[photopress:doj.jpg,thumb,alignright]This website put out by the Department of Justice’s Antitrust Division is…Oh MY GOD!!! It’s almost an indictment of the entire industry!
Most of you know about the lawsuit that is still ongoing filed by the Department of Justice against the National Association of Realtors. There are a few other cases as well, noted on this website.
Based on the entire content of this site, which is well worth your time to peruse, it seems the DOJ is taking a stand whether they win or lose in the individual suits.
It’s a Call to Action. Will the Industry respond accordingly? Quite an amazing site! Portions appear to have been written by Glenn Kelman 🙂
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Added to post from comments below. What can Brokers do to help the DOJ’s efforts:
There are many things that Brokers can do to help.
1) Remove all commission language that reduces the mls offering to the Buyer Agent, if the Buyer Agent is not present when the buyer first views the property. In fact, I think the mls should not permit these clauses, as they are not being uniformly enforced, and in fact may be totally unenforceable.
2) Remove all minimum commission language directing agents with regard to agent client commission negotiations. While a Company can set a minimum amount that the agent must pay to their broker, they should not control the amount an agent can negotiate with a client.
Don’t you think it’s a bit odd that many agents will not pay a Broker for a whole year, what they would charge some clients for one move out-move in?
3) Clearly no Broker should permit talk within their office against any new business models. No talk about not showing certain property. No talk about how to combat the intrusion of certain business models on their income stream. In fact, I will not talk about commissions en masse at any office meetings.
I will meet one on one with any agent to discuss their individual goals and business plans. I can further discuss the amount the Company expects that particular agent to pay to the Company in a year’s time. But I will not discuss commissions as general policy, nor tell them what commission they must charge their clients.
Each agent is their own business. So any company that binds these separate businesses together as one commission model, is hindering competition in the marketplace. I know that’s a different way to look at it. But it’s true. No Company should have a policy that addresses in any way, the commission dollar that is not staying with the Company.
As a consumer, I hope the DOJ wins. After the DOJ website, a visit to the P-I real estate “professionals” blog should be considered “continuing education”. Thanks for highlighting this, Ardell.
I hear gripes about minimum requirements.
From the DOJ
Utah law requires real estate brokers entering into exclusive brokerage agreements to accept and present offers and counteroffers, and answer their clients’ questions for consumers in every real estate transaction.
Rememebr this is for an exclusive agreement, there are other types of agreements.
So I am not sure what is wrong with it.
I hope the DOJ wins as well. The Real Estate Industry in this country has been engaged in cartelism practices for far to long with the consumer as the loser. With sites like estately.com, redfin.com, zillow.com, ziprealty.com and propertyshark.com the shift is beginning to happen even with the RE industry fighting back. Hopefully government will be able to finally step in and create a true competitive marketplace.
I agree that there are changes needed in the industry and think over time the market will shake it out.
As for Cartels, there may be pockets of it, but to say with whole certainty that the industry is a cartel well…
As for brokers giving rebates to their client, I have no problem with that it is their money. I do question that some of the services they are forgoing are being pushed to broker on the other side of the transaction too, that allows them to keep their cost lower. That one has promise but kinks.
The argument that prices have gone up and that commissions haven’t gone down.
So in essence it is considered unfair that my gross income is higher than it was ten years ago. How many people make the same amount of money, make more or less money than ten years ago? My commission rate hasn’t changed in ten years, so it could be argued that I haven’t had a raise in ten years.
I have heard arguments from consumers that I should lower my commission in a down market, so I asked the gentleman would he pay me a higher commission in an up market and I haven’t heard back from him in well over seven years.
As for the listings being on all the other sites, I know my firm is working diligently to break away from Realtor.com control. We have entered into several arrangements with listing aggregators.
So the public understands, Realtor.com does not represent the Realtors, they are a Separate For Profit lead generation business.
I am not for over regulation, I am for fair play, remember I live in the United States too. However I am against any government telling me how much I can charge anyone. Especially from bureaucrats that don’t have to balance a budget, I think if there is to be any government intervention there needs to be business people involved. A good portion of government workers do not fully grasp a balance sheet.
Foxton certainly didn’t. It was stated by a senior executive that the company had been “well run, very efficient
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Ardell,
Thank you for the information and link. I have been following this for a little while now but the news of the web site slipped by me so I will check it out big time!
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Sorry about the double pingback.
Sorry about the double pingback.
I don’t know why it did that.
I don’t know why it did that.
It’s interesting that the bubble folks keep stating that real estate only goes up as fast as inflation, but when our commissions go up, it’s somehow excessive.
Clearly the real estate industry is the new Microsoft for the DOJ. Back in the Clinton era they were all over Microsoft even though there were much larger offenders in the tech industry (Intel for example).
To argue there’s no competition in the real estate industry is absurd, at least here in the Seattle area. If anything needs to be changed at all it’s prohibiting rules where a broker sets the commission for the agents at the firm. But other than that, there’s clearly competition.
Kary,
I don’t think it’s fair to suggest that only the “bubble folks” are involved in disucussions regarding non-competitive practices when it comes to real estate commissions.
In fact, I don’t know how it relates at all to “bubble folks” except for the fact that they are the most vocal. Clearly if only the “bubble folks” were concerned about this issue, the Department of Justice would not be involved.
There are many things that Brokers can do to help.
1) Remove all commission language that reduces the mls offering to the Buyer Agent, if the Buyer Agent is not present when the buyer first views the property. In fact, I think the mls should not permit these clauses, as they are not being uniformly enforced, and in fact may be totally unenforceable.
2) Remove all minimum commission language directing agents with regard to agent client commission negotiations. While a Company can set a minimum amount that the agent must pay to their broker, they should not control the amount an agent can negotiate with a client.
Don’t you think it’s a bit odd that many agents will not pay a Broker for a whole year, what they would charge some clients for one move out-move in?
3) Clearly no Broker should permit talk within their office against any new business models. No talk about not showing certain property. No talk about how to combat the intrusion of certain business models on their income stream. In fact, I will not talk about commissions en masse at any office meetings.
I will meet one on one with any agent to discuss their individual goals and business plans. I can further discuss the amount the Company expects that particular agent to pay to the Company in a year’s time. But I will not discuss commissions as general policy, nor tell them what commission they must charge their clients.
Each agent is their own business. So any company that binds these separate business together as one commission model, is hindering competition in the marketplace. I know that’s a different way to look at it. But it’s true. No Company should have a policy that addresses in any way, the commission dollar that is not staying with the Company.
Ardell, what I’m saying is one group of people are saying real estate only goes up with inflation, and another group of people are saying that real estate agents make too much money because prices of real estate have gone up so much. I’m not trying to say there’s a connection between the two–just point out the glaring difference in their opinions.
I think your #2 is the same thing I suggested.
I’m not sure your #1 is legal, but if it is I wouldn’t have a problem with that. In the new construction area I think companies use that to help insure they’re dealing with unrepresented buyers. On the other hand, I don’t have a problem with a clause reducing the commission if the selling agent isn’t doing what they’re supposed to do (e.g. show up at an inspection).
As to #3, I’ve never heard anyone suggest not showing certain properties. One of the few things I like about the NWMLS is it really doesn’t emphasis who the listing agency is.
If there is competition in the marketplace then why can I not view a property if I don’t have a buyers agent or agree to have the listing agent use me to get their double commission?
I am currently looking to buy a house and am taking Craigs advice from awhile back about not using a buyers agent and submitting an offer with the 3% commission reduced which will not reduce the sellers final price but will only give the listing agent 3%.
The problem I am finding is that RE agents will not show me the places. When they find out I don’t have a buyers agent, and don’t want one, they do not want to show me a property or even talk to me.
I am to the point where it seems like it would be easier to contact the owner directly to see the place they are trying to sell and then wait for the contract with the listing agent to run out and make an offer to them directly.
When someone has to collude like this to buy something someone else wants to sell then there is definitely a ‘cartel’ like environment.
Before anyone goes off on their ‘safety’ excuses let me say that I have been ready and willing to schedule a meeting and the agents would be free to bring a bouncer if it makes them feel safer. You would think that people don’t transact business anymore without a body guard in tow.
Atlanta Bound: Why would an agent want to do more work for the same amount of money? In addition to showing a house, there’s dealing with the buyer over the entire transaction. It’s typically much more difficult to deal with an individual than it is to deal with another agent. So I think you’re expecting too much if you’re expecting the commission to be cut in half.
Also, there are ethical issues involved. When a property is placed on the MLS, the seller is telling all agents: “Bring me a buyer and I’ll pay you a commission.” That is not the same as: “Bring me a buyer and I’ll pay you a commission, but if another buyer shows up without an agent, your buyer will be at a disadvantage and your offer will most likely not be accepted.” It’s not quite the situation you’re describing, but if an agent has a standing deal with a seller to cut the commission with unrepresented buyers, that needs to be disclosed in the listing so that the buyer’s agents will know they’re working at a disadvantage when showing the property.
Atlanta Bound –
First off, what’s happening to you is wrong. If an agent really is working for their client to get the home sold and you’re not making unreasonable demands (such as, “drop everything because I want to see the house in 15 minutes or else I’m not interested) then there’s no reason to show you the house.
Whether the contract with the commission reduction will fly depends on the local paperwork. Here in Phoenix, the full commission is in a separate written agreement between seller and listing agent. It’s not something that’s negotiable between you and the seller.
Is this right? Not necessarily. But until commissions are divorced and underwriters accept the commission as part of the loan formally and placed on the buyers’ side of the HUD (vs. the wink-wink acceptance currently in place), it’s what it is.
When I write up my listing agreements, there’s almost always a clause that covers purchases by unrepresented buyers. It’s not the full co-broke as I end up having to do some of the work a buyers’ agent would do, but it’s a reduction nevertheless.
Short of divorcing commissions, if more agents covered that scenario up front rather than holding out for the all-mighty double dip, you’d probably not be having as much trouble as you are getting a showing scheduled.
Oh goodie! Back to my pet peeve again. Kary, I think Jonathan Dalton’s thinking on this point is much more convincing than yours. You, as a seller’s agent, represent the best interests of the seller right? Your job is to sell the house and get the most you can for the seller. If one buyer is at a disadvantage over another buyer what does that matter to you? The interests of the seller are not affected negatively if they end up with the same net as a result of the sale.
So which ethic wins, the duty to your seller, or the duty to the other agents reading the MLS?
I wrote a post over on the Seattle PI blog that touches on this. There are people in our industry who won’t like it but the reality is that as long as consumers feel that they are not getting value for the commissions we are receiving then there will always be alternative business models that will come up that try to address this issue.
Companies and organizations that try to fight this are really fighting the consumer, and that makes no sense. I say, we should all spend less time worrying about whether the Redfins of the world are rebating their commissions, and more time trying to figure out how to provide real value for the commissions that we are making.
I think there is a place for a variety of models in this business and for brokerages to gang up on and attack companies that do business differently than they do is simply a waste of time. Not only that it makes us all look bad.
Provide a better service, and you will always have clients. Charge more to do the same or less, and you will have problems. It’s really not that complicated, and I don’t understand why the NAR seems to think it is.
Yet another reason why I hate paying dues to the NAR every year.
John, I’m not saying I won’t show a house to an unrepresented buyer. And I’m not saying I won’t cut the commission to put a deal together.
What I’m saying is that Atlanta Bound was expecting too much! He was expecting extra work to be done by the listing agent for no extra compensation.
As to cutting the commission, when I do that I always let the seller and buyer know that if another offer comes in prior to the time of mutual acceptance, that the commission cut is gone. The seller will then have to compare the offers on their own merits with an equal footing between the offers. Doing that I’m representing the interest of the seller and meeting my ethical obligations.
BTW, it is possible to put language suggesting a lower commission in all instances if no agent is present into the marketing remarks, but few if any sellers actually want that language because it hurts their chances to sell. So think about it. How ethical is it to do something covertly where you wouldn’t do it overtly?
Sandy, do you have a credible source that says the NAR is against say the Redfin model? As I understand it, the dispute with the DOJ is only over the ownership of listings (can agents control whether their listings are published elsewhere).
BTW, I like Redfin in some instances. For example, if you have a client that wants too much money, a Redfin buyer might be willing to buy if they get basically a 2% reduction in price.
To clarify what I said in my previous post, my understanding was that the DOJ was concerned that if agents could keep their listings from being posted on other Internet sites, that their listings wouldn’t appear on sites like Redfin’s site. I can’t see that happening because that would mean it also wouldn’t appear on other sites, such as say Windermere’s site. If the choice is it automatically goes out to all or nothing I don’t see a problem.
Kary,
What extra work are you doing for the unrepresented buyer?
I am not asking the listing agent to do “more work”. I am only asking to tour the properties. If I decide to purchase I will submit an offer through my real estate lawyer to the listing agent just as my buyer agent would do.
The listing agent only needs to then submit my offer to the actual owner of the property. IE – be the middle person and then take their commission.
From my understanding the commission of the listing agent is agreed upon by the seller and is for marketing the house in order to bring in buyers (which of course includes the MLS). If the commission is not for this then why would a seller need a listing agent anyways? The buyer (me) is the one taking all of the risk of buying a lemon. If the seller is worried about anything couldn’t they just include an ‘as-is’ clause?
I don’t understand why showing a home to a potential buyer is “asking to much”.
I agree with #17, I will show a house to an unrepresented buyer. What do I care if they choose to not be represented, that is their American Right.
As for being compensated for it that is another issue.
If I am going to give a consession I would give to the one that hired me.
HELLO
Rob,
In other words, you will not consider modifying the listing agreement to so that you get 3% and rebate the rest back to the buyer. So in effect, you consider that you are being paid the 6% for your services and get to decide how the 6% will be split. Is this a correct reading of your post?
I am willing to discuss what is good for my client. However giving YOU my money is not part of the conversation. Whatever agreement my client and I have agreed upon is already set. So if I were to reduce the fee that my client is paying, I think it should benefit my client. Based on the scenario you have laid out you are not my client.
My clients hire me one because I market the heck out of their properties, two because I am a pit bull when it comes to negotiating their money. They know if I am not giving up my money, I am most likely to not give away their money.
I don’t know why people are offended by strong negotiators. I am not offended by people asking even if they ask the same question 20 different ways.
Rob,
Doesn’t reducing your fee in consideration of an unrepresented buyer benefit your client by getting their house sold with the same net gain to them at closing?
I guess I don’t get the hostility to the reduction of your fee when you end up with the same amount you expected when you entered into your agreement with the seller (unless you are really confident about landing that dual agency) and your client gets the same amount they would have at closing.
I understand that technically the contract is between you and the seller, and technically an unrepresented buyer has no right to a 3% discount, but I just don’t see how anyone is harmed…except all those other agents viewing the property on MLS, which according to Kary are owed an ethical duty of some sort.
Kary
http://www.usdoj.gov/atr/public/real_estate/faqs.htm
Well, I think DOJ lays it out pretty well right there what the NAR’s role has been in anti-competitive practices and I would lump opposition to Redfin into the kinds of practices that NAR has aided and abetted all along. They may not state that they oppose other business models, but who promotes and pays legal fees to enact anti-competitive legislation such as the anti-rebate and minimum service laws? In some places it may be the MLS’s but most of the time it has been NAR and the state boards that have done so.
And keep in mind that in many places, the board and the MLS are one and the same.
I’m with Ardell. I think if I am an independent contractor what I charge is my business and not my broker’s–as long as I am not losing him money. And if the point that Ardell brings up in her point number three is as common a practice as I think it probably is, then the industry is in fact engaging in anti-competitive practices on a regular basis.
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No hostility intended.
You; Will you reduce your fee for me
Me; No any other questions
Rob,
OK. From a consumers perspective, your response is the poster child for why we need reform in this industry. I keep hearing from realtors that the 6% is not sacrosanct. ANY realtors out there who don’t agree with Rob? The 6% is HIS money and is sacrosanct. So even if a buyer wants no services, he has to pay for it. Nice. Very nice.
SS
I agree with you, except for your last three words. I would have said Sad. Very Sad.
I think it may be time for someone to go undercover inside real estate offices and come out with real findings of anti-competitive practices.
I think this post provides an appropriate forum for posting the following link to a telling online discussion that took place a year ago between various real estate agents. Some of the potential issues re: price-fixing and anti-competitive practices are discussed, albeit in more of a schoolyard than an academic manner:
http://tinyurl.com/2494ah
or if you prefer the full link:
http://www.beaubetts.com/news/archives/2006/09/progressive_hom.html
My favorite quote remains: “If the National Association of Realtors was a labor union, and we were union workers, you’d be a scab, my friend” to a realtor who dared to offer services for less than 6%…
SS,
First I never mentioned a commission amount.
Second it was never about an amount.
It was about if you are an unrepresented buyer does not mean I will reduce my fee and give it to you. If I were to give a reduction it would belong to my client based on the conversation that client is the seller.
I have no problem with competition. I compete daily, I went to an appointment last night that they are meeting with three other agents. Most of you have no clue what that means.
When was the last time you ernt to work and there were three other people willing to do your job, some for more some for less?
So if you are going to comment please no what you are talking about.
I am not apologizing to you or that gentleman for not giving him my money because he didn’t have an agent.
Please read the last two sections of post 4.
I find it interesting, that if you want MY money, it is your right. If I want MY money is anti-trust.
Rob reminds me of the character in the movie ‘War’ with Jet Li where he infiltrates his enemies by acting as one of them to bring them down.
Rob is the epitome of what is wrong with the RE industry. Rob causes people like me to lump all realtors into the category of greedy, self-serving leech. I find myself feeling very very sad for his clients because I am sure they have absolutely no idea that he is screwing them over because he feels a sense of ownership over the 6% commission. I would bet that he would even turn away other buyers agents in hopes of finding someone unlucky sucker who isn’t represented by anyone and doesn’t know any better so that he can take HIS full and due commission.
Rob is almost to perfect and I wouldn’t be at all surprised if he was really a DOJ agent inserted to stir up the RE industry and bring it down from within… just like Jet Li! 🙂
The conversation was not about how much I charge.
I will pretend you do not speak english and I will say it slow.
I F I A M G O I N G T O G IV E A CON CESS ION IT WOULD BE TO MY SELL ER
NOT TO AN UN REP RESENT ED BUY ER THAT THINKS THEY ARE EN TITLED. WHAT PART DON’T YOU UN DER STAND
I have clearly identified myself. I notice you don’t identify yourself. You hide and call people names. You philosphies are based on a Jet Li movie whoever that is. Your family must be so proud.
I don’t need to call names. I just need to let you post to prove my points. Thanks!
SS, when there’s an unrepresented buyer, the listing agent has to do everything the buyer’s agent should be doing. That includes going to the inspection, financing and just dealing with them in general. And in the context of dealing with them, that can be a real problem.
Sort of the reverse situation but last year we had a situation where our buyer clients walked after the inspection. The seller was extremely upset, and the listing agent had to tell them that we had an absolute right to walk. If you reversed that, and had an unrepresented buyer taking an unreasonable position, they’d be much more likely to listen to their own agent.
Anyway, the point is the buyer’s agent’s job isn’t done when the contract is signed and it’s not fair to expect the listing agent to do that for free.
Finally, there is increased liability concerns where you’re dealing with an unrepresented buyer.
Atlanta Bound,
It would certainly be different if you were using an attorney (attorneys are not used much here in Seattle), but is your attorney going to attend the inspection?
Sandy,
The DOJ site, unless I missed something, is referring to state laws, specifically minimum service and anti-rebate laws. Now it’s probably a safe bet that the NAR (or a state variation thereof) supported or even proposed those laws. But I don’t see how the DOJ goes after the NAR for that–I think they’d need to sue the states that enacted the laws.
Stated differently, when there’s an illegal law passed, you don’t sue the lobbyists, you sue the entity enforcing the law.
After reading the rest of the thread, I want to make it clear I do not consider this a 6% or nothing issue. Commissions are negotiable. My point was simply that the unrepresented buyer shouldn’t expect to have the full selling office commission knocked off. Redfin, for example only rebates 66% of the buyer’s commission. They aren’t getting the 33% for doing nothing!
Rob,
What you are missing is that there are two ways to look at this. Your way and the other way.
Here’s the “other” way. You list a house telling the seller that your fee for representing them is 2% and the fee for the agent who brings (and represents) the buyer is 2.5%. You have the seller sign a listing contract for 4.5% all to you, because the agent for the buyer is an unknown entity at that point. You price the house at $512,500 with a 4.5% total commission.
A buyer comes with no agent and submits an offer of $500,000, which the buyer deems to be a full price offer, given there is no buyer agent to be paid.
It is only “your money” because the buyer agent was an unknown entity at the time the home was listed. Had the buyer’s agent been known on the day you listed the property, then the seller could have signed a contract for 2% to you and 2.5% to the buyer’s agent, and would gladly have done so.
Every listed property that is in the mls has two fees in it, not one. The second one is only shown as payable to you and your company until the buyer agent becomes a known entity. The fee for the buyer agent is included in the price. It is for the buyer’s representation and paid to the agent the buyer chooses to represent them.
Since that fee for the buyer’s representation is by design built into the sales price, the buyer expects it to come back out when he is unrepresented, meaning he is representing himself.
If a person represents themselves in a court of law, they do not pay an attorney. If a person represents themselves in the purchase of a home, they still pay for representation in the sale price.
I do think a seller and seller’s agent can insist that the buyer have an agent, to diminish their liability. I do think that is the seller’s right. But forcing someone to pay for representation who isn’t getting any, only appears to make sense to people who apparently don’t understand the meaning of representation.
Just as a seller can say “no agents” and be a for sale by owner, a seller can also say “you must have an agent who represents you to view this home, and it can’t be my agent”. But no one should tell someone that they have to pay for something they are not getting.
I bet the 6% standard fee is hurting the really good RE agents. If any shmoe who gets a license can get 6% then why bother becoming in expert? Who cares to add extra value if everyone gets paid the same anyway? Sure, a better agent might get more leads, but that doesn’t really scale. How many more houses can one person sell?
If the DOJ suit is successfull, I bet good agents, like Ardell, will be better off.
Kary,
Don’t you think an agent is going to lose the argument that taking the buyer agent fee portion of the total commission is “for the work”? To win that argument, they would have to have a different commission when the house sells in 2 days vs. 4 months. They would have to have a different commission if the buyer looks at one house and buys the first day vs looking at 100 houses and buying in 8 months.
The real estate industry has already established that their fees are not based on the amount of work involved. So it seems hypocritical to turn around and make an argument to get more “because of the work involved” when the buyer has no agent.
Thanks for the compliment Alan, but in reality I price my services lower when the client is good. Often it has nothing to do with how good I am, but the work at hand.
If the seller is not really wanting to sell, my job is harder. If the house isn’t selling because the seller is being unreasonable, my job is almost unbearable. If the buyer wants to make unreasonable lowball offers for a protracted period of time, like playing Russian Roulette, hoping to get a screaming deal, my job is harder.
As to %, that has more to do with sale price than anything else. I probably shortchange myself when I stage the home prior to sale, but that’s my favorite part 🙂
Ardell, I have done a commission arrangement where my commission was dependent on how quickly the house sold. Since I do open houses, that was worth it to me.
Alan,
I don’t view the 6% as being a number that has anthing to do with how good the agent is. I look at it more as being a number that indicates how much work will be required to sell the property.
Stated differently, I’m much more likely to cut my commission if I walk into a house and the owner lives like the house has been staged than I am if I’m going to have to spend two months advising the owner on fixing/cleaning up the property.
Hey Kary,
If we didn’t let everyone into “the club”. If NAR membership wasn’t mandatory for most and only the price of admission, it could be quite meaningful.
If Brokers sent licenses back of agents who they aren’t proud of, we could clean this up a lot.
I spent over a year shapening the tool of pricing fairly. Now I’m working on sending licenses back to the DOL 🙂 There’s always something we can do to make the industry better. We just have to stop pretending that we charge everyone the same and the same as one another, and stop being willing to be the Broker of anyone who passes the mirror test.
Remember the “Would you buy a used car from this man?” ads? Maybe Brokers should only hire people they might use to represent them in the purchase or sale of a home. Now THAT’s “raising the bar”.
On of my agents was in Broker class last week and the teacher cynically asked “When was the last time you saw a Broker send a license back to the DOL?” My agent stood up and said, “an hour ago”. Of course I have to replace them with good and better agents. That’s the hard part. Not saying there’s no room for new and newer agents who still have a lot to learn. But there shouldn’t be room for agents who don’t “get it” and are not willing to put their best effort into it.
When the DOJ gets involved, there’s good reason. We should stop watching the lawsuits for who wins, and start trying to help the DOJ with the bulk of the work at hand needed to clean up the industry.
What is the one thing we can do, in your opinion, that would help the DOJ make the world a better place for the buyers and sellers of homes, other than the things I’ve already mentioned?
Ardell,
Thanks for your much more in depth explanation of what I was trying to explain in my post #25. If I were selling a home I would be very upset to know my agent was taking the stance Rob is taking. I would assume most home sellers factor in the 6% (or whatever the agreed upon commission is) when setting their list price. If that is the case, and an unrepresented buyer wants to negotiate 3% off while not taking anything away from my net, or from my agent’s expected net, I don’t see the problem. I get the distinct impression Rob would frame an unrepresented offer in a very unfavorable light to his listing clients.
Kary,
I don’t get the “increased work and increased liability” argument. If a buyer chooses to go at it alone, it is not your responsibility to hold their hand. They sink or swim on their own. Obviously, you don’t want that affecting your client, but I don’t see why you need to go to the inspection with the buyer. I also don’t see increased liability as you don’t have any agreement with the buyer, so what liability could you possibly have to them? If you mean increased liability to the seller, I don’t know if any liability has increased…you already have it…now it just might require a little more care taken in the language used so you don’t have any issues pop up after closing.
John,
No it isn’t a situation where I can just let them sink or swim on their own. If that were the case I’d tell the client find another buyer. Having a sale flip is not a good thing for a listing.
And someone has to go to the inspection! Typically it’s the buyer’s agent. I don’t know who else could substitute for that. You can’t just give the buyer a key, and you can’t have your client be there. The listing agent is the only person left. (BTW, buyers’ agents get fined if they ever leave an inspector alone in a house.)
The increased liability pops up because you’re having dealings with an unrepresented party. A judge is more likely to think you over-reached, and since you would be trying to represent your client the seller, chances are you’d be asking for things that could be seen as over-reaching.
Think about it:
A seller wants no inspection contingency, and buyer wants one.
A seller wants no financing contingency, and a buyer wants one.
A seller wants a large earnest money and a buyer a small one.
A seller wants to have election of remedies in the event of default, and the buyer wants just the forfeiture of earnest money.
Ardell, I’m not disagreeing with much of what you’re saying, but you have a lot more faith in the DOJ than I do. Again I’d point to their attacks on Microsoft during the Clinton years, while leaving Intel alone. I’m not saying either company was perhaps innocent, but what Intel did cost consumers a lot more money than what Microsoft did.
Oh, to answer your question, rather than attacking minimum service and anti-rebate laws, I’d think the DOJ would be better attacking broker policies that limit what the individual agent can charge a client. So rather than suing the NAR, they should sue brokerage companies that have such policies.
There are thousands of agents in any major area. If you take away limitations on their competing on price, you have competition, and that would be true even if the agents had to comply with minimum service laws (although the rebate thing might be a different matter).
John,
In all fairness to Rob, his thinking is the norm, and also the way it has been for about 100 years. The purpose of this thread and ongoing discussion is to enlighten not just him, but you and others, that the way this is viewed is changing. It is why Redfin, whether they are a successful business model or not, is important to the real estate industry. Redfin has set this chain of events into motion. Buyers who understand that they are paying the Buyer Agent fee in the sale price, and wanting to negotiate their side of the equation as much as the seller can on their side.
Remember, Rob is not in Seattle and Seattle is the forerunner of this changing perspective. I am amazed when agents in the Seattle area don’t get it, and many, many if not most, don’t. But to agents in other parts of the Country who haven’t seen anything like this thinking in their markets, it’s like you are speaking Greek.
On a positive note, Jonathan Dalton above was just as vehement as Rob, if not more so, just a few months ago. So these discussions do have an impact. Change is slow…but I am seeing change in many agents who are being forced to take a harder look at the way things have been done for so very long.
I have to say it doesn’t necessarily make me the most popular REALTOR in a room full of agents, but regardless of where the agents fall after it is explained to them over and over again, it’s worth having the conversation. And I do see some change in the way agents think and act, if we just keep this conversation moving in the right direction.
If all Brokers would view it differently, than all agents would view it differently and would explain the whole thing to their sellers differently when they list homes. Personally I have always viewed it this way from back around 1993 or so. I have always explained the commission as two part to sellers. But that is clearly not the norm.
Perhaps if you would say Please TRY to see it from the buyer’s perspective, we might have some impact on Rob. But in my experience, he may be back again and again before he starts to soften his stance. At least he’s here, and in my experience, though it may not look or sound like it, that means he is open to changing his thinking. Those who won’t ever change, don’t comment on blogs.
Kary,
Please explain how suing a bunch of brokers will impact the industry more than suing the NAR. A quick explanation of how brokers can prevent competition would be appreciated.
Well, first I don’t think the NAR has any power, besides lobbying. So what’s the DOJ going to do–prevent the NAR from lobbying? I know the Supreme Court has cut back on Free Speech in some areas, but I have a bit of a problem with the DOJ telling any group it can’t lobby state legislatures.
Stated differently, I don’t think the NAR controls pricing at all. Any effect they have is minimal. Which gets me to the second point–some Real Estate brokerage firms apparently do, apparently requiring 3% on the listing side (they probably don’t care what’s offered on the buyer’s side, but I’m not sure of that). Let’s say between 100 and 200 agents typically work for most brokerage firms. For every broker that limits what the agent can charge, you have 100 to 200 agents that are not competing with one another, or with agents from other firms with the same policies. Which gets me back to the first point–it’s not the NAR that causes that.
Finally, just to be clear, the NAR is not your local MLS. Those entities (and there are probably hundreds of them), may have policies which affect pricing. I don’t think the NWMLS does.
Oh, and a P.S. of sorts. There is the ethical rule which does prevent an agent from having a standing deal with the seller to cut their commission if there’s no agent on the other side. I’m not addressing that, in part because it’s really just a disclosure rule–you can have such a policy you just have to disclose it in your listing.
Kary–DOJ starts with NAR, and ends up at the broker level most likely. The fact that they didn’t drop the case when the VOW language was changed indicates to me that it’s not really about VOW. It’s about something else…my guess is they are going after some sort of practice that they believe to be industry-wide and NAR is just a jumping off point. Kind of like tax-evasion and Al Capone.
All the NAR is, is a banding together of competitors in the marketplace (brokers…and agents to a lesser extent), unfortunately in some instances they’ve banded together in a way that is a violation of anti-trust acts. I personally hope DOJ ends up ruling that brokerages cannot require NAR membership, and that brokerages cannot require a single commission model among independent contractors. That would be a nice place to start.
They’ll cut the legs off NAR if they succeed, and that wouldn’t be such a terrible thing in my opinion. I agree with Ardell, NAR would be great if it actually meant something–if they took the right side on issues, rather than the realtor’s side. Not only that, they spend so much time trying to enact legislation to protect our jobs and commission structure that they totally miss the boat on the stuff they should be doing, see all the posts people have written on the new forms for examples of NAR/WAR/SCCAR/SKCAR having missed the boat.
Should be interesting. Anyway, I will continue to pay minimum dues only and make a stink about paying those legal or lobbying fees they add on. Nice of them to break it out for me. I am not paying to have some organization that supposedly represents my interests promoting positions that I don’t even believe in. At least this way I can be a member and feel somewhat good about it.
http://www.bloodhoundrealty.com/BloodhoundBlog/?p=2033
Doesn’t Dustin work there?
It still seems to me that the brokerages would be a more natural target, and in fact the only target, or at least necessary parties. I haven’t reviewed the list of defendants–maybe they are.
What are there–maybe 30,000 some agents in Washington State alone? And they have little or no financial connection to each other (it’s not like say a law firm organized on the partnership model). Everyone is out for themselves for the most part. Absent a requirement that some have to charge X%, that would be a rather competitive market.
The odd thing is that the standards set to keep the commissions high are actually state law vs NAR or MLS imperatives.
They would do more to achieve their goal to have each state include a non-representation option on agency disclosure forms in each state, than the way they are approaching it.
Hard to have more options and then have each State Law hold you to the highest standard.
Where’s the DYI real estate option on the Agency Disclosure pamphlet? Where’s the “select this option as a hold harmless for drastically reduced cost” option?
The sad thing is that they missed the boat as lower cost options made more sense in the hot market, than they do today. A case of “too little too late” at this point.
Right Ardell–but which organization to which most real estate agents pay dues and lobbying fees has lobbied to put those anti-competitive laws on the books?
NAR. And they did it because their broker members urged them to do so.
The cost to go after individual brokers would be too high. NAR is an easy target. You cut the legs out from the lobbyists and it reduces the power that brokers have to get this kind of legislation passed.
Kary–those 30,000 agents have little connection to each other except that the majority of traditional brokerages require membership in NAR. And this is done to provide political power to those brokerages. Maybe I am just cynical but I don’t really think that NAR’s primary role is to oversee code of conduct issues. NAR exists to provide political power to players that would otherwise be too small to be powerful.
In general, I oppose lobbying groups and it bothers me to have to pay dues to one.
Kary,
Most “bubbleheads” argue that historically speaking housing prices have increased at or slightly above the rate of inflation over a broad amount of time (last 50-100 years). I don’t think any “bubblehead” would argue that housing has not defied historical norms the last 5 years. The whole point of arguing that we are in a bubble is to acknowledge that real estate has appreciated at a rate much greater than historical norms (i.e. the rate of inflation).
Secondly, why are you even bringing “bubble” people into this discussion? Are you arguing that the DOJ is full of bubbleheads? I’m totally lost on your rationale for your comments on post #9 other than some obvious animosity toward the believers in a bubble.
Matthew, the DOJ very well could be full of real estate agent haters. They are people. Again I’ll point to their decision during the Clinton years to go after Microsoft rather than Intel, when the damage to consumers from Intel was much greater than what Microsoft had done.
BTW, the Bubbleheads have been making their arguments for more than five years now, so apparently they think prices have been going up at more than historical norms for longer than five years. What they don’t understand is today is different–we’ve touched on a lot of it recently (dual incomes, Section 8, First-time Homebuyer programs, 80%+ financing, etc.). Even ignoring increased population factors, that leads to increased demand.
Sandy,
I think that some of the things the NAR proposes (e.g. minimum service, anti-rebate) are supported by more than just brokers. But in any case, going after the NAR isn’t going to get those laws off the books in the states where the NAR has been successful to date. Again I need to look at who the defendants are, because I’m guessing they have to have sued some additional parties to get any relief at all.
Also, while I agree with you about forced membership, I don’t see that membership alone results in less competition. Also, not everything the NAR does leads to higher commissions. A lot of their new housing initiatives would tend to lower prices. In fact, it’s possible that NAR activity in some states has been a significant cause of the collapse of markets there (I’m not saying it has been, just that it’s possible). But back to the point–I’m a member of the NAR (as required by my broker–not sure whether I would be otherwise or not), but I don’t always charge 3%.
Is this the genius we’re discussing?
http://www.aubrey.net/
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