MCMILLAN. Well you proceed with your further witnesses. Did you complete your statement?

Mr. KNOX. She hasn't started yet.

Mr. MCMILLAN. You haven't started yet. I've been interrupting you. Go ahead and speak and then after you conclude we'll ask some questions probably. Mrs. SPENCER. That's perfectly all right. I'd like to say that from time to time, particularly during the period 1955-56, a number of the Negro real estate brokers contacted me to determine whether or not they had a cause of action in our law court to compel the Los Angeles Realty Board to accept them to its membership. At that time they brought to my office copies of their application, gave me a biography which clearly, as least as far as I was concerned, supported their contention that they were in every way qualified for admittance to the Los Angeles Realty Board, and also brought their letters of rejection.

At that time I made what I consider to be a careful study of the law and concluded that there was absolutely no basis for bringing such an action under our present laws. Since that time a number of other gentlemen as well as some of the same members have again applied, time and time again. This began in 1955 when I first became interested in it and as recently as this year some of the members of consolidated have also applied to the Los Angeles Realty Board and been refused. Now, in addition to these members being refused, I mean the Negro brokers, there are also a number of white real estate brokers who are members of the Los Angeles Realty Board and have held membership in that body for several years, but who are denied membership in the southwest realty board, which is an affiliate, and the basis of the denial is because of the fact that these men associate with consolidated realty board or have close association with some of the Negro brokers and cooperate with them in the sale of property. Now, the problems that stem from this practice of exclusion and the threat of discipline that is inherent in the present practices of the southwest realty board as well as the other affiliates of the Los Angeles Realty Board, relate to situations like this, where a Caucasian member of their board desires to cooperate in the sale of a property in, shall we say, a fringe area, an area that has some integration but is not, oh, 70 percent or so, integrated, and the practice of the board is to discourage its members from selling property in areas of this type to Negroes or other minorities. And hence the broker is threatened with discipline which takes the form usually of being fined and amount equivalent to the commission that he earned, and if this is repeated to be expelled from the board. This has been done; then they, too, are hamstrung in the sense that they cannot operate freely as they would if these restrictions didn't occur.

Further than this the thing spills over so that the owners of properties who desire to place their property on the market and have it sold at a fair price and get a reasonably quick sale, they are restricted in the sense that the practice requires that the listing broker if he is a member of any of the Los Angeles Realty Board affiliates, he must hold that property until a Caucasian buyer or a buyer who is acceptable to the group appears. Now, in addition to the obvious economic problems in this practice, it spills over into other areas in that the association of appraisers, the American Institute of Appraisers for example, requires as a condition of membership that an applicant must first be a member of-must first be a realtor. Now, in Los Angeles there are no Negro brokers who are realtors. This is not true in areas such as Pasadena and San Francisco. It is true generally throughout the United States with some rare exceptions such as Pennsylvania and Washington, D.C. And in these areas wherever this preclusionary practice is not in effect, there are appaisers who are affiliated with the American Institute of Appraisers. Now, this problem has been brought home very sharply to me within the past year, because I have been representing a number of homeowners in Stockton who are caught in the bind of urban redevelopment. Unfortuntely, the group had to come to Los Angeles to get counsel because they were unable to engage local counsel. They were also unable to engage the services of a local appraiser. The appraisers who have been engaged there, who are all members of the American Institute of Appraisers are working for the agency. I have had to take appraisers from Los Angeles and because of these preclusionary practices these appraisers, although eminently well qualified, have not had the benefit of being associated with the American Institute.

This can me a handicap in a trial because the buildup that is given to affiliation with the American Institute is such that the trial judge in one case thought it was equivalent to a master's degree conferred by a university. So the other side of that is the fact that in any association members tend to stick together and the brokers in the Stockton area, for example, being realtors, had the benefit of all of the comparable sales data, their comparable files, which is readily made available to all of the appraisers who are also affiliated with the realtors. This information is denied to the appraiser representing the homeowner because he does not have this affiliation. Hence, he is under two handicaps, having to come from another city, and to work from the outside, trying to get all the comparable data. Obviously with this handicap, this does not make for a fair presentation of the evidence and has resulted, in some instances, in a miscarriage of justice as far as the court being able to determine the fair market value of the property. In connection with the urban redevelopment problem I would like to say that I was very gratified by the past session of the legislature in enacting the article 3 to our Business and Profes

sions Code which deals with the causes of blight, slums, and also the provision which you set forth for assisting the displaced persons in being relocated. However, the problem that has flown from this is that this language is only permissive, as the language in the code is permissive only with reference to the relocation payment, and because it is permissive, and since there isn't any condition precedent which requires that the displaced person, the person to be displaced, must first be given an opportunity to find housing before possession of his property can be taken.

The practice of the agency is still one of ignoring the permissive section and taking possession without regard as to whether or not the people can be relocated. And, obviously, when you have a small community like Stockton, and this can happen also in Los Angeles, just because of the restrictions on where people can live, the surrounding properties on the periphery soar in price the moment that redevelopment becomes a reality and hence people are forced to go and pay inflated prices for properties not much better than the ones they are bing displaced from. And yet, because of the problems we have in getting this testimony in, and the question of comparable sales and so forth, the adjustments that the court will naturally make, the people do not receive the highest price that they would normally be entitled to under the court interpretation of what is fair market value. I think generally that sums up the problem except that I would like to comment on the problem of minorities with refernce to getting financing. Forunately, throughout recent years at least, there has been an abatement of the discriminatory practices which existed for so long, in that now most of the institutions will readily loan to applicants without regard as to race, but this is where the similarity stops. It is a fact that certain minorities-this is particularly true of the Negro minorities-do pay higher interest rates, and in addition to this there is a disparity with reference to the loan point charge by loan correspondents. This has caused, in some instances, an increased rate of foreclosures, because frequently a second trust deed has to be created, just to take care of these costs. And I don't believe that the incident of foreclosures is any higher in the areas where most of the homeowners are Negro. However, this creates an added burden, and I think that many of the foreclosures are attributable to the existence of the second trust deed.

Mr. MCMILLAN. Thank you, Mr. Levering.

Assemblyman LEVERING. I am interested in your last statement about the higher interest charges and the increased burden brought upon this group by financial institutions. Do you suppose that-maybe you can't answer this-do you suppose that these financial institutions keep records on the payments made by various racial groups as to the risks and determine actuarily whether they have to charge a higher rate because of loss, or do you suppose it is just plain discrimination. Have you anything on that?

Mrs. SPENCER. I have made inquiry, and it is my understanding that there are no records kept on the basis of race, once the application is approved and the loan is made. However, this, in my opinion, relates to this unfortunate stereotype that exists, wherein certain minority groups are deemed to be poor risks. Mr. LEVERING. Without justification.

Mrs. SPENCER. Without any proof of it. I think there is no question about it. Individual cases should be treated as individual cases.

KNOX. Mrs. Spencer, could I ask whether or not you attempted to obtain appraisers in Stockton? Did you attempt to obtain appraisers who were members of the real estate association, or realtors?

Mrs. SPENCER. Yes. All of the appraisers in Stockton are realtors.
KNOX. Why couldn't you use any of those people?

Mrs. SPENCER. Because they refused their services.

KNOX. They refused to testify? Did they refuse to appraise the property or simply to testify?

Mrs. SPENCER. They refused to appraise the property. They refused to have any association with the defendants in these cases. I don't know if you are acquainted with the atmosphere that is usually engendered-I shouldn't say usually, because my experience relates to just one instance-but there is tremendous hostility.

Mr. KNOX. Pardon me if I interrupt you for a minute. Let me tell you what my experience is. I also try a number of these cases up in Richmond. We haven't had that trouble at all, and that's why I wanted to go into that. We have no trouble in obtaining appraisers, licensed realtors and others if you pay their fees, which are sometimes high. I just wondered if you could elaborate on why you were unable to obtain local appraisers.

77736-62-pt. 2—29

Mrs. SPENCER. My experience there has led me to these conclusions. There was a tremendous interest engendered by the urban redevelopment program and all of the forces in the community of any influence, the chamber of commerce, all of the service organizations, the Stockton Record, which is the only newspaper there, all of the officials, every person of any prominence, was rallied to the cause of urban redevelopment. Which incidentally I want to say that I am all in favor of. I think the urban redevelopment is a wonderful program if properly administered. However, when the homeowners did not immediately accept the offers which were made, and there is no question that the offer which was made was not necessarily the highest offer, based upon the agency's own appraisals, own appraisal report. They adopted a "concurred in" approach, you know. And then when they didn't accept this-many did. Many did, incidentally, under the belief that their property would be condemned, meaning that it would be taken anyway, and they would get nothing if they didn't accept the offer. Now those that held out were then treated with a great deal of hostility, as though they were responsible for holding up the progress, and everything closed against them.

Mr. KNOX. Hostility by whom? By the agency, or by everybody? Mrs. SPENCER. By the community, as far as the influential sources in the community are concerned. And the agency as a broker.

Mr. KNOX. Excuse me. I'm sorry.

You mean the agency disclosed to other people in the community that certain individuals were not accepting the concurred in values, and therefore

Mrs. SPENCER. Oh, yes. This was well publicized.

Mr. KNOX. Then it was discussed publicly-the individuals, the names involved?

Mrs. SPENCER. Yes. As a matter of fact, when I first commenced the file of these cases, the situation was completely out of hand in that someone gave the press misleading information as to what had been offered and they published the alleged offer.

Mr. KNOX. They published in the paper the offer?

Mrs. SPENCER. The alleged offer. And this would appear 2 or 3 days prior to the trial and during the entire course of the trial, and obviously the jury would be prejudiced by this information. Frequently the information was I won't say frequently, in every instance the information was incorrect. And they also published the asking price, in other words, what the defendants contended their property was worth.

Mr. KNOX. This was just prior to the trial.

Mrs. SPENCER. Two or three days before and during.

Mr. KNOX. Let me ask you this, did the agency in the plaintiff's case come up with that amount that they thought the property was worth? Or did they come up with less? Customarily they will offer an amount, and if you don't take it, they will come into court with a lesser figure.

Mrs. SPENCER. That is right.

Mr. KNOX. Now, did they do that in this case?

Mrs. SPENCER. In every instance. In other words, I had received by virtue of stipulation at the pretrial, copies of their appraisal reports, which were made in 1958 and 1959. Now, in every instance, their-I won't say that-in one instance there was a variation. But in all but one case, their appraisers came in and testified to a lower valuation than their 1958 or 1959.

Mr. KNOX. You were able, in deposition, to get their appraisal as part of the trial?

Mrs. SPENCER. Yes. The pretrial, by stipulation.

Mr. KNOX. Did you two other gentlemen want to make some comments? Mrs. SPENCER. This is Mr. Nickerson who has had some experience I was referring to.

Mr. KNOX. Did you testify as an appraiser, sir, in Stockton?

Mr. NICKERSON. No, I did not. I testify in court as an expert witness in the area in which my office is located. It seems to me there is some injustice. I have appraised in the Los Angeles area for approximately 10 years and this appraisal institute which is sponsored by the national board is similar, I would take it, to the, to a doctor, perhaps, wanting to become a member of the American Medical Association, who has passed the State boards and has, perhaps, his specialty, and applies for membership, and in certain cities, because he happens to be of the wrong racial group, is denied membership. The same for other professional groups-the American Bar Association. Now, it may be that in my lifetime I will never, perhaps, be a realtor, or perhaps even apply for mem