The Hall of Shame

In the early, crazy days of Redfin Direct, when the whole office went bananas every time we got an offer (which was usually bogus, and was often breathlessly announced in the middle of a meeting with skeptical venture capitalists), we encountered plenty of resistance from listing agents. Some called customers about to close on a property and said such awful things that the customers sat on the floor and cried. Some sent us deranged, vengeful e-mail, comical with misspellings.

Mostly, the listing agents just tried to scare the crap out of our customers. It got so bad that we occasionally went on home-tours posing as Redfin customers, and secretly recorded what listing agents said (for a TV news magazine story being prepared later this summer). It was like watching a movie where the bad guy is so ridiculously bad that you just start laughing. The cloak-and-dagger stuff was fun too.

The Wall Street Journal (subscription required for full story) picked up on the action in a story published in last weekend’s paper:


Cem Sibay, a business-development manager at an Internet company in Seattle, sought a rebate through Redfin. Mr. Sibay says he and his fiancee, Tam Pham, arranged to see a condo about six months ago. The agent representing the seller, Ron Waxman of Coldwell Banker Bain, was initially friendly and helpful, Mr. Sibay says. But Mr. Sibay says Mr. Waxman’s attitude changed when Mr. Sibay mentioned that he planned to use Redfin as his agent. Mr. Sibay says Mr. Waxman then refused to show the condo to the couple again and said he would advise his client not to consider any offer they made.

Mr. Sibay and Ms. Pham gave up on the idea of bidding for the condo.

When reached for comment Wednesday, Mr. Waxman said, “I don’t remember that at all.” He said he stopped working as an agent last year; then, a few minutes later, Mr. Waxman acknowledged that he was still working as an agent and declined to comment further.

The WSJ article goes on to say that Cem and Tam stuck with Redfin, won a house that is now closing, and are due to receive a refund in excess of $10,000. Judging from its picture, the house they ultimately got seems a lot better than the condo:

And that’s the real story. That things have started to turn around. Some time in May, we began taking ten, twenty offers a week. The winning percentage of our clients when competing against multiple offers increased to above 40%. Every deal we did, the agent we talked to was surprised at how comprehensive our service was from offer to close and how experienced and professional our agents were. We started sending thank-you notes, and now we’re even including gift cards for the agents as part of a charm offensive to win every agent over in Seattle and San Francisco.

The overwhelming majority of listing agents take their profession as seriously as we do, and always act to advance the interests of their clients, but even now there a few listing agents who just don’t care. They hate our model, and wish our customers would drop dead. Unfortunately for those listing agents, our customers tend to be highly qualified buyers who are usually going to submit the best offer (especially since they have $10,000+ in commission refund to sweeten the deal). So in the rare case when a listing agent is hostile to one of our buyers, we just call the seller. You can tell during these calls that the seller is hopping mad, and can’t wait to get off the phone so she can chew out her listing agent.

We’ve created a special place on the Internet to bust those agents. It’s called the Hall of Shame, and it’s right here on the Redfin blog. If you’ve got a listing agent who tried to kibosh your offer, tell us about it in a short e-mail (glenn (dot) kelman (@) redfin (dot) com) and, if the story checks out, we’ll post the agent’s picture. Our first electeee is the agent who was hostile toward Cem and Tam, Ron Waxman.

Welcome Ron to the Redfin Hall of Shame.

Discussion

  • CSP

    Does it matter to anyone that the Redfin agent representing the buyers is not entitled to the commission which he is so generously offering to his client as a rebate? In fact, if the listing agent has any sense, he will file a request for arbitration through his local board of realtors and dispute the validity of the buyer’s agent’s claim to the commission.

    Most consumers don’t understand (in fact most agent’s don’t either) the concept of procuring cause. I think some people will be astonished to find out that in real estate the person who gets paid is the person who does the work. In fact it kind of makes sense, if I go to work and produce X number of widgits, I would reasonably expect that I and not someone else would be compensated for the production of those widgits.

    In real estate, procuring cause says that the person who STARTS the unbroken chain of events that leads to the consumation of an offer, is the person who is entitled to the commission.

    As a member of my state’s professional standards committee, I have overseen many such disputes, and can say with certainty that I have never been a part of a panel that has awarded the commission to the buyer’s agent when they have taken the course that the Redfin agent took in this transaction.

    Now before we get to the, “that’s not fair” session, I would like to politely remind everyone that procurring cause is not a new concept or rule. In fact the national association (which Redfin is a member of) established this rule to foster cooperation many years ago. It is not a new rule, and it certainly isn’t optional. Membership in the national association however, is optional, and if I would encourage every company that doesn’t agree with the rules, to either dissociate themselves with the body that made them, or work to change them through that same body. It is sad that we have to run to congress every time we don’t get our way these days.

  • http://www.thexbroker.com jeff corbett

    If a widget only costs $500, you don’t need to charge $50,000 for it, and chances are, someone else is selling the same widget for far less, with no ‘special interest monkey’ in the middle of a viable transaction.
    Procuring cause (and other pseudo-legalese talk) has nothing to do with the ridiculous amount of commissions the ‘Realtor Cartel’ dictates.
    Why do Realtors spend so much time in arbitration and litigation, form special committees, and fending off Congress & The Department of Justice? Because they deceptively RIP PEOPLE OFF. The NAR’s problems are products of the industry’s innate greed. Treat and charge someone FAIRLY for Real Estate services and you won?t have to worry about your ‘procuring demise’.
    So don’t hate the new players, hate the new game. Your 6% veil has been pierced.

    Kudos to open source inforamtion! Kudos to Redfin!

  • CSP

    Jeff,

    I don’t recall bringing up the cost of doing business up in my post, but since we are on the topic, let?s have a conversation about the matter with real facts and not just pent up anger and accusations.

    First, the national association of realtors is an industry trade group established to further the interests of the real estate industry. Look at NAR like the realtors union, their job is to look out for what is best for the real estate industry as a whole. Their job isn?t to make sure that every person with a website who can?t write a marketing plan or do any real work is able to compete in our industry. If the discounter?s business model is so great, then they will quickly put the full service companies out of business. However, the discount brokers in my market have been around for 10+ years and they still can?t manage to pick up more than a .5% market share. Considering the two largest companies in my market carry a 40+% market share, I don?t really feel that threatened by this brand new revolutionary business model.

    I should remind you that membership in the NAR is optional. If you don?t like how they treat your business, fell free to discontinue your membership. If you don?t like how the MLS system works, start a competing model, attract patrons and consumers and put the established model out of business. The sad thing is that rather than do the hard work of starting a viable business and growing it, the discounters keep running to the government and trying to establish their advantage via legislation. Don?t kid yourself; the discounters are in business to make money too, they just happen to want to do it in a different way. Are they any less greedy for wanting to make money, or does greed only apply to full service brokers?

    Let?s envision for a moment the real estate community without the NAR or the MLS system. Without the MLS, there is no way to share information with other brokers and no format to foster cooperation with other brokers. Without cooperation a seller would only be able to sell their home to the buyers of their brokerage (dual agency). Buyers would only be able to look at homes that the broker has listed for sale and would undoubtedly gravitate toward that company that had the greatest selection. The sellers would want to list their homes with the company that had the most buyers. Eventually the entire system would perpetuate itself until there was only one real estate brokerage in each area.

    Jeff, who are you to stand in judgment of the entire real estate community for how much they charge to sell a house. If you don?t like what is charged in the norm, start a company, charge less, and see if you can make it. I can?t think of a single industry that doesn?t mark up the cost of the product they sell. It is called profit Jeff, and it is how a business is run. In fact, without it, you aren?t running a business, you are running a charity. As great as I would feel selling houses at my cost, it wouldn?t do anything to pay my mortgage, and as mush fun as it would be, I wouldn?t last long because without a paycheck I can?t function in society.

    I would be remiss if I didn?t state that you missed the entire meaning of my post. By way of recap my point was that Redfin electively joined an optional association, agreed to its rules and are now upset that agents don?t like that they aren?t following them. What is even worse, is that they expect other agents to do the work (show houses, etc.) and then they step in at the last minute, fill out a boiler plate form and collect the commission (interestingly enough, they don?t seem to mind that the fees are charged at the rates they are, in fact their business model fails unless someone else goes out and does the work of listing a property for ?x? percent). All that said, nobody seems to care because they are generously offering part of the money they didn?t earn back to the consumer. How noble.

    CSP

  • http://www.thexbroker.com Jeff Corbett

    Your opinion:
    First, the national association of realtors is an industry trade group established to further the interests of the real estate industry.

    My opinion:
    The NAR is a special interest group whose sole purpose is to insure that a Realtor stays in the middle of every real estate transaction.

    Your statement:
    Look at NAR like the realtors union, their job is to look out for what is best for the real estate industry as a whole.

    My opinion:
    A union is formed to look out for the interest of its members, and to insure they receive the best possible benefits from the industry

    Your opinion:
    However, the discount brokers in my market have been around for 10+ years and they still cant manage to pick up more than a .5% market share. Considering the two largest companies in my market carry a 40+% market share, I dont really feel that threatened by this brand new revolutionary business model.

    My opinion:
    The cost saving, efficiency related technology to effectively service a discount brokers business and financial model has only been around (and affordable) for about 3 years. It typically takes 5 for IT to root out antiquated and cost intensive business models so things are pretty much on schedule. Traditional real estate brokerages will continue to dominate the 50+ age demographic as well as the few remaining non-PC having, dont know how to surf the net crowd. What you are witnessing is a paradigm shift, one that wont be stopped. Remember travel agents and stock brokers?

    Your statement:
    If you dont like how the MLS system works, start a competing model, attract patrons and consumers and put the established model out of business.

    My answer:
    http://www.openmlsinstitute.org
    The Open MLS Institute also seeks to end certain real estate abuses including steering, spooking, pocket listings, withholding purchase offers, and hoarding of listing data.

    Its already started. This is a solution to the problem not more red-tape. You need to catch up with the times before they pass you by.

    Your question:
    Jeff, who are you to stand in judgment of the entire real estate community for how much they charge to sell a house.

    My Answer:
    I used to own a real estate brokerage, mortgage brokerage, & construction firm. I have closed over 3500 mortgage transactions and worked with Realtors and their brokers-in-charge for 12 years. I have advised and managed residential and commercial syndicated deals in the tens-of-millions. My current real estate portfolio includes properties in 4 states with an aggregate worth that I dont feel the need to mention. In other words, I know what I am talking about. 6%…any % based commission model is financially illogical to everyone but the Realtor/broker.

    Your statement:
    If you dont like what is charged in the norm, start a company, charge less, and see if you can make it. I cant think of a single industry that doesnt mark up the cost of the product they sell. It is called profit Jeff, and it is how a business is run.

    My response:
    My current venture (I am a serial entrepreneur with 7 start-ups under my belt) is http://www.thexbroker.com. Im not a blowhard slinging statements I cant substantiate with a demonstrated solution. Ill leave that to the unions and committees of the world.
    Hopefully you find that real profits come from working on your business, not in it. Not from hording information and charging ridiculous fees for it. In any case I am not insinuating you shouldnt make money, Realtors simply need a value for service adjustment and dump the Realtor Tax model.

    Think about how the 6% tax excludes some homeowners the ability to market their house via the great NAR and MLS.
    Think about how much more equity people would retain, how much more market movement there would be without the 6% hack job.

    Realtors sell homes quicker and for more money? Realtors will get you about 6% more for your home and they sell the home quicker by offering the buyers agent 4% to steer them their way. Nice system.

    Your statement:
    All that said, nobody seems to care because they are generously offering part of the money they didnt earn back to the consumer. How noble.

    My opinion:
    Much more noble than anything I have seen the NAR do.

  • CSP

    Jeff,

    Thank you for so eloquently stating my point about the purpose of the NAR. Since we agree that NAR?s function is to further the cause of the realtor and not the consumer, can we stop complaining about NAR doing what is best for the realtor community, even if you may perceive that it isn?t the best thing for the consumer. It should be noted before that comment is taken out of context that I don?t feel that any of NAR?s recent actions or policies have harmed the consumer any more than any other business that sets a policy to protect the interests of their company. After all in the short term it would be better for the consumer if everything was free. It should also be noted that I feel that the betterment of the real estate community as a whole will benefit the consumer greatly, so even though NAR?s job is to protect its members, its decisions will ultimately end up benefiting the consumer.

    Unless you can point out a specific policy or practice by NAR that you feel is harmful to the real estate community and therefore violates their original purpose, I will assume that you agree that the problem really isn?t NAR and therefore we should leave them out of the rest of this conversation.

    I will disagree that some magic computer is two years away from putting the full service agent on the chopping block. I am a student of real estate technology and whenever possible I spend as much time as I can, reading about and researching new technologies in the real estate business. I have yet to see that magic database, or visual technology that will replace the expertise of the realtor. How do you propose that houses will get shown without realtors? Let?s consider Redfin itself for a moment. Their model fails unless there is a listing agent available to show the property to the buyer, and do the work for them. Unless you are proposing to me that magically people are going to start buying houses sight unseen, at which point I would have to end this entire conversation, as it would appear that you are simply irrational about the matter, and understand nothing about the process of buying and selling houses.

    You brought up my favorite topic in connection with your technology point: ?realtors will be replaced like travel agents and stock brokers.? These industries couldn?t be more different, I suppose you also think that the magic internet will put doctors, lawyers, architects, and accountants out of business as well.

    Jeff, I must ask how often are stocks traded and airline tickets booked. Once, twice, three times per year? The average consumer buys a house every 5-10 years. The legislative changes to the real estate transaction from year to year in my state require a full days study for the average real estate professional. How difficult is it for the consumer who hasn?t bought a house in 10 years to get up to date on the process and all of the new and different statutory regulations. How much do you think the average airline ticket costs? A couple hundred dollars would be my guess. That is a far cry from a couple hundred thousand dollars, there is a little bit more at stake when you buy or sell a house. How many varying choices are given to a consumer when purchasing airline tickets? Is there more than 10 major commercial airlines operation any given area (maybe?I don?t know)? Currently there are over 30K active listings in the multiple listing service that I belong to, each one is unique in nearly every aspect. Each one of those houses is a choice that must be researched in order for a consumer to feel as though they are comfortable in making a decision? What happens when you purchase an airline ticket or a stock online. The vast majority of the time you receive the item in the mail or your account if not right away in a couple of days. There are more things that can go wrong after an offer is accepted, that some real estate agents don?t know what to do (don?t worry they won?t last in the business), let alone a consumer who may have never done this before. No I?m sorry Jeff, you are going to need to come up with a better example if you hope to convince your readers that the real estate industry will be put out of business just because stocks are traded online.

    You talk about the Open MLS Institute, but you need to understand that this isn?t what I mean by start your own MLS. The open MLS institute is attempting through legislation (Maine?) to force real estate agents to place our information in their database. When I say start your own MLS, I mean start your own and compete with the other model and not force the other model to give you for free the information that they have collected and managed. This is almost as ridiculous as MasterCard or Amex going to the government and crying and whining to get legislation to make Visa turn over their database of clients so that they can compete. No Jeff, when I say compete, I mean good old fashioned American competing where phenomenal service, and great prices attracts enough business to have a viable model without whining to the government about the other guy giving you his database.

    I applaud your ability to start and build companies. It seems as though you are very educated in the real estate market and it seems as though your personal opinion of realtor?s fees is a little negative. However, I would encourage you to not use a realtor next time you sell one of your numerous real property investments. To a man with your type of experience and knowledge 6% is way too much, in fact anything is too much. You should be finding and buying and selling property on your own. However, you need to understand that just because 6% is too much for you, that is not the case with the other 99% of American consumers.

    Since you agree that realtors are able to make a profit, I would like to know what you think is reasonable for a realtor to earn. It appears to me that you feel as though a flat service system would work better in this industry. Jeff, real estate is not the same as mortgage (your current business model is a flat fee mortgage service, no?). If a realtor dumps a $1 million mortgage in your lap you will do about the same amount of work to bring that close as you would a $100K loan. (maybe I am wrong, maybe there is more paperwork for a $1 million loan versus a $100K loan, please educate me here) However, if you want to assert that selling a $1 million house is the same as $100K house I would question whether your real estate brokerage ever sold a property. By virtue of supply and demand fewer people can afford more expensive property. Fewer buyers mean more work trying to find them (especially in today?s buyer?s market). Fewer buyers also mean more money in advertising and more risk since we aren?t guaranteed a commission until the property closes (more risk should return more pay ex: anesthesiologist vs. family practice doc). More money means more emotions and more difficult people to deal with on a whole. As you can see, flat fees just aren?t profitable (sorry, we are running a business not a charity) in our business and therefore aren?t a viable long term solution.

    I will wrap up by saying that from your last comments in your last post I noticed that you have a low regard for ethics in business and on that topic we will just have to disagree. In an age of relative morality, if you don?t believe in absolute truth, then there will be no way for me to convince you that what Redfin is doing is wrong.

    CSP

  • http://www.thexbroker.com jeff corbett

    Down to THE point.
    Consumers are evolving in their search ability to find real estate online. 70%+ seach online for a home before buying. That will continue to grow.
    The technology and information databases you use, will be the technology and databases the consumer will use.
    In other words, your need and thus value diminish…your tasks are marginalized….much like the stock and airline industries. The advance of technology and information sharing marginalized their value, and their gross numbers evaporated.
    The Realtor will suffer similar attrition….hence my comparison.
    I dont care to champion every individual cause that continues the current paradigm shift…there are more than enough people like me who are doing their part to make ‘it’ happen. ..see openMLS.

    thexbroker.com is a transparent view into the deceptive and preadtory mortgage industry…but with a demonstrated, effective, and proven solution….for the consumer. Wow…For The Consumer…. a true fiduciary relationship…whoda thunk it.

    Realtors should charge a practical amount of money to cover expenses and time. ..why some % based model that yields ludacris commissions when you can affford to do business for far far less. Maybe you wouldnt need an NAR if your business model made sense to anyone but your special interest group.

    As far as low regard for ethics??? I am the one standing up for the consumer, congratulating Redfin for their vision that benefits the consumer, starting a company that directly solves the predatory lending problem in the mortgage industry…for the consumer, and am encouraging the open exchange of transparent information for the greater good of the people…..while you are proud of your org that defends some illogical pricing model that gouges consumers out of tens of thousands of uncessary dollars by witholding information…and then get upset when a company or concept threatens it? Practice what you preach.

    There is no magic computer or pixie dust…I guess you will have to step outside your tiny little box to see and accept what is coming. My guess is that by then it will be too late. Get with the early adopters or get swallowed whole.

  • http://www.thexbroker.com jeff corbett

    Down to THE point.
    Consumers are evolving in their search ability to find real estate online. 70%+ seach online for a home before buying. That will continue to grow.
    The technology and information databases you use, will be the technology and databases the consumer will use.
    In other words, your need and thus value diminish…your tasks are marginalized….much like the stock and airline industries. The advance of technology and information sharing marginalized their value, and their gross numbers evaporated.
    The Realtor will suffer similar attrition….hence my comparison.
    I dont care to champion every individual cause that continues the current paradigm shift…there are more than enough people like me who are doing their part to make ‘it’ happen. ..see openMLS.

    thexbroker.com is a transparent view into the deceptive and preadtory mortgage industry…but with a demonstrated, effective, and proven solution….for the consumer. Wow…For The Consumer…. a true fiduciary relationship…whoda thunk it.

    Realtors should charge a practical amount of money to cover expenses and time. ..why some % based model that yields ludacris commissions when you can affford to do business for far far less. Maybe you wouldnt need an NAR if your business model made sense to anyone but your special interest group.

    As far as low regard for ethics??? I am the one standing up for the consumer, congratulating Redfin for their vision that benefits the consumer, starting a company that directly solves the predatory lending problem in the mortgage industry…for the consumer, and am encouraging the open exchange of transparent information for the greater good of the people…..while you are proud of your org that defends some illogical pricing model that gouges consumers out of tens of thousands of uncessary dollars by witholding information…and then get upset when a company or concept threatens it? Practice what you preach.

    There is no magic computer or pixie dust…I guess you will have to step outside your tiny little box to see and accept what is coming. My guess is that by then it will be too late. Get with the early adopters or get swallowed whole.

  • http://www.thexbroker.com Jeff

    Down to THE point.
    Consumers are evolving in their search ability to find real estate online. 70%+ seach online for a home before buying. That will continue to grow.
    The technology and information databases you use, will be the technology and databases the consumer will use.
    In other words, your need and thus value diminish…your tasks are marginalized….much like the stock and airline industries. The advance of technology and information sharing marginalized their value, and their gross numbers evaporated.
    The Realtor will suffer similar attrition….hence my comparison.
    I dont care to champion every individual cause that continues the current paradigm shift…there are more than enough people like me who are doing their part to make ‘it’ happen. ..see openMLS.

    thexbroker.com is a transparent view into the deceptive and preadtory mortgage industry…but with a demonstrated, effective, and proven solution….for the consumer. Wow…For The Consumer…. a true fiduciary relationship…whoda thunk it.

    Realtors should charge a practical amount of money to cover expenses and time. ..why some % based model that yields ludacris commissions when you can affford to do business for far far less. Maybe you wouldnt need an NAR if your business model made sense to anyone but your special interest group.

    As far as low regard for ethics??? I am the one standing up for the consumer, congratulating Redfin for their vision that benefits the consumer, starting a company that directly solves the predatory lending problem in the mortgage industry…for the consumer, and am encouraging the open exchange of transparent information for the greater good of the people…..while you are proud of your org that defends some illogical pricing model that gouges consumers out of tens of thousands of uncessary dollars by witholding information…and then get upset when a company or concept threatens it? Practice what you preach.

    There is no magic computer or pixie dust…I guess you will have to step outside your tiny little box to see and accept what is coming. My guess is that by then it will be too late. Get with the early adopters or get swallowed whole.

  • CSPP

    Jeff,

    What point? I hear a lot of ideas and concepts from you, but most are simply your opinion of the matter. It would help your case immensely if you got around to supporting your arguments with actual facts or examples. Simply having an opinion on a matter never made your opinion right. What makes an opinion something more is your ability to articulate why your opinion is more likely the reality than the opposite.

    I hear you saying that the internet is going to reduce the need for real estate agents? How? You claim that the advances in technology will marginalize the value of the real estate professional. How? Allowing consumers to access active listings on the web doesn’t mean that realtor’s will become extinct.

    You claim that our technology and our databases will become the publics. The fact is they already have access to our technology; every piece of technology that I use in my business is readily available to the general public with one exception, real estate electronic keys and key boxes. I?ll let you think about the security repercussions we might have if we gave the public access to our electronic key systems. The fact is that any consumer could run out and spend the thousand?s of dollars we spend on technology today if they wanted to. They could buy the cameras, the virtual tour equipment, pay for design and hosting of a website, etc. However, the thousands that they would spend just to sell their house might not be worth it just to save a few lousy percentage points on the listing commission.

    You mentioned again the http://www.openmlsinstitute.com again. Once again, you have stated your opinion on the matter, but have brought nothing more to the readers of this blog. So there is a movement for this or that in this country?so what!! What logical reason do any of us have to believe that the open MLS institute will succeed beyond the fact that you think that it should? As noble as you think their cause may be, I doubt the likelihood of their success, however that is just my opinion. The facts of the matter are the following. Contrary to popular opinion, the data contained in the MLS is not a matter of public record. It is not a public utility and is not the property of the public. The data in the MLS was gathered, entered, and maintained by the members of the MLS, and is therefore the intellectual property of those owners. I would encourage you to site one case where a judicial body has forced a company who has collected and maintained data to turn that data over to a competitor in order for that competitor to gain an economic advantage.

    The truth here is that it won?t happen; your rose colored glasses have distorted your view of reality in this matter. That data doesn?t belong to the public, they didn?t collect it, didn?t organize, and certainly haven?t maintained it. There certainly is no judicial precedence for a judge to turn over the data just because Jeff wants it. I am sure MasterCard would like to get a hold of Visa?s private corporate databases too, but you don?t see them running to congress to cry about that because they just aren?t that dumb.

    I appreciate what you are doing for the mortgage industry with your latest endeavor. I am sure that there are those in your industry who don?t agree with your business model, but competition is what our country?s free market is here to foster. Much the same, I welcome any viable brokerage to the real estate industry. The problem that I have is that rather than compete in the market, they need to run to the DOJ, FTC, of congress, in order to legislate their business advantage. I?ll ask again, what happened to good old fashioned American competition where hard work and competitive prices made a business successful, not running to congress for a rule change. If you don?t like the game, start your own.

    You stated ?Realtors should charge a practical amount of money to cover expenses and time. ..? I will again submit the question to you. Do you feel that it takes the same amount of work to list and sell a $1 million home, as it does to sell a $100K home? Given that Realtors don?t get paid until closing, do you feel that they tolerate the same risk in each scenario? I have already given the reasons for why I don?t think that the two transactions are the same, and I won?t waste page space by restating them. Do you have anything beyond your opinion to support your assertion that they aren?t?

    Ethics:

    Jeff, the rules are the rules, whether you like them or not. To willfully disobey the rules is unethical. Redfin chose to join NAR and to submit themselves to their rules. (most consumers don?t understand that membership in the National Association of Realtors is optional, there are many real estate licensees in this country who operate a business without joining NAR) For them to willfully and proudly disobey the rules they electively chose to obey is wrong. If you electively submit to something, and then disobey it because that is the only way you can make money, that is unethical. For you to applaud them in that is to say that you agree with their ethics, which in the end leads to the logical conclusion that you as well aren?t ethical. I really don?t think any more needs to be said on the matter.

    You insinuated in your post that our industry fails consumers by shirking our fiduciary responsibility to them. I think the exact insinuation was that your open mortgage practices were ?a true fiduciary relationship? which when taken in context insinuates that real estate does not have a true fiduciary relationship. Once again Jeff, we have opinions and conjecture, but no logical or factual support. Can you please shed some light onto which of our fiduciary responsibilities we so openly violate?

    The end of your post asks me to step outside my ?tiny little box? and ?accept what is coming.? Since you seem to be the enlightened one, and I am simply a bumbling fool in this real estate matter, can you please send my colleagues and myself this oracle which you have been so blessed to be given. Please however, for the sake of all of the readers in this blog, lets leave the opinions out of the matter and support our assertions with logical and factual statements.

  • CSP

    Jeff,

    I fear as though you have missed the point of blogging. In case you did not catch it, a blog is an open exchange of thoughts, facts, and ideas between consumers for the benefit of all readers in the blog. From time to time a blog will contain comments or discussions between industry experts or professionals in hopes to educate the readership as a whole. This intent would be lost if you put on a seminar that this readership could not access (what was this claim you made about hoarding information?). Since you refuse to support your opinions with logic and fact, the point of the discussion is lost. I suppose we must at this point leave it up to the readership to decide who has made a more convincing case. Were your opinions more believable or were my opinions backed up facts and logical arguments more believable?

    You claim ?Just as you withhold information for profit? I will again submit to the question, what information are we withholding to make these hoards of money that you claim? All active listing data is now available on the internet free for any consumer with a computer to browse. Pending data is not available to the general public, but would in no way enrich their lives. Sold data, while not available from the MLS, is a matter of public record and available for anyone with the time and the desire to view at their local county recorders office. Add that sold data to the terrible records that the county keeps on each individual house and you have your own semblance of an MLS right there at their office. The only problem is that you need to wade through millions of recorded documents to find the data that is often incorrect. Just because we do not publish our more accurate database for the consumer to view in the comforts of their home does not make us data hoarders. I am sorry Jeff, your claim that we hoard information and therefore harm the consumer holds no water. All the information that the consumer needs to access (with the exception of our accuracy) is available to them for free. The fact of the matter is that most consumers do not want to take the time or the energy to find it.

    You claim that you have a system that will replace the work of a realtor through technology and outsourcing. You claim that there is a ?realtor tax? added to every transaction. Let us analyze this ?realtor tax? and the effects that technology has had on it over the last 10-15 years. Not that many years ago I suppose (no stats to support, but is a very common complaint) the average commission was at one time 7%. It was reported recently that the average commission rate has fallen to 5.2% (realty times as I recall). That means on a $100K transaction the real estate community earns $1,800 less. Some simple math would tell us that $1,800 / $7,000 equals a 25% pay cut to the real estate community. That is right Jeff, those greedy realtors have already taken pay cuts because of your marvelous technology, in fact a fairly substantial pay cut at that.

    This idea of the ?realtor tax? that you brought up earlier was a fascinating one. You said:

    ?Realtors sell homes quicker and for more money? Realtors will get you about 6% more for your home and they sell the home quicker??

    Consider for a moment the gravity of what you said in your post. You claim that all that a real estate agent can do is recoup their fee in the selling price of your home. (the actual numbers from my MLS research come out more like 13%, but that may be a local anomaly) Remember, I did not say this, you did. Consider for a moment that that would make all of the service and all of the marketing that the real estate agent paid for out of their own pocket, free for the consumer. Free service, and free marketing, not a bad deal if you ask me.

    Jeff you once again attempt to mislead you readers by not telling them the entire story about how commissions work. You asked me not to try and justify that it costs $12K to sell a $200K house. I will not try to justify the entire $12K, but I will attempt to educate those that do not understand that the listing agent does not get $12K in that scenario (since you were a broker yourself, I am sure that you understand this). In a real estate transaction the buyer?s agent, the buyer?s broker, the seller?s agent, and the seller?s broker are all paid from the listing commission. Because each commission structure is different it is impossible to say how much each party will receive, but since we have already agreed that business people are entitled to a profit, they all deserve a portion of that commission regardless of their actual costs. If you hack up that commission equally 4 ways, then each party receives $3K for their time and effort.

    That may seem like a lot of money for what is perceived that we do as realtors, but consider that all of that money is received before taxes. The vast majority of realtors are independent contractors and are therefore responsible for paying both sides of the social security and medicare tax. Because we are independent contractors most are not given benefits like retirement or medical and dental coverage. Last year alone my wife and I forked out over $5K for our medical coverage because as an independent contract we must purchase individual insurance because we do not have access to a group plan of any type. Technology is incredibly expensive today and is necessary for an agent to compete in the market. So Jeff, no I do not think that it COSTS $12K to sell a house, but since we do not earn that much in that transaction, I do not feel as though your argument is valid.

    Your last paragraph deals with transparency. Since you really have not elaborated on your point, I am at a loss as to how respond to it. You claim spooking and steering, again since you have not elaborated, I can not respond fully. Except to say that steering (directing a client to a specific area based on their ethnicity, religion, etc.) is 100% illegal. If an agent has done this, and is tried and found guilty of such crimes, they should be stripped of their license as it is evident they are not fit to practice in our industry.

    Jeff, I am growing tired of this conversation as you seem to be simply regurgitating what you read recently on CNN or some other realtor hating media outlet. Since you can not seem to back up your arguments with facts or examples, I have nothing more to go on than to say you are simply repeating the thoughts of others and while you claim to be experienced in these matters, you lack the ability to articulate the reasons for your opinions. In the end you are just repeating arguments that lack all merit in order to sensationalize your arguments against realtors whom you obviously hold a vendetta. Each time I have made a point in this thread I have tried to support it with at least one factual or logical example. Since you seem to be unwilling to do the same in order to convince the readership of this blog, I can only assume that you do not have any facts or logic to support your examples and henceforth they can not be true.

  • http://thexbroker.com Jeff Corbett

    What I meant is that this blog would be an inefficient means of communicating ‘the grand plan’. 55 pages of economies of scale, IT integration methods, securities markets, databasing, and Web 2.0 banter is a bit much for a blog, no? Anyone who wants to see all the major points I have made about technologies impact on the real estate service industries need reference theXbroker.com. I hesitate making shameless plugs, but it will be the epitome of how business should be done. If you are a mortgage broker and cannot conduct business according to the pre-set guidelines we have established, you need to change your business model or face extinction.

    (And on the contrary, where in these postings is the redeemable proof for your opinions? Like I said, I will post links and references to support my opinions, if that is the wishes of the court…since you obviously take me for naive and confused. If I want to watch yesterdays news on these issues I would watch CNN. ‘The news’ reports what we put out, not vice-versa. Innovation is rarely understood in its earlier stages, and is traditionally fought by the late adopters. So I accept your refusal to realize and understand the changes that are upon these industries. )

    cont. Same for Realtors. You are very correct in saying you only receive a sliver of the actual total commissions, THAT is THE problem that the traditional realtor business model, it is a capital and equity draining machine and needs a fixing. Let me draw out another side to the Realtor-Broker business model.

    All numbers aside, we are all moved by incentive; the more incentive we perceive something to have; the more likely we are to do it. This is basic human psychology and can be further illustrated by a world renown economist named Steven Levitt (Google him for unequivocal proof if you need).

    What is the incentive for a Realtor to sell my $700,000 home for an additional $10,000 higher? At a 6% split model, this turns out to a $300 (max) pre-tax windfall for the Realtor…in other words very little incentive to put in the extra time and work to achieve this sales price. (I am simply showing hard numbers here etc). But it is a $9,300 difference to me…huge.

    On the other side, as my agent, what is your incentive to advise me to take $10,000 less because that’s how the offer came in? You only lose $300, still pocketing $20,700 on the same split model. The incentives for you to have me accept the offer is substantial, and at my great expense.

    Since I can afford a $700k home, $10k may not affect me that much, so dial it down to the homeowner with a $125,000 home. The $10,000 impact is far greater for the homeowner but you are still driven by the exact same incentive paradox.

    This business model is broken in more ways than one and it is destined to fold. If you think 5.2% is ‘bad’, you are in for more disappointment.

    Im not talking about ethnicity, race, creed, religion etc. steering, I’m talking about financial steering like the example above, showing your Realtor buddy’s house first, showing the listing that pays a 3.5% buyers commission instead of 3%, cajoling a seller into accepting less $ for their home to complete a quick sale…that sort of steering.

    And in the end, I welcome comments as well…Lets filter out Realtor comments, like you filter out buyer agent commissions on public MLS listings…Public MLS sites provided by Realtor.com etc. do not provide 100% of all data. I owned a real estate brokerage (and construction firm) as well and selectively filtered out the same content.

    Anyone who wants to see not only my opinion regarding Realtor practices, but also that of the DOJ and the greater consumer voice need only Google ‘NAR vs DOJ’. Assuming that isn’t too technical.

    I agree we are at an impasse…good luck, and my offer to enlighten via more efficient means remains open.

    Jeff

  • CSP

    Jeff,

    I see that you are a freakonomics fan. I thought that your arguments were strangely familiar and that I had heard them before. Does writing a book that sensationalizes topics that most people don’t understand make you a world renowned economist? While I have never read the book and do not profess to be the world?s greatest expert on Steven Levitt, I have had the pleasure of tracking him both on the web and in the print / television media that he frequents.

    Writing a book never made you credible. My limited study of Steven has shown that he uses more logic in his arguments than actual data. His study of the entire real estate industry took place while looking at 50K real estate transaction that took place in Chicago. (http://www.nytimes.com/2003/08/03/magazine/03LEVITT.html?pagewanted=6&ei=5007&en=c9b022f0cc736e28&ex=1375243200&partner=USERLAND, for those that would like to read it for themselves).

    The study while interesting fails to look at all possible angles or solutions and rule them out. I am not a scientist, and have no desire to ever become one, but I would question any research that sets out to prove a particular point, but fails to exhaust all possible causes to that point. If you set out looking for something you will be able to manipulate the data in such a way as to find what you are looking for. A more reasonable approach might have been to try and figure out why the realtors? homes sold for more. Could it be because they understood the market better and had an advantage as to market timing? Could it have been because they understood more of what a buyer was looking for and were therefore able to address that for consumers? What control was used in determining that the realtors? houses sold for more than the average? Average sale price, $/ finished square foot, etc.? Depending on the type of statistic used, a number of answers might simply answer the question. For example: If it was the average sale price, realtors might own more expensive houses in general than the average consumer. If it was the list to sale price ratio, it may been because realtors have more experience and therefore an upper hand in negotiations.

    The fact of the matter is that from his experience with them, Levitt didn?t like realtors. He saw them as crooks and set out to prove them as such, found some data, manipulated it to fit his model, and then wrote a book that has made him loads of money (assumed because he isn?t giving it away for free and it has sold a lot of copies).

    Steven Levitt is no ordinary dummy, every time he gets a chance; he goes on a television show or writes an article that gets gobbled up by the media, because sensationalism sells these days. He has sold a lot of books and made some money doing it. I will not blame him for that, but I struggle to believe what he has to say because his research on the real estate market is too localized to be applicable anywhere aside of Chicago, and was born out of his personal vendetta with the real estate community.

    I think that you and Steven give real estate agents too much credit anyway. I have never once been able to sign an offer for a client. If they choose to make or sign and offer, it is on their own accord, no amount of pushing or cajoling can FORCE them to do something they do not wish to do. At the end of the day a real estate contract is a mutually agreed upon legal binding document between the buyer and seller. The agents can?t make either party agree or disagree with any of its terms.

    For Levitt or you to assert that human nature is the only plausible answer for how a real estate transaction is handled is to essentially call the entire real estate community crooks. The truth is that human nature can be overcome and the right thing does get done. While it may not happen all of the time (I have been very clear that I don?t think the agents that break the law should be protected) the vast majority of the time, real estate transactions are handled honestly and fairly. Real estate agents can overcome their human nature much the same as the married man who walks down the street behind a beautiful woman.

    You ran through some math for our readers about the incentives to talk someone into doing some they don?t wish to do because human nature is such that the real estate agent wants to simply make a deal. As a fiduciary this would be illegal. If you have evidence beyond your own postulation that it takes place, please turn these agents in to your local authorities as I think they should be the first to go in your upcoming ?real estate extinction.? However, if you have no evidence of this, you are guilty of sensationalism yourself.

    The truth about real estate agents:

    Our business is a service industry where we assist buyers and sellers in fulfilling their dreams of homeownership. As with any low barrier to entry industry there are plenty of bad apples to spoil the barrel. It is my personal opinion that they should each be stripped of their licenses and not allowed to practice real estate ever again. However, the vast majority of real estate agents are hard working dedicated people who care deeply about their customers and their hopes and dreams. (I wonder if a computer will be able to pull that off, since they will be replacing us?) We have already established in this thread that our services are free, because using an agent recoups at the very least the agents? commission in your sales price.

    Our business is driven by repeat and referral business. If I fail to provide the type of service that will satisfy you and bring you back or send your friends, I will be out of business very soon. This concept is seen in the attrition rate of new agents in our business. I have seen rates varying by area and company between 50-75+% of all first year agents fail in the real estate industry. It is a very short sided agent who ?cajoles? his $700K listing to take less and therefore alienates them in the process. It may mean a quicker sale in the short term, but in the long term you and Steven fail to realize that the real cost of this ?human nature? will be in the 10-100?s of thousands of dollars in repeat and referral business. Case in point, my father in law has a client who has purchased and sold 8 houses from him in 22 years, and has sent countless referrals his way. Had he gone for the quick sale in the beginning he would have lost all of this future business. Steven?s research fails to account for the future economic loss of an upset customer and in so doing shows a very one dimensional type of analysis. In the end he found data to support his point, not an answer derived from his data.

    CSP

  • http://www.thexbroker.com jeff corbett

    I throw my hands up.
    You wanted a logical base to my arguments, I cite a world renowned economist and get right down to the psycho-’logical’ underpinnings of a real estate transaction and now you say this is not good enough.
    Let me say this:
    I have a healthy respect for a good Realtor, unfortunately they are few and far between.
    A computer will never replace a Realtor, but technology will readjust their income models.
    If a good Realtor can embrace a new business model, he/she has secured his place in the future real estate marketing and service.
    Businesses with an industrial age model and an inforamtion age spin are not going to cut it. It is the integration of information age technologies within the actual fiber of the buisness that causes substantialy favorable changes in efficiency and cost models. Greater efficiency and lower cost equals better customer service, retention, and referrals….so long as the principle driving it all is good at his/her trade.
    The bad apples will get thrown out of the basket and the good ones, who recognize these points, will be able to leverage themselves successfully.

  • http://sunnyspot.wordpress.com Maggie Knowles

    Who is CSP? Can I get CSP’s contact information?

  • http://www.legacyescrow.net Tim

    Very interesting discussion and while exhausted reading it, I couldn’t help but think to myself, “gosh, our escrow office charges 30% less than our competitors on average and are profitable. And, that’s without subjecting our clients to escrow junk fees–which suggests correctly that our clients (buyers,sellers, refinance folks)actual savings are more.

    One of the comments that Jeff made really hit home. Probably because I’ve been saying it for so long: just think how much business would take place if transaction (ALL) fees were lower and higher equity positions were realized by consumers. You want to put some octane into our national economy, that’s a heck of a way to accomplish it.

    To the extent that one argues that someone does another’s job, I always found that rather humorous, odd and peculiar. Take a field trip to ANY escrow office and work in it for a week. I think you would find that outside of being a real estate attorney, the most heavily credentialed real estate professionals are residing in escrow offices(LPO’s). Not only will you will find that they do a lot of work on behalf of agents, but also educate them on a variety of issues. To boot: all that for earning the very least in a transaction.

  • CSP

    Tim,

    An interesting commentary on the topic, I want you to know that I appreciate what you have to say about your industry. In fact my mother-in-law works in an escrow (“title” in my state) office, and has for over 20 years. I know a thing or two about the title industry myself, but I don’t recall that coming up in the discussion that Jeff and I were having.

    I applaud your firm for charging less, and think that you should continue in doing so. Each and every person or business should be allowed to set up a business model and earn a living. This is something that Jeff and I established early on in our conversation. However, your complaining about getting paid the least amount in the transaction bothers me. The first thing that I would like to say is that if you don’t like the payment structure in your industry, work to change it. If you are unwilling to do that work, you have not earned yourself the right to complain about how little you are making.

    Second your claim that you are the most qualified and least compensated in the transaction is without basis. Every industry has their new comers and their old timers, if you would like to reference the study that shows that on average your industry has more experience than mortgage or real estate sales, I would be happy to take a look at it. If by qualified you mean state appointed credentials, I would wholeheartedly disagree. In the two states that I hold licenses real estate salespersons (brokers require more experience in practice and more state training and tests) are required to attend 90 hours of state controlled curriculum, and then are required to pass an exam on the material. Where as an escrow agent or title closer is only required to have a notary?s certificate, no training, no tests, just a clean criminal record. As I have maintained all along, real estate is a very local industry. Different areas in my own state have different practices and norms and certainly from state to state there are vast differences. As I am only qualified to talk about my state and our practices, I will only tell you how it works here, if you have a different experience, you should happily input yours for the sake of those reading this blog.

    You and Jeff both make the ridiculous point that if transaction fees were lower, then the economy would be booming, people could afford more house, and I suppose there would be peace and love throughout the world. I suppose to the same logical end, if Wal Mart sold shampoo for less, or if Pfizer sold prescription meds for less, I would be in better shape as a consumer. Your argument while in the short term is true; it is also unintelligent and really goes without saying. If you charge less for something, that would be better for the consumer.

    Lets examine however the effects on a national reduction in all fees for all real estate transactions. In the salary based positions, less profit would mean that jobs would have to be cut in order to maintain the same profit levels (unemployment?). Or less profit might also mean that companies that are running lean right now would be out of business, and that would mean that more people would be laid off as a result. The commercial space that they were leasing to operate their business would be vacated and therefore there would be a drop in profit for the rental management industry. Fewer jobs and less rent also would mean fewer taxes. Fewer taxes collected would mean that the government would have less to give to the poor, and would therefore have to raise taxes again. Rising taxes for everyone means that corporate growth would slow down. Slowing corporate growth means that fewer people will get raises and everyone?s 401(k) will suffer. Suffering investments means less consumer spending and less spending leads to less profit and therefore fewer taxes for the government and the cycle goes on and on.

    Less profit for commission based earners would also mean a reduction in the work force. Reductions in competitive workforces would lead to less innovation (isn?t that original point of this blog anyway?), and it would also mean that more workers would be seeking employment in other industries. More competition for fewer jobs (rising unemployment rate?) means that employers will pay less to each new applicant since they have more than enough starving people to choose from. I?ll let you pick up the continuation of this cycle above.

    While I am not an economist and have never claimed to be one, it is fairly simple to see the progression of things if you just think them through a little bit. The benefits that would be gained by consumers being able spend more on a house would be offset in the drain on the economy that would from the fallout. My college courses in economics called this market efficiency. You see Jeff and Tim, because our market is efficient it will keep the balance at all times. If a gain is made somewhere a loss will be seen somewhere else.

    Finally, you talk about doing other peoples job in your job. I don?t know if it is different where you live, but where I live, the closer?s job is to handle the issues revolving around clear title. My closer has never taken my clients out to look at houses. She has never created a CMA for one of my sellers, and she certainly has never written a purchase agreement for one of my clients. Your resentment toward real estate agents for having to ?do our job? is rather a matter of having to do your job, and not liking it. My closer does her job, my loan officer does his, and I do mine. None of us do each other?s. If you are showing houses, or writing offers for your agents then you should be compensated for you time.

    My original post was all about this very concept. The person who does the job should be compensated for it. If a listing agent shows a redfin client a house, and the redfin client buys the house, the listing agent should (and will through the rules of the MLS) be compensated for the work that they did. Buyers are being misled by redfin because they don?t disclose that by having the listing agent show the property they are jeopardizing their ?rebate.? Who is taking advantage of consumers now?

    In fact, on our state approved buyer?s representation agreement it clearly states in all caps and big bold print ?A BUYER?S ACTIONS IN LOCATING A PROPERTY MAY AFFECT THE PAYMENT OF COMPENSATION BY SELLERS AND MAY THEREOFRE OBLIGATE BUYER TO PAYING ALL OR PART OF THE COMPENSATION IN CASH AT CLOSING. FOR EXAMPLE: THE ACT OF GOING THROUGH AN OPEN HOUSE UNACCOMPANIED BY YOUR AGENT?? It seems pretty clear to me.

  • CSP

    Jeff,

    I can only assume that you throw your hands up because you are no longer willing to continue to defend your position. I don?t envy you that job anyway. However, it is not my fault that you chose the difficult task of defending a position without much for support.

    You are correct, you did point out the research of one economist on real estate. Having some special understanding as to why his research lacked merit, I attempted to create an argument to show such. Whether it was successful or not remains to be seem, but since you don?t seem to have any counter arguments for the matter, I think that I did an okay job.

    I see from your last post that we agree on more than most might think. However there is one major difference. I will never be persuaded that technology will have any great impact on the fee structure of real estate agents. You have yet to show any of us how that will happen.

    In the end real estate is a people business. When dreams are on the line, families are moving, and hundreds of thousands of dollars are in play, people want people to help them not a computer. Tasks may be automated but often to the point of being cold and impersonal. The greatest value that a real estate agent will ever provide to a client is the personal service that they give to them. It is the reason why I take calls late at night or on the weekends from my clients. They need that to make it through the transaction. Technology will never replace that.

  • http://www.legacyescrow.net Tim

    CSP-
    Lighten up! Have some fun in your line of work! Stop taking things so personally.

    Complaining about my income? You’re kidding right? Our balance sheet and P&L is phenominal. Oh blasphemy! How can it be done while charging significantly less than competitors! Could it be that others are paying too much? Could it be that consumers are not afforded the luxury of shopping but are steered to their agents favorite title or loan officer? Nah, I’m just a complainer and my complaining is probably one of the reasons why we’ve had two offers for the company just this past quarter, in a slowing/shifting market.

    My statement is without basis, unintelligent and I don’t like my job? You don’t even know me! You are making yourself look fairly foolish stating things like that. For all I know you may be be finest Realtor in the country. But your comments seem to match the MO of a lot of the people we run into who like to slam other people. Seems to be kinda’ the innate part of the real estate culture.

    Who am I trying to disprove? I’m not arguing with anyone, just stating simple funny and tongue in cheek blog comment. If anything on any blog bothers you, that’s your problem.

    This may be helpful to you……Credentials: In Washington State, closers have what is called an LPO (limited practice officer) license. This license and exam is administered by the Wasghington State Bar Association. Not the department of licensing. The LPO exam is held twice a year. The real estate license is held all the time– either at your local high school, testing center or online, depending upon the state.

    Our LPO’s on staff passed the exam when 11% was the pass rate for those that sat for the exam. In contrast, over 90% pass the real estate exam on the 1st try.

    So, yes, I firmly believe that some of the most knowlegable and heavily qualified real estate practitioners in our state reside in escrow offices AND title offices. This does not mean that your experience is less valuable or less of an asset.

    Escrow staff do not involve themselves in procuring listings or purchase and sale agreements. Totally different functions and totally different compensation structures. But there is serious irony and starkly different levels of experience: yet compensation stays relatively the same. The thing that’s ironic and is questioned by a lot of our clients (sellers)is value received for commission paid. For one, my signature on a $20,000 commission check going to seasoned people who appear to need much more seasoning. I think that a healthy portion of closing agents across the country would agree that they have to do a LOT of educating: not just for agents but LO’s as well.

    For example, you wouldn’t be one of those brokers or agents that send us their own sale of their home and we have to explain what excise tax is? Or, how about having us explain to an agent AND broker that the individual signature on the listing WAS NOT THE OWNER. Or, explain to an agent how tax prorations work. Or, explain to an agent refinancing their own home, why they owe more than their original loan amount (neg am. ln). Or, explain to an agent vesting issues. Or explain to an agent that signing our mutual client is not the same the closing date, therefore we don’t cut them a commission check at the moment our mutual client signs paperwork or why abbreviated legal descriptions don’t cut it…..and on and on.

    I think the picture is painted rather well….

    Lighten up CSP and enjoy life! I think you read to much into the statements of bloggers.

  • http://www.thexbroker.com jeff corbett

    Don’t you get it Tim? CSP as a hypocrisy complex, he may swiftly discredit our opinion as without fact, logic, or basis, yet we are led to believe his banter is gospel (Please CSP, cite YOUR sources if you are going to demand ‘studies’ to back up what I/we say).
    I purposely draw reference to a world renowned economist, not some other bloggers opinion, re: the incentive of real estate agents to sell a home and their unpractical revenue model, and CSP immediately discredits him as well. Sorry Mr. Levitt, I guess you dont know what you?re talking about either.

    Lets try this again…only since we have a couple more people engaged in this dialogue. CSP’s TV education was beginning to bore me…hence the ‘throw my hands up’…anyway:

    CSP:

    You and Jeff both make the ridiculous point that if transaction fees were lower, then the economy would be booming, people could afford more house, and I suppose there would be peace and love throughout the world. I suppose to the same logical end, if Wal Mart sold shampoo for less, or if Pfizer sold prescription meds for less, I would be in better shape as a consumer. Your argument while in the short term is true; it is also unintelligent and really goes without saying. If you charge less for something, that would be better for the consumer.

    Jeff:
    So, it is unintelligent to say less cost is better for the consumer….could you please direct me to the study that says rising costs benefit the consumer please?

    CSP:
    Lets examine however the effects on a national reduction in all fees for all real estate transactions. In the salary based positions, less profit would mean that jobs would have to be cut in order to maintain the same profit levels (unemployment?)??.
    ?..The benefits that would be gained by consumers being able spend more on a house would be offset in the drain on the economy that would from the fallout. My college courses in economics called this market efficiency. You see Jeff and Tim, because our market is efficient it will keep the balance at all times. If a gain is made somewhere a loss will be seen somewhere else.

    Jeff:
    And you speak of unfounded generalist banter? Your approach to business finance only considers one side of the balance sheet, the profit side. How about the novel (innovative?) idea I previously posted re: interweaving cost saving technologies into a businesses process flow? Let me give you the simplest of examples…You email a document for a client instead of using Fed-Ex. The email cost $0, Fed-Ex charged $10. You spent $10 less on this client and thus profited by $10. Now dont go on a rant about email and Fed-Ex in relation to a Realtors job..its a simple example of a technology that increases profit by decreasing cost.
    The moral of the story is, you cut fees by cutting expenses and saving time, and can still realize better profit %?s.using technology.

    Taking the logical assumption from above:

    1000 Consumers sell their $200k homes for $6000 as opposed to $12,000 under the 6% model with a Realtor/Broker who works within a business model predicated on internal time and cost saving technologies. Although they charge less, their profit margins remain lucrative. (If you think that a $200k home cannot be marketed and sold and profited on for $6000 per, you must be a Realtor.)
    The aggregate savings realized by the consumers would not all be allocated to buying more home. They could buy other necessary goods for the home etc.
    This equals $6,000,000 back into the consumers pocket to spend in our capital economy.
    This is just a snapshot of the economic drain that the Realtor tax model imposes.

    Dropping your commissions to a practical flat-fee model based on the property would substantially increase market activity and benefit the consumerism that drives our economy. Yes, it will further the current attrition in the gluttonous real estate service industrys, a trimming of the fat that is well overdue.

    CSP:
    Finally, you talk about doing other peoples job in your job. I don?t know if it is different where you live, but where I live, the closer?s job is to handle the issues revolving around clear title. My closer has never taken my clients out to look at houses. She has never created a CMA for one of my sellers, and she certainly has never written a purchase agreement for one of my clients. Your resentment toward real estate agents for having to ‘do our job’ is rather a matter of having to do your job, and not liking it. My closer does her job, my loan officer does his, and I do mine. None of us do each other?s. If you are showing houses, or writing offers for your agents then you should be compensated for you time.

    Jeff:
    The difference Tim is referring to here is that his job pays him substantially less for performing tasks just as vital to the closing of a real estate transaction. He creates letters, contracts, and forms from templates, just like you. Unfortunately, Tim has to correct the errors of Realtors, the same Realtors who receive the 5 figure checks. I concur with Tim that the least educated person at the closing table is usually and unfortunately the Realtor. During my years as a mortgage broker/banker, I found myself correcting the Realtors closing statements, almost without fail. There are now stricter educational licensee qualifications to become a Realtor, thank goodness…
    Finally, any Realtor could become a top producer if they allocated 4.5% for buyers agent commissions. Something tells me their listings would show and sell FAST…with $0 spent in additional marketing or time. You can?t tell me that you dont filter MLS listings by % buyer commissions?.

  • http://www.thexbroker.com jeff corbett

    CSP,

    You last paragraph to me represents your complete lack of ability to wrap your head around where your industry will be in 5 years. I encourage you to diligently research what I have attempted to explain, only to be minimalized, for yourself CSP.
    Ask a friend, who is not a Realtor to ask another friend, who is not a Realtor, what his/her opinion is of Realtors. It’s time to be honest. ‘Realtor’ has a foul stigma for well founded reasons.
    People are looking for a alternative to the traditional model. It’s already being assembled by insightfult innovative companies like Redfin.
    Buyers agents are being marginalized as we speak. If I identify the home I want to buy and simply need a Realtor to let me in and create an OTP, they dont deserve 3%, which I am paying for. I want to pay $5000 less for a home more than I want you to ‘share my dream’ and ‘hold my hand’.
    Consumers want a fair deal more than your expensive friendship. Offer that and you wont need to patronize your clients with cliche’s to earn their business.

  • CSP

    Jeff and Tim,

    I thank you that this will be my last post to this worthless blog. I have attempted through logical arguments to make points in support of an industry that I love and care for dearly. My wife and I both have real estate licenses and earn our living in the industry. My father-in-law and my own father are both licensed agents and have combined experience of over 40 years. My mother-in-law is a title closer, and I have an aunt and uncle in another state that have over 40 years of experience in real estate.

    Your point Jeff that realtors have a poor public image is the reason why I am here talking to you folk. The problem that realtors in general have is that we are too busy helping people buy and sell houses to care about what the liberal media is saying about us. Since nobody has tried to shed some truth into these matters, I thought that I would give it a shot here in this blog. However, I see now that it is just a waste of time. People who are truly prejudiced on the matter will never be swayed. Just because one real estate agent is not worthy of the commission they charge, does not mean that they are all crooks. For you to judge the entire real estate community based on the unethical actions of a select few is deplorable. I suppose you consider yourself a crook as well since you associate with the mortgage industry (we all know what type of name they have earned for themselves?they must all be lying cheating fools)

    Finally, anyone who claims that breaking the law to make a dollar is the only plausible cause for an action is a poor economist, because he fails to consider all factors. Steven Levitt is more concerned about selling books than conducting good research, and hey, what better topic than the booming real estate market and the crooks that screw every home buyer and seller to snag a sale. It is not my fault that you brought him into this.

    Tim, I have taken your advice and lightened up. So much so that I could care less about these measly discounter brokers, they have always existed and have rarely made a dent. I want to thank you for refocusing my efforts on helping my customers and allowing the discounters to peaceably go about their squabbling over the bottom 5% of the market in my area. I was also happy to see a list of the agents who support your business the most on the front page of your company?s website. I am sure they will enjoy the copy of your comments that I sent them by email, I know that it was very flattering as a real estate agent to read them myself. I hope that they are as understanding of your thoughts on real estate agents; after all, you were talking about the agents that you work with.

    I will leave you with this:

    Jeff, wake up and realize that no amount of technology will replace realtors. Our fees will only drop if our income rises. (Damn us for wanting to make a living) NEWSFLASH: Fees haven?t fallen because realtors are making less every year not more!!

    Tim, enjoy the PR work you will have do in order to keep your current client base. I am sure that they will understand that you were just kidding when you talked about how over paid they were or how often you have to educate them. I am certain they will all be very understanding and will continue to force their clients to use your company and make you a millionaire.

    Final Thought: (Yippeee!!!!, you can all back to realtor bashing in peace)

    If the realtors are so grossly overpaid for the simple tasks they do, why are neither of you swimming in our pool of money with us. If it is so easy, and we make so much, hop in.

    Jeff, why couldn?t you make it in the real estate industry anyway?

    Quote from Jeff?s second post: ?I used to own a real estate brokerage??

  • http://www.thexbroker.com jeff corbett

    For my thoughts re: Mortgage brokers, see theXbroker.com CSP…I believe I mentioned this in a few of my past posts…

    Implement a better IT model and your costs drop, so your income rises…then drop your fees. Jeepers CSP, this getting repetetive.

    **Jeff, why couldn?t you make it in the real estate industry anyway?**

    Becasue there is way more money and fun involved in taking the traditional model down.
    I sold my brokerage in 04 because I got tired of defending my business model to the local NAR…who told me to shut it or lose my license. Yes, that’s correct…too many other Realtors complained that I was ‘screwing things up’ in their business because I told the truth and offered a cost effective alternative.
    It became clear that if I really wanted to make an impact I would have to do it ‘from the outside’. (again see thexbroker.com)

    If you cant ‘do the right thing’ in an industry, it’s time to get out and/or change it. I tried things the NAR way, until I realized it is nothing more than a special interest group, looking out for themselves and no one else. Plus the commission structure sucks. The consumer gets banged for 6% and all I got was .6% after splitting things up by half, then half, then taxes….IT IS AN ECONOMICALLY IMPRACTICAL MODEL…for the 10th time already.

    CSP, get ready for theXrealtor.com, coming spring 2007. Throw me your email and ill be happy to keep you privy to it’s pre-launch.

    By the way, what a jack move trying to throw Tim under the bus to his own clients…you’re such a realtor. Those who live in glass houses should not throw stones CSP.
    Another case in point as to why I ‘got out’.

  • RealtorJM

    Why shouldn’t CSP send Tim’s true feelings to the people who he profits off of? You suck up to us with one breath and in the next you complain and slander us. Enough of the double talk, say what you mean and mean what you say. If Tim truely feels that he is more educated and should make more then the realtors who sustain his business then he has nothing to hide.

  • http://www.legacyescrow.net Tim

    I love the transparency of no way to contact the other posters! That’s the way to discuss things. I don’t suck up to anyone or subsidize any agent or loan officers advertising that could be construed as a kickbacks. We are not the ones being sued lately– like some brokers, lenders, title companies and builders. :)

    Hey everybody! The tomato throwing has begun! LOL

    The rhetoric is getting silly. It is one of the things people should steer clear of regardless of whether someone feels one’s business model is more worthwhile than other.

    A couple things:

    It’s amazing how a tongue in cheek comment can get blown way out of proportion. That’s one of the problems with blogging. Another problem I’ve noticed over the last year I’ve been blogging is that there appears to be a lot of animosity out there between people who either own/operate or aspire to another type of business model vs. Realtors who work at traditional brokerages.

    If you could have “heard” me laughing while I made my own comment a day ago you probably would have laughed WITH me, maybe even felt sorry enough to buy me a Coke. I do think it’s funny & ironic. It’s like the little guy on the totem pole (me) looking up and saying “gosh, everyone is all up in arms about charging this and that while making a living–what about us? We DO MAKE the least in a transaction, even if we charged as much as our competitors. I’d LOVE to make the bank that some of the Realtors AND loan officers make, but my wife and I chose another path. Am I envious? Heck no.

    As I pointed out, the licensing requirements for real estate folks and LPO’s in Washington State differs drastically. So do their functions. They are TOTALLY different businesses. No where did I state that I’m more educated than anybody else. Lynn and I DO educate a LOT of Realtors AND LOAN OFFICERS, and that includes our existing clientele. In fact many absolutley enjoy the educational e-mail updates we send and blog about.

    Some of the finest people I know are the Realtors that send work our way, including loan officers. We do not get ALL our work from the Realtors. We also close a good amount of for sale by owner transactions (I market heavily to them) who’s savings are substantial by keeping more equity than hiring agents at 6%.

    Our clients send work our way for a reason. We do a swell job AND keep their clients from paying stupid junk fees that they may encounter elsewhere.

    For example, stupid e-mail doc fees I see in the Seattle Metro area of up to $200. In fact, the majority of our Realtor clients were existing clients of Title or other companies. Some (ok probably most), even told us to get lost initially, until they had a snafu and asked us to give them a hand.

    Lastly, one of the primary reasons people do business with our small business is our TRANSPARENCY & authenticity!

    I would hope that if people disagree with me about real estate issues or whether our market is in a bubble or not, they wouldn’t take it personally and try to hurt our small business. I undertand that some elect to go that route. To them, I would encourage they take their business to a place where they feel more comfortable. Transparency is something I DO BELIEVE is lacking in many allied real estate professionals, as is the case here where some individuals HIDE behind alias or anonymous postings.

    So, by all means go ahead and e-mail all our Realtor AND loan officers clients. Should I save everyone the time and e-mail you the entire database? I think you would find that many would not look too kindly on someone who is trying to financially hurt another business, because they don’t tow the party line or whatever. If someone disagrees with me,that’s fine. A lot of people do, including my spouse!

    PS. We do not profit off of Realtors. Realtors find professionals who make a difference in their business and who foster the long term business relationship with their clients, like Legacy Escrow Service, Inc. does every day. We are ALL paid by our core client, the buyer who brings the dough to the table.

    For those that love to hate us, you should wonder why all those agents on our website choose to use us. And if you follow us closely or sleuth us like our competitors, you’ll notice that names are not repeated over and over.

    I think it’s pretty neat that an under dog company like ours can be started in the Fall season (which some said was foolish)with one desk, one computer, one phone and NO business contacts–and in less than three years start to blossom. And fine fans, that’s while NOT being owned by a real estate broker, lender or title company that steers clients or sends their own pipeline of business. We do it the old fashioned way.

    Do you know how tuff’ that is? For those that hate us, start a blog called:

    http://www.whyIhatelegacyescrow.blogspot.com

    PSS. We are coming out with some hilarious videos poking fun at our industry and the things we encounter in our line of work. It’s also educational. Stay tuned.

    PSSS. Go ahead and e-mail my clients. I don’t think you’ll mind them back-tracking your e-mail address or IP address. Then we can have a real open and transparent dialogue. LOL.

    :)

  • John Carson

    Wow, that was exhausting just trying to get to the bottom of this whole post. Can someone please explain to me what this “procuring cause” thing is that CSP is talking about and if it will impact me if I choose to use a Redfin agent?

  • http://www.thexbroker.com jeff corbett

    Procuring Cause = CSP alleging that a Redfin agent shouldnt get paid and subsequently rebate part of his commissions to the consumer becasue the Redfin agent ‘didnt do enough’ to deserve the commission.
    CSP states that the listing agent should file for arbitration against the Redfin agent to keep the commission from him/her, and subsequently the buyer. He(/she?) also attributes PC as to meaning that the person who STARTS the chain of events should be the only one paid. So much for buyers agents, I guess.
    John, I would address Redfin directly on this for your own piece of mind, but I feel you will find CSP’s comment doesn’t mean sqaut in any arena, except the backroom board meetings of local NAR. This is exactly why the NAR is headed straight toward an anti-trust suit from the Department of Justice.
    What you have in this blog, as Tim stated, is two sides to a feverishly debated opinion. The Realtors vs. The Innovators (who are also Realtors and Brokers). I am passionate about bringing change into these veiled and expensive industries. Those who are making a killing at doing business the way they are, are just as passionate about discrediting people such as myself and keeping the gravy train flowing their way.

    My two main points for this ‘exhausting’ post, which I have stated more than twice:
    1) The traditional Realtor buisness model of holding data hostage for a 6% ‘fee’ is unpopular and unecessary, see:
    http://www.dailyherald.com/search/searchstory.asp?id=205015
    Here is a clip, if you dont want to read the entire article:
    The NAR ?obstructs real estate brokers who are using the Internet to serve their customers, and who are developing innovative business models that take advantage of Internet technology,? argued J. Bruce McDonald, a deputy assistant attorney general. The suit alleges that the NAR prevents nontraditional brokers from gaining equal access to the massive Multiple Listing Service registry.

    Last week, the Consumer Federation of America labeled the real estate trade industry a ?cartel? that sets artificially high sales commissions and blocks competition from the coveted property listings.

    2) Realtors will not be ‘eliminated’ by ‘a computer’…this isnt Judgement Day…There is a paradigm shift towards Realtors who are savvy enough to have the vision that you dont have to rake people over the coals to make a living. They are adopting new technologies to lower costs, raise efficiencies, and charge practical fees. To label Refin, Propsmart, Trulia, etc. as another FSBO service or ‘discount’ broker is misguided and naive…and shall lead to the traditional models Procuring Demise…

    If I can put my contact info out there, anyone should, as theXbroker.com essentially blows the whistle on the entire mortgage industry. There is nothing like hate mail, frivolous lawsuits (which are hysterical), and death threats from other brokers/bankers to know you are on to something big.

  • RealtorJM

    John,

    Procuring cause is a rule established by the local MLS system or board of realtors. While membership in the MLS/board is optional, once a member, following the rules is not. Jeff will tell you that this is the way that the full service broker keeps the little guy from innovating, but I would propose the opposite. Electively joining the MLS places all brokerages on the same playing field. If you were a small business owner and you wanted to compete against large brokers there would need to be a format to do that, the rules of the MLS provide exactly that opportunity. It essentially guarantees a new business owner that his listings will not only gain exposure to all the members, but it also guarantees his right to compensation for his buyers. Without the MLS a large broker could simply choose not to pay a small broker and the cost of litigating the matter alone would put the little guy out of business. If rules weren?t in place to foster this sort of cooperation then I can only imagine that the real estate industry would be much more polarized with only a few major players able to operate in any one area.

    In layman’s terms CSP is correct, procuring cause can be defined as “whoever does the work, gets paid for that work?, however it is more technical than that. Quoting directly from the NAR website: ?Procuring cause is in fact the interplay of factors which together demonstrate that the unbroken efforts of a specific broker were responsible for the buyer making the decision to consummate the sale on terms which the seller found acceptable.? Each and every transaction is unique in nature and the arbitration panel is encouraged to consider the entire scope of the transaction prior to making a judgment. Published for each property in the MLS is an offer for compensation. The broker who can show that they are the procuring cause in a transaction is the broker that will receive the compensation offered by the seller/seller?s broker.

    So how does this apply to you and your consideration of Redfin Realty? When you work with Redfin they may have you sign a contract, they may not. If they do have you sign a contract, then the contract will stipulate that as a buyer you are responsible for paying ?X? to the buyer?s agent in the form of commission. The contract may or may not also stipulate (most do) that any amount of commission received from the listing agent will reduce your obligation to pay the buyer?s agent?s fees. Breaking that down, you may have to sign a contract that obligates you to pay some money to the buyer?s agent for his work. If the seller is offering to pay the buyer?s agent you will most likely not need to pay anything for their service. Not a bad deal really.

    Procuring cause probably won?t be a problem if you don?t actually visit the property, but that is where most buyers get hung up. I don?t know for sure, but I having a feeling that the vast majority of Redfin?s buyers are calling the listing agent to have them show the property to them. Buyers are going to run into procuring cause problems when they call a listing agent, have them show the property, and then decide to write the offer. The question to ask yourself at that point is, which agent?s ?efforts were responsible for the buyer making the decision to consummate the sale?? Certainly the Redfin agent has no claim to the offer for compensation because to this point their efforts have done nothing to foster the buyer?s decision to consummate the sale. The only agent to do anything to this point in the transaction is the listing agent.

    I Imagine that there will be more and more agents who will grow tired of taking time out their days to run Redfin clients around town only for Redfin agents to step in and ask to be compensated. Right or wrong that is not how the system of cooperation that has been established works. As these agents grow tired of working for nothing, they will begin to enforce the rules. In the end it will be the Redfin buyers that will be left feeling duped because without compensation from the seller/seller?s broker, Redfin will not earn a commission and won?t be able to give anything back to the buyer. The only buyers that will be able to make this system work are those buyers who can feel confident in buying a house sight unseen. Since they didn?t involve the listing agent, there won?t be an issue with the compensation and Redfin should be compensated. In the end you run the risk of doing all the work yourself and not saving any money because Redfin may not earn a commission. In fact you run the risk that you will end up owing Redfin money to fulfill the duties of your contract. Seems like a lot of work and risk, when you could retain the services of a competent buyer?s agent for free, but that is just my two cents on the matter.

  • http://www.thexbroker.com jeff corbett

    Great post by Realtor JM, well thought out and professionally written.
    Intersting point re: the MLS…it does level the playing field, allowing big and small to compete, mandating cooperation. Do you see the irony in how the very nature of the MLS is sinking the traditional Realtor business model?…A great example of ‘The Innovators Dilemma’…

    One item that bears further interpretation is that procuring cause is addressed on a case by case basis, usually attempting to resolve two Realtor agents claim to the same buyers commission on a particular property, with the clause favoring whoever started the unbroken chain of events that led buyer to purchase (there are about 12 guideline type questions when attempting to determine who has the rights).

    So here is a scenario:

    Potential buyer finds a listed property through services provided by a ‘Redfin’.
    Buyers would like to physically inspect the property and so contact the sellers agent via Redfin for a ‘showing’.
    The sellers agent has an agreement with sellers to advertise and market the property (for compensation).
    After the physical inspection, buyers decide to offer a contract (via ‘Redfin’) on the home, which is ultimately accepted.
    Now the question, which agent started the chain of events that led to the purchase?
    The Redfin agent provided the service to the buyer which enabled them to identify and ultimately purchase the property. The sellers agent simply held to their fiduciary duty of showing (marketing) the sellers property for the seller. How could a sellers agent turn away a potential buyer from inspecting the property they are contrcated to market? If the sellers agent won’t market a property they are listing because of bias or prejudice, wouldnt they be in serious breach of contract based on ethical (and other) standards?

    No one is asking listing agents to run Redfin clients around town…just market the properties for which they are contracted to do so!

    Contracting with a buyers agent IS NOT FREE. The buyer and the seller are both paying for the services via a fee that is (typically) 6% of the sales price of the home, which is reflected in a higher sales price. The 6% higher sales price does not benefit the seller or the buyer, only the Realtors. The seller receives substatially less and/or the buyer pays substatially more for the home, using the expensive ‘allocation of %’s’ based revenue model.
    The Redfins of the world recognize that their services are ‘labor marginalized’ and cost effective enough to rebate a portion of the buyers agent fee appropriately back to the buyer to accommodate other costs associated with purchasing property.
    If its all the same, have the listing agent pay Redfin agents a logical fee for delivering the buyer and drop the remaining buyers agent commission from the purchase price of the home. Thats just my 6% on the matter.

  • http://www.thexbroker.com jeff corbett

    thexbroker.com/h-list.html

    Our version of the ‘Hall of Shame’

  • RealtorJM

    Jeff,

    Three points. CSP was incorrect in stating and you were incorrect in restating that procuring cause is determined based solely on who STARTED the chain of events. You were however correct in stating that the arbitration panel considers the entire course of events. I apologize if I did not make that point clear enough in my initial explanation. Yet, you are mistaken in your understanding that the Redfin agent will would prevail because they introduced the property via an electronic format. To assert this method as making a valid introduction would also then follow that each agent who places a client on an email listing campaign is also the procuring cause when the buyer buys. Having served on countless hearing panels in arbitration disputes, I can say with great certainty that 99% of the time, the panel will find that it was the listing agent?s actions by showing the property was the key factor that lead to the consummation of the purchase agreement. The arbitration panel will therefore hold that the listing agent is to be awarded the commission.

    I agree with you 100% that the listing agent?s fiduciary duties obligate him/her to do everything they can for the seller in order to see the seller?s property sold. While a very valid point, procuring cause considers the factors that lead to the offer. Regardless of whether you are legally bound to do it or not, if your actions directly and integrally influence the procurement of an offer on a property, you hold procuring cause in that transaction. Ultimately, a listing agent?s fiduciary responsibilities are immaterial to procuring cause arbitrations, only their actions carry any weight.

    I once again agree with you that there is a cost to doing business with real estate agents. You established early on in your conversation with CSP that as working professionals, both buyer?s and seller?s agents have a right to earn a living. My submission that the services of a buyer?s agent are free may have been misunderstood. You have established on more than one occasion that you feel that 6% is too much to pay for the services of a real estate agent. For anyone holding the same opinion, there are opportunities in every market to list your home for less. Both the 6% seller and the 0% seller have the right to choose the path that they take. My assertion that the buyer?s agent?s services are free follows Webster?s definition of the word being: ?of no cost.?

    Of no cost, meaning when a buyer chooses to engage the services of a real estate agent and that agent shows them properties that are listed on the MLS and have a defined offer of compensation, there will be no additional cost to purchase that home through the services of that agent than had the buyer found the already listed home on their own. Having already listed the property, the seller is already contractually obligated to a set commission amount. Should the buyer do it themselves or engage an agent to do the work, the seller will still be obligated to pay the commission and the buyer will realize no additional savings having done all of the work on their own.

    Look Jeff, you and I agree on a lot of items and we disagree on just as many. I don?t intend to argue you with you about your thoughts of the real estate industry for the next month. A blogger asked for clarification, I provided it, and then you hoped back in with some misinformation that needed correction. I don?t mean to engage you, I am sure that you are a perfectly nice person, but please don?t mislead the consumers. They are the ones who will be getting burned here. I applaud Redfin for attempting to innovate; I welcome these newcomers to my industry and have for many years. Unfortunately, the business model that they choose to employ does not follow the established rules of the MLS and consequently the consumer will be the person who is harmed.

  • PCC

    So the realtors are arguing that internet brokerages won’t work because a licensed realtor is needed to open to get into the house.

    Just thinking outside the box here, but couldn’t it be possible to hire someone to be available to open the house to internet customers? Maybe someone would be willing to do it for less than the tens of thousands of dollars that the realtors want. I think we can overcome this tremendous barrier if we all put our American ingenuity into it.

    Heck, I’d make myself available to open a few doors for just a few thousand. :)

  • RealtorJM

    PCC,

    I can’t speak for the entire real estate community, but I don’t think that anyone has argued here that internet brokers won’t work because there is nobody to let people into the houses.

    The discussion that has taken place in this thread of recent has been regarding whether or not Redfin’s business model will succeed in the face of the present definition of procuring cause. Procuring cause is a rule established by NAR and local MLS providers in order to facilitate cooperation between brokers of varying business models and sizes. A more detailed discussion takes place over the past few posts if you would like to learn more about it.

    Simply handing out keys to every listed house in a metro area would pose an enormous security risk. How long would it take the local burglar to catch and start signing up to “let people in”? While the present system is not perfect, there are measures in place that guard the security of our sellers.

    However, if we were to open that system up to the general populous, I would guess that I would have a hard time getting permission to place lock boxes on my sellers’ houses.

  • PCC

    JM-
    Realtors often (and somewhere back in this gargantuan thread) raise the issue of internet models having to rely on traditional brokers to let people into a house. When complaining about internet brokerages, CSP said “they expect other agents to do the work (show houses, etc.)”

    I do agree with the obvious fact the 99% of buyers will need to see the house before they buy. I just think that full service realtors and their full 6% cut aren’t always essential to the equasion. I think there is an opportunity for some creative people to get around the issue.

    While realtors may engage in anitcompetative practices, I don’t believe they have a monopoly on being the only people who are capable of being accountable to show a home. A good business could hire reliable people to do this and I imagine theft issues would be no different than the status quo.

    Last I checked housecleaners from the scary “general populous” (what are realtor part if not the general populous?)are given keys to operate autonomously in peoples homes. Somehow the consumers are able to find businesses that hire people who don’t rob them.

    I just think there is a possibility for a new type of job here that would be symbiotic with internet brokerage and benefit some real estate consumers who know what ehy are looking for and don’t neccesarily need their hand held while viewing a house.

  • PCC

    JM – This is from one of your posts stating why you believe an internet brokerage like Redfin would have no claim of procurring cause..

    “Procuring cause probably won?t be a problem if you don?t actually visit the property, but that is where most buyers get hung up. I don?t know for sure, but I having a feeling that the vast majority of Redfin?s buyers are calling the listing agent to have them show the property to them. Buyers are going to run into procuring cause problems when they call a listing agent, have them show the property, and then decide to write the offer. The question to ask yourself at that point is, which agent?s ?efforts were responsible for the buyer making the decision to consummate the sale?? Certainly the Redfin agent has no claim to the offer for compensation because to this point their efforts have done nothing to foster the buyer?s decision to consummate the sale. The only agent to do anything to this point in the transaction is the listing agent.

    I Imagine that there will be more and more agents who will grow tired of taking time out their days to run Redfin clients around town only for Redfin agents to step in and ask to be compensated.”

    So if a group like Redfin had a representative or buyers contracted someone to represent them for a flat fee to open the door of shown house, wouldn’t that satisfy the procurring clause standard you described? I ask with full sincerity as procurring cause seems to be one of those legal concepts that seems ethereal at best.

  • http://www.thexbroker.com jeff corbett

    Procuring cause is as obtuse as it gets PCC, you hit that nail on the head. It is nothing more than a term the NAR uses in attempt to defeat competition to its monopolistic practices. JMs ‘mass email marketing campaign’ analogy to Redfin’s competitive business model further shows his propensity to bend definitions for his favor, albeit a very poor one.
    JM also ascertains that I am misleading consumers and they may be harmed because of it. Harmed because of the local MLS and NAR’s ‘policies’, he dutifully states…which is why they are in hot water with the Dept. of Justice and the scourge of a real estate transaction according to a vast majority of consumers. Hanging an argument on ‘ethereal’ legal jargon is ripe to have its legs kicked out from beneath it.
    In a real court room (not an NAR special arbitration meeting) Redfins business model would defeat a ‘Procuring Cause’ motion set forth by a complainant listing Realtor and reward the defending party under the same definition. Objectivity in regards to the subject matter is required, which is impossible to achieve in the NAR’s arena, as they are high on the proverbial ‘ether’.

  • http://www.thexbroker.com jeff corbett

    Procuring cause is as obtuse as it gets PCC, you hit that nail on the head. It is nothing more than a term the NAR uses in attempt to defeat competition to its monopolistic practices. JMs ‘mass email marketing campaign’ analogy to Redfin’s competitive business model further shows his propensity to bend definitions for his favor, albeit a very poor one.
    JM also ascertains that I am misleading consumers and they may be harmed because of it. Harmed because of the local MLS and NAR’s ‘policies’, he dutifully states…which is why they are in hot water with the Dept. of Justice and the scourge of a real estate transaction according to a vast majority of consumers. Hanging an argument on ‘ethereal’ legal jargon is ripe to have its legs kicked out from beneath it.
    In a real court room (not an NAR special arbitration meeting) Redfins business model would defeat a ‘Procuring Cause’ motion set forth by a complainant listing Realtor and reward the defending party under the same definition. Objectivity in regards to the subject matter is required, which is impossible to achieve in the NAR’s arena, as they are high on the proverbial ‘ether’.

  • RealtorJM

    Jeff,

    Where does all of your anger come from? I have attempted to politely correct your incorrect understanding of a specific NAR/MLS rule and have been met with nothing but anger and hostility. Your most recent even accuses me of being high. To this extent I am sorry that you feel the need to try and make your point through accusations and trite comments. I hope that in the future we can have a more pleasant conversation with less sarcasm and name calling and more polite interaction.

    I was hoping that you could help me with a conflicting statement from your most recent post.

    In your post on August 11, 2006 @ 9:52 AM you agreed with my supposition that the MLS ?levels the playing field? of competition and stated the following:

    ?Do you see the irony in how the very nature of the MLS is sinking the traditional Realtor business model??

    Today your post claims that the rules of the MLS are ?monopolistic? and ?anticompetitive.? So which is it? Is the NAR and consequently their MLS system good or bad for brokers? Consumers? Real estate as a whole?

    I personally still believe that the MLS does more for competition and less for large full service brokers than vice-versa, but I am willing to hear you out on the matter if you would like to add your input.

    I would like to also like to correct your assertion that procuring cause would favor Redfin in a ?real court room.? Procuring cause is not a law nor is it a legal theory and therefore in a court of law it would have absolutely no value. I hope that this is clear, because I feel like I am repeating myself here. Procuring cause is a rule. It is a rule that fosters competition between competing brokers. It is a rule that each MLS member voluntarily subjects themselves to when they become a member. And it is not a new rule.

    Your claim that NAR cannot objectively oversee the real estate community is also interesting to me. Is their inability to be objective based solely on the fact that they are realtors? Using the same logic, it would also follow that the AIA cannot objectively oversee the architecture community because they are architects, or that the American Bar Association cannot objectively oversee the legal community because they are lawyers.

    Finally Jeff, I did not intend to offend you when I stated that your statements may be misleading to consumers. It was not my position that you intentionally and maliciously were crusading to misinform consumers, but rather that your statements may be viewed as a type of ?expert? position in the matter and may unfortunately lead the consumer to an incorrect conclusion. I was simply hoping to lend my expertise to the matter having studied the arbitration manual and procuring cause guidelines and having overseen countless such arbitrations. Please accept my apologies if my words did offend.

    PCC,

    I appreciate your sincere approach to seeking understanding in this matter. As I stated earlier, each arbitration panel will weigh the entire course of the transaction so nobody can state for absolute certain how a panel will rule in a hearing. However, I can?t see what the listing agent would have claim to if Redfin were to hire someone to show houses on behalf of their brokerage. If Redfin, and not the listing agent, shows the property, I can?t imagine that the listing agent would have any claim to procuring cause because they will have had no interaction with the buyers.

    Your point is well taken regarding housekeepers entering homes while the owners are away. I would however encourage you to understand exactly what we ask of a seller when we put a lockbox on their home. In the case of most cleaning services the key is given to one company and they are granted access to the home. In the case of our local MLS and our electronic lockbox system, anyone with a valid key can enter your house at any time. The rules of the MLS state that you must have a confirmed appointment or face a $10K fine, but in total 30,000 people have access to these boxes and the only thing that distinguishes them from Joe Public is their valid real estate license.

    I suppose that we might argue that Redfin should hire a group of college students or whatnot to open up houses, but unfortunately until the rules of the MLS are changed, that simply won?t be a reality. I suppose that if enough of our sellers asked us to make their homes more available, these rules might change, but right now the sellers are asking us for more protection, not less.

    Another thing to consider when dealing with unlicensed ?showing agents? is that they would be of little use to the buyer with regard to information. In the state where I work, the statutes specifically prohibit an unlicensed person from entering a conversation with a buyer or seller regarding specific (price, terms, motivation, etc.) topics while in the employ of a licensed agent or broker. Please bear in mind that this law was created to protect the consumer and not to hamper competition. I don?t wonder if other states don?t have similar rules on the books.

    Lastly, if you do a bit more research on Redfin?s model you will find that they do have a pricing option that will provide the buyer with a dedicated agent to open any house they like. The only catch is that they don?t receive a discount when they do purchase a home and I can only assume that is because this scenario is more labor intensive for Redfin. The irony is found in that there is no less work done to sell the house when Redfin does offer the discount; it is just done by the listing agents.

  • http://www.thexbroker.com Jeff Corbett

    JM,
    Im not angry (spirited, if you will) and didnt accuse you of being high…Simply derived from PCC’s reference to ‘etherial’ arguments, tongue-in-cheek.
    My problem with the NAR and their licensed MLS’s, are monopolistic practices and non/un/wrong-disclosure, accordingly.
    The NAR has decidely taken the stance that the 6% model is necessary and mandatory (I know it isnt mandatory, but Realtors act as if it is). As stated somewhere back in this mile long thread, a % based revenue model is not consumer friendly and can be abated for a much more practical model. The AIA and other professional associations do not set pricing and revenue models, nor are they the subject of anti-trust suits.
    The concept of the MLS is great in theory but lacking in real-life use. The format, layout, and content needs a fresh infusion of innovation. The quality of information is very substandard, stating ranges instead of specifics. The reason for ‘ranges’ and lack of quality, sound information is the potential liability Realtors expose themselves to for misrepresentation and the resulting fear. The rightful heavy hand that weighs in for ‘being inaccurate’ is fostered by the exhorbitant fee’s consumers are forced to pay for what should be succinctly accurate diligence. If a consumer is paying $30,000 for a service, it all better be letter law perfect or a lawsuit is likely.

    If the NAR would stop its hard-headed chest thumping, make the MLS open source, and agree to a fair and practical revenue model, these debates would cease, the lawsuits would (at least) dramatically decrease and Realtors may be able to shed the foul stigma they currently wreak of.

    I have other thoughts to be posted later. Im late for a meeting, and apologize for any mis-spellings….

  • RealtorJM

    Jeff,

    A very interesting post. I had a couple of questions that I hope that you might address in your next post.

    You state that the MLS has monopolistic practices. Can you point out those practices for me?

    You also state that AIA does not set pricing and revenue models therein by insinuating that the NAR and subsequently the MLS systems do. I found this interesting because in all of my years of practice; the MLS has never once dictated my pricing. I was hoping that you could point out the specific rule or practice that sets these pricing models.

    You also state that the MLS data needs an infusion of innovation. I couldn’t agree more. Innovation will only improve the MLS systems and ultimately the experience of the users. However, you need to understand that this innovation cannot destroy the delicate balance of cooperation that takes place in the MLS system. If destroyed, brokers would no longer cooperate with one another. Do you feel that this would be good for the consumer? (I was hoping that you could address whether or not the MLS should be abolished)

    You also mentioned that your local MLS uses ranges rather than exact numbers to protect agents from liability. I kind of wish that our local board agreed with this practice. There isn’t a single field in our local MLS that can be entered as a range with the exception of the potential range of price found in unbuilt new construction. As frustrating as this may be for you, you are dealing with a local anomaly here.

    Finally, you state that the NAR needs to make the MLS open source. What possible benefit would be provided to the consumer if the MLS were set wide open? Any consumer can already access active MLS data via the IDX policies established by the NAR. Active listing information is wide open, so the argument that it would benefit the seller is lost. Sold data is already available at your local county recorders office. Cancelled and Expired listing data is of absolutely no consequence to the general public. I was hoping you could explain to me why you feel the MLS databases should be opened to the general public.

    Hope that your meeting went well.

  • http://www.thexbroker.com Jeff Corbett

    JM,

    OK..using your questions, followed by my ‘opinion’.

    “You state that the MLS has monopolistic practices. Can you point out those practices for me?”

    There are layers of complexity here, but on a general level, by forcing the market to come through your orginazation to list a home and/or gain access to listings is a monopolistic practice. Please (and I mean this in the nicest of ways) spare me the speech that consumers may choose any outlet they like to market their home. If a consumer does not use the services of a (traditional) Realtor, they are for all practical purposes, black-balled by the Realtor community (see Spooking below) and must resign to the fact that their home will receive little to no exposure.

    “I was hoping that you could point out the specific rule or practice that sets these pricing models.”

    As I stated, it isnt mandatory, but Ill mortgage my big red hotel on the fact that if you asked 100 people how much a typical Realtor charges to list and sell a home, at least 99 of them will say ’6%’. Id say that qualifies as a ‘practice’.

    “However, you need to understand that this innovation cannot destroy the delicate balance of cooperation that takes place in the MLS system. If destroyed, brokers would no longer cooperate with one another. Do you feel that this would be good for the consumer? (I was hoping that you could address whether or not the MLS should be abolished)”

    I answer this question with question…Why and how does the MLS keep a ‘delicate balance of cooperation’?

    NO! I dont think the MLS should be abolished, nor could it be.

    It needs to be as open and transparent as possible.

    Everyone needs to play by the exact same rules, no info-hoarding what-so-ever. Sellers deserve maximum exposure and should be privy to any (non-personal/private) information available. Cancelled and expired listing (and other) information can be VERY valuable when trying to guage probable market values; the MLS is a treasure trove of valuable information. The relatively new IDX policy, while better, still falls way short of true transparency.

    We are in the Information Age, attempting to commodotize public information at such an exhorbitant cost is an Industrial Age, Big Business proposition, and will ultimately fail.

    Meeting went great :)

  • RealtorJM

    Jeff,

    Short on time, so the post will be short and to the point.

    1. There is no law that says a consumer must list a home for sale through a realtor, so to the extent that a consumer is forced, I wholly disagree. I can’t believe that you are upset that the real estate community has built a system that works so well that it doesn’t make sense to sell a house elsewhere. The problem FSBO’s face is a matter of exposure, not blackballing. There exposure problems reside in the fact that the only people that know they are selling are those that drive by their house. Tell me, what cross sections of buyers drives every street in a given area, every day? Just this past month I sold an FSBO to a client that I found for them. You raise serious allegations with your comments on the matter. As CSP encouraged you, I will as well. If you have proof take it to the authorities, if not, stop slandering the name of millions of professionals simply because you THINK something happens.
    2. Will you finally admit that the real estate pricing models have nothing to do with the MLS system but rather the real estate community as a whole? Working in the industry, I know very well the entire spectrum of commissions charged. There are many companies in my area that charge a flat fee. There are also agents that I know personally who charge and receive consistently 8% for the homes that they list. In the end, the MLS model has absolutely nothing to do with pricing. Each real estate agent is an independent contractor and is free to charge whatever rate they choose. Any person who really looks will find that real estate commission rates are as varied as those individuals who are licensed to sell it. If you boil it all down, agents will charge the maximum of what they feel comfortable asking and the most that the market will bear. If the market continues to bear your proverbial 6% then agents will continue to charge it. Call us crooks if you like, but I think you will find this with any profession. In a free market economy prices will be set by the tolerances of the market. If the full service agent begins to starve because the reduced service agent decides to charge less and attract more business, there will be a shift in the market. However, reduced service has been around for a very long time and has made no real significant impact on the real estate community as a whole.
    3. You asked how the MLS fosters cooperation. I think you know the answer, but I will go over it for the readers anyway. The MLS is forum for cooperation. If a small broker sells a big brokers house, they are guaranteed compensation through the rules of the MLS. They don?t need to sue; they don?t need to go to court. A new broker?s first listing will receive the same exposure to the entire MLS membership as the listing of the broker who holds a 50% market share.
    4. I covered this in my last post, but sellers already have maximum exposure. I mean really, how many websites should an active listing end up if the present system isn?t providing ?maximum exposure?? Is it good for a seller if their listing ends up on a website and a buyer finds it and calls the company, but nobody calls them back?
    5. You hit the nail on the head. The information in the MLS can be found as a matter of public record. So tell me this, why is it necessary for us to turn over our descriptions and pictures, when it can be found elsewhere. You talk about transparency, please expound on how you think the MLS could be more transparent. Simply saying that we should hand out information because it is more convenient for the consumer is a weak argument. Is there something here that I am missing? Should we just hand out usernames and passwords to anyone? I wonder if they would be as willing to pay hundreds of dollars in annual dues like I do.

  • http://www.thexbroker.com Jeff Corbett

    OK…instead of exchanging general banter back and forth about our opinions, let me provide you with a detailed solution to what I see as the fundamental problems within the current traditional real estate industry.
    I understand that the statements I am making and remaking are taken as relatively inexperienced ‘pockshots’ at the Realtor community, and if I knew this thread would play out as long as it as, I would have done it from the start…20/20 hindsight.
    It will take a day or 3, as I remain sretched with other obligations, so dont take my pause as abandonment.

  • Screwed by REALTOR in Seattle

    The NAR and the Washington Realtor’s Association are more marketing shams than legitimate organizations. Buyers should not feel any extra comfort because members of REALTOR supposedly have an ethics code and review committee.

    If you are a buyer that was given false information about a property, as I was by a Windermere agent, you might as well forget any possibility that one of these so-called self-regulating bodies will do anything for you or even discipline the broker. Even when the evidence is completely clear, they will stonewall you, ignore you and then tell you what the broker did was not wrong. Brokers cover up for other brokers. Even if you manage to get the WRA to acknowledge fraud or wrongdoing, guess what? There is basically no penalty with any teeth. They will basically tell the broker that they’ve been naughty.

    Don’t expect Windermere to help you out either. Go directly to a lawyer, but don’t expect that Windermere has any concern at the corporate level. Windermere has a neat trick of saying that the corporate entity is different from each individual office/broker, so they’ve got nothing to do with any wrongdoing by a particular agent.

    TAKE-AWAY LESSON: You get no more protection as a participant in a real estate transaction by using a big-name broker than by going in yourself.

    The NAR and WRA are most definitely for the protection of the industry’s jobs. I am glad that Redfin has provided a forum for people to know the truth.

    That’s fine, but called it Trade Union #995 for real estate agents then. Using the REALTOR designation as a marketing tool to gain clients is a travesty.

  • Screwed by REALTOR in Seattle

    The NAR and the Washington Realtor’s Association are more marketing shams than legitimate organizations. Buyers should not feel any extra comfort because members of REALTOR supposedly have an ethics code and review committee.

    If you are a buyer that was given false information about a property, as I was by a Windermere agent, you might as well forget any possibility that one of these so-called self-regulating bodies will do anything for you or even discipline the broker. Even when the evidence is completely clear, they will stonewall you, ignore you and then tell you what the broker did was not wrong. Brokers cover up for other brokers. Even if you manage to get the WRA to acknowledge fraud or wrongdoing, guess what? There is basically no penalty with any teeth. They will basically tell the broker that they’ve been naughty.

    Don’t expect Windermere to help you out either. Go directly to a lawyer, but don’t expect that Windermere will be concerned about their overall corporate reputation. Windermere has a neat trick of saying that the corporate entity is different from each individual office/broker, so they’ve got nothing to do with any wrongdoing by a particular agent.

    TAKE-AWAY LESSON: You get no more protection as a participant in a real estate transaction by using a big-name broker than by going in yourself.

    The NAR and WRA are most definitely for the protection of the industry’s jobs. I am glad that Redfin has provided a forum for people to know the truth.

    That’s fine, but called it Trade Union #995 for real estate agents then. Using the REALTOR designation as a marketing tool to gain clients is a travesty.

  • RealtorJM

    Screwed,

    The bloggers in this thread seemed to have agreed early on that the primary function of the NAR was to support the realtor and not the consumer. Unfortunately, it appears that your perception was that the NAR and the WRA were consumer goups, which just isn’t the case. I think if you understood the inner workings of the NAR and your state association, you would find that they do more for the consumer than you might have originally thought.

    As with any industry there are bad apples that spoil the barrel for the rest of us, and it appears as though you may have had an interaction with one of them. I think that you would find that the vast majority of agents are out there fulfilling their legal obligations to look out for their clients.

    Your post interests me and I would like to be able to point you in the right direction for help. If you would like to post back more detailed information as to what took place in your transaction, I would be happy to give you my input as to what I think you might do to rectify the situation.

  • http://www.thexbroker.com Jeff Corbett

    For whatever reason, my last post keeps disappearing?.?

    Screwed…unfortunately that is the feeling too many customer leave their Realtor relationship feeling like.

    I do not, however, feel that Realtor JM is amongst the predators in his industry and suggest Screwed utilize JM’s knowledge on how to cut through the carefully constructed Red Tape factory that the NAR can be…

    As for my promised post…I have been busy updating our blog, thexbroker.com/blog…I will make my post there….

    Redfin…I do link back to you guys too….

  • TomA

    I just stumbled into this room today and thoroughly enjoyed this banter as it confirmed what I have witnessed and believe regarding where realtors heads are today. Most are buried in the sand. The industry needs change…..and it is happening thanks in large part to the Internet and forward thinkers like Redfin, Zip, Zillow, Foxton’s, CataList, etc. Interesting that I did not read once in this exhaustingly long thread anything about what the seller thinks about the agent practice of holding back info on their listing via opting out, etc. Gee, do you think by exposing their home once to the Universe the seller might benefit by the millions of eyeballs out there? As was stated in several of the posts, agents want control of the sellers info so they can dictate the who’s, when’s and most importantly how much. There are a lot of fine real estate professionals out there…….and a lot of really crummy ones too. Don’t fear change, embrace it. Transparency is the future. Viva la Consumer!

  • robert

    I would like to warn buyers and sellers that there is a tactic being employed by agents which involves a full price offer with the seller paying a portion of the buyer’s closing costs. The trick is that the full price offer establishes the agent’s commission at that price while the real price for the seller is considerably less because of the agreement to pay a portion of the buyer’s closing costs.It is perfectly legal. It benefits the buyer who may be short on cash…but it also benefits the agent.

  • Art

    Good point, Robert. The tactic though, is not necessarily a bad thing. It helps the buyer avoid having to pay thousands or even tens of thousands of dollars upfront as closing costs (which they may not have or would rather use for furniture or other expenses), while providing minimal impact to the sellers’ bottom-line.

    If the sellers have a good agent, they will ensure that their agent puts in a clause to limit the commissions at the list price, not the amended sales price. I always do this for my clients. The problem, like many that can occur in any transaction, is that the consumers are not educated or not aware of their options.

    Agents, like people, are not the same. I am a traditional agent, but I applaud Redfin’s creative approach to real estate sales. I believe that putting more information and knowledge in the consumers’ hands allows them to make better choices and decisions. A better educated consumer that can make better decisions about their purchase is, in my opinion, more inclined to be a satisfied client. Every agent will talk about their excellent service and commitment to customer satisfaction, but how many will put their money where their mouth is?

    In my mind, the animosity should not be between traditional agents and any type of non-traditional agents. The reality of the situation is that there are too many agents that – whether they be traditional or not – do not do the full amount of work that:
    (a) they say they will in their marketing
    (b) they are required to by whatever code of ethics, office policy, etc
    (c) is necessary to successfully close a deal on time
    (d) is necessary to provide their clients with an acceptable level of service

    Even among traditional agents, I would say that nearly 90% of the ones that I work with on either side of a transaction do not deserve what they are paid. I consistently see sloppy paperwork, lack of communication, etc.

    If there was a higher barrier to entry in my profession, perhaps our standards and levels of service would be at such a level that no one would question what we’re paid.

    To better prevent a bad real estate experience, it is essential to have a good agent. I highly recommend doing research to find out what to look for in a good agent for the type of property/area that a consumer would like to buy in. When in doubt, ask for credentials, letters of recommendation, proof of past business experience/sold listings, etc. Consumers are entrusting us professionals to handle what may possibly be the biggest purchase they have yet made, and it’s about time all of us are held to the standard of care and expertise that is required to ensure the client’s needs are met.

    A transaction involves more than just finding a house and writing the paperwork to buy it. I think the bustling market in recent years has caused some professionals in the industry to forget about the skill and care they need to represent their client. Consumers need to be aware of what an experienced and GOOD agent can bring to the table, and they have to understand that there is a difference in this regards between a traditional agent and a Redfin agent.

    In short, not all agents are alike. In fact, in my opinion, most agents really should not be in this business. To the consumer, be educated, do your homework, and when in doubt, ask!

  • PCC

    Great post Art. Your statments reinforce my belief that the attempt to have a 6% commision for each deal is not beneficial. If a more innovative fee model was created and an agent demonstrates he or she performs to the stadards you describe, I am sure many consumers would be willing to pay more than the typical cut of a 6% commission. If the agent is not that hard a worker or lacks experience, he or she would warrant a smaller fee. And internet brokers like Redfin would fit in as another alternative to consumers.

  • PSP

    Do you guys really think this ‘hall of shame’ feature works in your favor?

    Makes you look like a bunch of petty children!

    I’m all for alternative business models, but really, can’t you find better things to do with your VC resources than berate people? I wonder what will happen when you actually have to earn the revenue to keep your business afloat?

    Sooner or later one of your clients’ future will depend upon your ability to interact with other industry professionals. It might just be one of your ‘hall of shame’ candidates! Whose interest will be served then, do you suppose?

    Try providing some service beyond a rebate, and you might not have to resort to this sort of thing.

  • Brian

    If you are going to continue with this link you need to update the content. I am sure you have more stories to tell.

  • http://www.real-reform.org/pc.pdf Jay Reifert

    Oh, how exciting! About every six months, I do a Google search of the terms, “Realtor”"Procuring Cause”.

    I’m happy to have found this “little” discussion, in that the abusive concept of (Realtor)procuring cause is of special interest to me.

    So, my plan–over the next few days–will be to make my way through this entire message thread, to rebut, buttress and add new information to this discussion on organized real estate’s best kept dirty little secret…Realtor Procuring Cause.

    Keep watching…

    Jay Reifert, Broker/Owner
    Excel-Exclusive Buyer Agency
    Madison, Wisconsin

  • http://www.real-reform.org/pc.pdf Jay Reifert

    Let’s start near the beginning. Way up the line, on 7/26/06, CSP began speaking of the “Redfin Rule”.

    CSP doesn’t call if the Redfin Rule, but that’s what it is.

    On January of 2005, NAR changed its Code of “Ethics” to allow listing agents to claim to be the procuring cause of sale.

    Prior to then, procuring cause arbitrations were between COOPERATING firms, to establish which firm may have procured the buyer.

    Cooperating firms were the ones to whom the listing agency offered compensation. As such, the listing agency could not claim to be the procuring cause of sale.

    Redfin, because of the way it conducted business, created a need for NAR to augment their procuring cause rules. (This is not the first time that NAR did such. All prior abuses, however, were meant to put true buyer agents at a disadvantage.)

    Procuring Cause originated at a time when all licensees represented the seller. At that time, there was no–or very, very little–buyer agency.

    At that time, PC made sense, in that no firm could offer a buyer anything more than any other, as all licensees were responsible to the seller.

    As a mechanism for making sure that seller licensees did not cut each other’s throats to steal deals that were started by others, PC made sense.

    Today, however, buyer agency is an available choice, causing PC to be a tool that has evolved–thanks to other changes to the Realtor Code of Ethics–into a trade-restraining device.

    Originally, buyer agents were not–as they should not have been–affected by the concept of Procuring Cause, as it was something that applied to seller agents.

    NAR, though, just as it created a Redfin Rule, has made several changes to the Code of Ethics to subject buyer agents to Procuring Cause. (All of these changes precede the Redfin Rule.)

    Now, I must point out…I disagree with the method that Redfin uses…but not because of PC.

    My opinion is that a true fiduciary does not encourage their client to see property, alone, with licensees who have a legal duty to represent the seller, as is the case with the listing agents.

    Even when they are with me, on the rare occasions when sellers or listing agents are present, I have seen a number of clients give off buying signals–in spite of my coaching to the contrary–which could hamper their positions in later negotiations.

    I can only imagine what might happen in situations where I was not present to pull my clients aside and remind them what kind of messages they may be conveying to the parties against whom could end up negotiating.

    In spite of what I think is a dereliction of fiduciary duty to the buyer to help them evaluate all properties and to keep the other side from gauging their interest, it IS the listing agent’s duty to sell the seller’s property.

    If that means showing the property in cases where they will not get the double dip–in other words, both sides of the fee in the transaction–then so be it.

    It is up to the buyer to take issue with how their agent protects them, not up to the seller or the listing agent.

    So, when CSP starts out in an attempt to beat Redfin over the head with Procuring Cause, it must be understood that, prior to January of 2005, the listing agent could make no such claim. (My research shows that Redfin has been in existence since at least early 2003.)

    And that’s only the tip of the procuring cause iceberg.

    Jay Reifert, Broker/Owner
    Excel-Exclusive Buyer Agency
    Madison, Wisconsin

  • http://www.real-reform.org/pc.pdf Jay Reifert

    I feel the need to post a correction/clarification:

    Listing brokers can certainly claim to be the procuring cause of a sale.

    When they are actually squaring off against another seller’s broker, I would not see a problem with a panel determining that they are the procuring cause, given the appropriate circumstances.

    Protecting seller agents from one another was the basis for (Realtor) procuring cause in the first place.

    It is when the buyer has no awareness that procuring cause exists, and then wishes to have a buyer’s agent–at no additional cost to them–that I truly take exception to the abuses inherent with the non-disclosure of procuring cause.

    http://www.real-reform.org/pc.pdf

    And I still maintain that the changes made to Realtor procuring cause, in January of 2005, were in direct response to Redfin and others that might conduct business like Redfin.

    Jay Reifert, Broker/Owner
    Excel-Exclusive Buyer Agency
    Madison, Wisconsin

  • Dual Agent?

    A simple way to cure this Redfin issue of letting the listing agent do the work of a dual agent is to lower the co-broke!

  • matt

    Sorry to interject in all this wonderful broker talk about what is best for consumers but as one I think you all are missing an important point. Some of us don?t want an agent showing us a house, so why then should there be a buyer fee of 3%? You might argue that as the selling agent you are entitled to it because you have to do double the work, TOTALLY NOT TRUE. I have used Redfin and they gave me BETTER service than other agents I have used in the past. I wish you realtor ?professionals? would stop suggesting that somehow I am getting less service because I?m not paying as much.

    Furthermore as a consumer, I am perfectly capable of deciding what house I like on my own. And to use the argument that I might give off ?buying signs? during the inspection is a lame and weak argument. If that?s your value proposition than fine, I?d rather pay a slightly higher price because I gave of buying signals during an inspection than pay an agent a full 3% commission. In the end I will still save money.

    Lastly, if you are a good agent, than there is nothing to worry about and the Hall of Shame shouldn?t bother you.

    • JonT

      Your grammar totally sucks!

  • redfin sucks

    red fin is the worst real esstate company ever and they are racist they wouldnt hel me get a home just because i am african american

    • Jdigrassi

      Lick your wounds! They do not work with/hire African American agents either.

  • redfin sucks

    red fin is the worst real esstate company ever and they are racist they wouldnt hel me get a home just because i am african american

  • EBB

    I wondered when someone would get the picture! Kudos to “Dual Agent?” for pointing out the obvious – if we come to a time when Sellers compensate the Listing Agent, and Buyers compensate their Buyer Agent – then there won’t be an offered co-broke for Redfin or anyone to rebate to their client. Just as Listing Agents negotiate their service fees with Sellers, Buyers would do the same with their reps, and likely be a whole lot more selective about who they worked with!

  • mary J

    How do you people get any work done?? I have very little time to devote to “writing or even reading” all I have seen here! Too busy representing by buyers & sellers! However I have enjoyed the excitement created here.

  • http://www.Money2get.blogspot.com mr. big

    Hey you should check my post

  • Laurie

    I know so many realtors who have cheated my friends. They lie about inspections, jack up fees, tamper with appraisals and take kickbacks from mortgage brokers. Realtors have told many people that interest rates are still going down (until recently they were not), and that now is a good time to buy. They will do anything to get someone into a house. Who is left to take responsibility for talking some poor person into a house they cannot afford and end up losing?
    I understand that not every realtor is not a dirtbag, but I have heard too many stories about realtors who are.
    P.S. I don’t want to hear any excuses from you CSP, I think we all know what kind of realtor you are

  • jt

    face it….you’re all full of it, and redfin sucks!

    • Noz

      I couldn't agree more…I'm sure some sissy-mary is going to flag my comment below because the truth hurts….

  • Noz

    Redfin are bunch of jackasses….other than being useless agents that do NO work for you, their forums are riddled with idiots and biased, unfair moderators who think being attacked by other posters and trying to defend yourself is inappropriate. Don't waste your time using this service or website….go to a real agency and get a real agent…you get what you pay for…..using discount garbage to get a home is NOT a wise thing to do.

  • BlueGill

    Wow Jeff you might want to consider pulling these posts because any student of logic can see that CSP destroyed you across the board. You arguments were weak and unproven, with little or no data to substantiate them other than a sorry reference to Freakonomics. A book that is more geared toward amusing than enlightening. Are you aware of the veritable plethora of stats that NAR has to “prove” that on average homeowners sell for substantially more money when they USE a realtor? One of the best books you'll ever read (and anyone who bandies about stats as if they were gospel as much as you do really needs to read it) is called “How to Lie with Statistics”. Basically, I can “prove” or “disprove” anything I want by merely manipulating what is there. Finally, considering the failure of your business model to date (as evidenced by the continually shrinking rebate first 66% then 50% and now down to 33% and less in some markets) you really ought not pontificate so wildly on a market you clearly have very little real understanding of. You really need to pull yourself away from the computer screen and step into a home for sale sometime and meet the actual people in it instead of just the numbers on the screen…Real Estate is after all a people business, but, a comp geek like you would never get that :)