admin – Page 4

Seller Tip – Require Your Broker to Share Their Commission With Unrepresented Buyers

Sellers want to increase the market demand for your house and eliminate the competition? Require your listing broker to share the fee offered to cooperating brokers also directly with buyers. If your property is listed on the MLS, then your broker is likely offering a 3% commission to cooperating firms that find a buyer. Make sure that same money is also offered to “do it yourself” homebuyers who find your property without a broker.

Today many homebuyers are finding their homes through internet searches without the help of a Realtor. However, when they go to buy that home they are often unwillingly and unknowingly providing the listing broker with an opportunity to hog both commissions (the listing commission and the buyer broker’s commission). Although some listing brokers claim that unrepresented buyers require more work, we find that to be untrue. Many claim that they have to spend time showing unrepresented buyers the house and possibly writing the offer. Isn’t that their job? We believe listing agents should be present at every showing to help sell the house and protect the seller’s property. Request the buyer to hire an attorney to write the offer.

First, negotiate two commissions, not one bundled fee. One commission is payable to your broker and another commission is typically offered to brokers who procure a ready, willing and able buyer who purchases your house. There is a widespread practice throughout the united states of concealing this information from both buyers and sellers. Your listing broker will be offering compensation to your adversary’s agent and you have a right to be the controlling party in setting that amount and how it is paid. That means determining how much is paid to your broker and determining how much will be offered to cooperating brokers representing the buyer. It also means that you have a right not to offer compensation to the buyer’s broker or make that compensation payable directly to buyers who can use that money to pay their brokers directly or represent themselves and use the money to be applied towards the purchase price or closing costs.

Second, ask your broker to see the full MLS listing of your house and verify that your broker is offering fair compensation to other co-operating brokers. Some brokers offer substandard cooperative commissions reducing the demand on your home and at the same time increasing the probability that their firm will collect a double commission. This fee is a key element of your contract and should have been offered up for negotiation to you prior to you signing the listing contract. Failing to do so may be grounds to void the contract (check with your attorney).

Next, once you determine that your broker is offering an agreed amount to cooperating brokers, demand that your broker offer and widely publicize this same amount to “do it yourself” buyers. If your broker refuses, you should try and find one who will agree to this. Most large and medium sized brokers will refuse to do this, however, for smaller firms that rarely engage in dual agency, this could be a fabulous market niche.

When “Do It Yourself” homebuyers find your home, they will see that the 3% normally offered to buyer brokers is also available to them*.

Caveat – Make sure that buyer reports this seller’s contribution directly to their lender as soon as possible to avoid violating any lender requirements that could delay your closing.

* There are a handful of states (click here to see the 11 states that have price fixed commissions) where it is illegal for listing brokers to share their commissions directly with buyers. In this case, offer to reduce the purchase price by that same amount if they are unrepresented.

Home Seller Tip for Today – Negotiate Both Parts of the Commission

Sellers – When you negotiate your broker’s commission, remember there are two parts to negotiate: The amount that goes to your broker and the amount that is offered to buyer brokers. Do not ever let your broker determine the buyer broker fee!

The Problem

For sellers, real estate commissions are one of the most misleading and anti-consumer aspects of residential real estate. Real estate brokers typically omit (except in those states that require more thorough fee disclosures) negotiations on how much is going to be offered to the buyer broker. And they almost never publish the buyer brokerage fee that they are offering. In addition, we have yet to find a broker who offers this same amount to an unrepresented buyer who is trying to save money by doing the work themselves.

The Solution

Unbundle the Commission! Always insist on negotiating the commission as two commissions. Negotiate the fee you are going to pay your listing broker and the fee that is going to be offered to brokers working with buyers. Buyer brokers have to do a lot more work and invest a lot more time and money into their job, so do not be afraid to offer a larger percentage to them.
Offer the buyer broker commission to buyers! If you want to generate more interest in your property, make sure that the money being offered to buyer brokers is also offered to unrepresented buyers or “do it yourselfers.” Your listing broker will likely try to negotiate a price differential to unrepresented buyers against your favor. Do not fall for it. Unrepresented buyers should not require more work if they use an attorney to draft the offer. Finally, insist that the listing broker publish the fees being offered to buyer brokers and unrepresented buyers in all their advertising on your house.

Example:

Seller calls 5 listing agents with this offer: I will consider listing my house with you if you agree to a 2% commission and offer 3% to buyer brokers and unrepresented buyers (total of 5%). You agree to publish the buyer broker/unrepresented buyer offering in all your ads about my house.

Click here for TIPS on how to negotiate commissions a seller’s Realtor.

Click here for TIPS on how to negotiate the terms of your listing contract.

Check Out Our Lists of Service Providers!

We have state-by-state lists of:

Exclusive Buyer Agents

Discount Buyer Agents

Independent Title Agents

No one else has lists like this and provides them at no charge. Beware of firms that offer to find you discount agents or exclusive buyer agents and seek your personal information. All of them that we have encountered are collecting large referral fees from the agents to whom they refer you.

Are MLSs the Real Data Pirates?

Have the Tables Turned in the Neighborcity Cases?

Who are the Real Data Pirates?

Multiple Listing Services (MLSs) around the country that launched an offensive against Neighborcity (“AHRN”) may have reason for pause because the legitimacy of AHRN’s counterclaims was just affirmed in the Minnesota Northstar MLS (“Northstar”) case. Northstar, claiming a copyright on “their” data (obtained by fiduciaries in the course of their duties), sued AHRN, a so-called “data pirate,” for redistributing sellers’ listing data to the public. Northstar may now find that they made a collasal error as the real story appears to be emerging.

According to AHRN’s counterclaim, Northstar and other MLSs have refused to license “their” seller data to AHRN because AHRN discourages dual agency and refuses to feature listing brokers on its site (a pro-consumer position that CAARE embraces). In its counterclaim, AHRN alleges multiple antitrust allegations including that Northstar and other MLSs started a group boycott against AHRN encouraging members not to accept referrals from AHRN.

We believe that AHRN may have legitimate and very significant claims against Northstar. Apparently, so does the Judge.

Judge Tunheim, in his recent Order (click here to see the Order) refusing to dismiss AHRN’s counterclaim spelled out how this MLS action may have exposed the Northstar MLS to liability for antitrust violations. In fact, we believe that AHRN’s counterclaim has now become the primary focus of this matter. Northstar MLS may have opened a Pandora’s Box of issues and they may find themselves wishing they had never filed this case. In our opinion, this case is no longer about whether AHRN violated copyright laws, but whether Northstar engaged in anticompetitive conducts in refusing to license data to AHRN. If AHRN wins their counterclaims, they will no longer be the bad guy, but the victim of restraint of trade. Those brokers who have refused to do business with AHRN may be construed to be conspirators to a group boycott.

CAARE advocates that data obtained by real estate fiduciaries be used only for their clients’ best interests and never for self-serving purposes. For us, this case raises many consumer concerns and some potential consumer causes of action beyond the issues in the case. Did Northstar improperly convert seller data obtained by fiduciaries and did they manipulate the distribution of that data in such a way as to wrongly increase their clients’ exposure to dual agency? If the MLSs did improperly convert fiduciary data that would make them the data pirates, not AHRN.

AHRN’s Counterclaim – You Decide (some of the key points in the Order)

Consider some of the allegations in AHRN’s counterclaim and findings of the Court and decide for yourself who might win this case.

1 .RMLS, NAR, other MLSs, and member-brokers of RMLS conspired to unreasonably restrain trade.

2. RMLS, NAR, other MLSs and member-brokers of RMLS initiated a “group boycott” to refuse to engage in good faith negotiation with AHRN on licensing agreements.

3. RMLS, NAR and other MLSs coordinated assertion of invalid copyright claims for the purpose of suppressing competition in the market for real estate brokerage referrals and the market for real estate agent services.

4. AHRN has been damaged because RMLS dissuaded brokers and agents with RMLS’s service area from entering referral agreements with AHRN and prohibited AHRN’s access to information about properties on the market.

5. RMLS’s anticompetitive conduct causes harm to consumers in the real estate market by suppressing information about and access to agents who are independent of listing brokers and agents and discouraging price competition for brokerage services and for home prices.

6. “The Court finds that AHRN has sufficiently alleged that RMLS’s petitioning activities were a sham. For example, AHRN alleges that, in the instant action, RMLS has asserted a copyright over the manner in which the facts and data are compiled on NorthstarMLS, even though the RMLS database is built on software RMLS did not design and does not own.23 AHRN also alleges that RMLS did not take the photographs over which it claims copyrights, and that it did not obtain the written assignments of these copyrights from the photographers that are required under the Copyright Act. These allegations, if true, could show that RMLS’s threats and pursuit of litigation against AHRN were in fact a sham.”

7. The Court finds that AHRN has alleged a plausible conspiracy among RMLS, other MLSs and NAR. “First, AHRN alleges that it received thirty similar cease and desist letters after NAR held its annual meeting in California. AHRN alleges that, at this meeting, there were discussions regarding the perceived threat that AHRN posed to the industry and what the industry could do to shut down AHRN. These allegations create a plausible relationship between the NAR meeting and the cease and desist letters. Second, AHRN alleges that Mosey sent an e-mail suggesting that AHRN should not think that MLSs were “unconnected, unserious, and more noise than threat.” This e-mail could further suggest an agreement between RMLS and other MLSs. Third, AHRN alleges that NAR voted at a later meeting to fund this action and other legal actions and adopted exclusionary rules. This allegation further supports the possibility of an agreement to pursue concerted action. Fourth, when AHRN approached third-party syndicators – through whom RMLS and other MLSs license the use of their data to other websites – it was allegedly told that the syndicators were not permitted to extend a license to AHRN because AHRN did not direct potential home buyers to a listing broker’s website. This allegation also raises the possibility of an agreement to pursue concerted action by suggesting that RMLS and other MLSs may have instructed third-party syndicators not to deal with companies who did not comply with their preferred business model. At this stage, the Court therefore finds that AHRN has sufficiently alleged a preceding agreement to engage in concerted action.”

8. AHRN alleged that, “RMLS and its member-brokers colluded to use RMLS as a vehicle to assert false copyright claims that impeded AHRN’s business model and to exclude companies like AHRN from accessing the universe of listings needed to compete. Furthermore, AHRN has alleged that RMLS and its member-brokers dissuaded brokers and agents within RMLS’s service area from entering referral agreements with AHRN.”

9. The Court finds, at this stage, that AHRN has sufficiently alleged a group boycott that amounts to a per se violation. First, AHRN alleges that RMLS and its co-conspirators cut off access to the “supply . . . necessary to enable the boycotted firm to compete.” Specifically, AHRN alleges that RMLS and its co-conspirators have cut off access to information that is critical to any business attempting to compete with them. These allegations satisfy the element of cutting off a supply necessary for AHRN and similar businesses to compete. Second, AHRN has alleged that “the boycotting firms possessed a dominant position in the relevant market.” See id. As noted above, AHRN alleges that there is no practical way for it to compete without licensing information directly from RMLS because RMLS and its co-conspirators dominate the market and information regarding home listings. Third, AHRN has alleged that the challenged practices were “not justified by plausible arguments that they were intended to enhance overall efficiency and make markets more competitive.” AHRN alleges that RMLS will only deal with competitors who comply with the business model of referring customers to listing brokers, which is allegedly intended to increase member-brokers’ profits at the expense of competitors and is not intended to enhance overall efficiency or to make markets more competitive. These allegations are sufficient to raise per se violation claim.

10. The Court finds that AHRN has alleged that RMLS’s business model has anti-competitive effects. Specifically, AHRN alleges that RMLS and its co-conspirators promote “dual-agency home sales,” wherein a seller and buyer’s agent are associated with the same agency. According to AHRN, because commissions are based on the sale price of the home, a broker and agent relying on dual agency have little incentive to negotiate in the interests of either the buyer or the seller, and both the buyer and the seller lose any right to independent advice and representation from the agent and broker. AHRN also alleges that the behavior of RMLS and its co-conspirators serves to increase the price of referral fees by excluding actors like AHRN from the market.

11. The Court finds, however, that AHRN has plausibly alleged that RMLS and its co-conspirators have attempted to restrict access to real estate listings to parties who will send potential home buyers to listing agents’ companies, thereby eliminating competition from those that do not comply with RMLS’s business model.

12. AHRN has alleged that the dual-agency process results in less negotiation on behalf of customers after these initial prices are set. Thus, AHRN has plausibly alleged that the conspiracy has an effect on home prices and commissions.

13. RMLS also argues that AHRN has not alleged that its activities produced significant anticompetitive effects because it has not plausibly alleged market foreclosure. Specifically, RMLS claims that AHRN is able to access “for sale by owner” and foreclosure listings and has already shown that it has entered into licensing agreements with over 180 Minnesota licensed real estate brokers and approximately fifty Minnesota licensed real estate agents. The Court finds, however, that AHRN has plausibly alleged that there are no reasonable alternative sources of complete real estate data than from MLSs and that RMLS’s refusal to license its data therefore had an effect on the ability of businesses like AHRN to compete.

14. AHRN alleges that, by advising its member-brokers that information obtained and used by AHRN on its NeighborCity website is subject to valid copyright protection, and that AHRN’s use of such information is unlawful, RMLS has disparaged the services and business of AHRN with false and misleading statements.

Another reason affiliated title companies are bad for our economy – Price Fixing

The Minnesota title industry’s 100 million dollar price fixing scheme

What happens when you allow the real estate brokerage industry to control the title insurance industry? In Minnesota the answer appears to be price fixing.

When a real estate brokerage firm has an ownership interest in the real estate safeguard service called title insurance, that relationship is called an Affiliated Business Arrangement (“AfBA”). We do not believe that it makes any sense to allow a gatekeeper, like a title firm, to have any relationship with an industry that has a huge success fee invested in every transaction. Minnesota may now be the best piece of evidence needed to demonstrate why affiliated title firms have no legal business purpose in providing real estate safeguard services to lenders and consumers. In light of the recent foreclosure crisis, these AfBA should be prohibited, yet now there is a Realtor sponsored bill that proposes to give this anti-consumer, inappropriate and unsafe business relationships preferential legal treatment under federal law. As we have discovered, not only are these AfBA’s unsafe, they also lead to market manipulations and artificial price increases.

In 2010, the Minnesota Realtor Association (MNAR) provided a forum for competing real estate brokers with title insurance AfBA’s to create a market inefficiency and eliminate routine title insurance discounts. MNAR allowed these brokers to change a boilerplate statement in the MNAR standard purchase agreement that secretly wiped out these discounts. We estimate that MNAR and these brokers have already cost Minnesota homebuyers over 100 million dollars (money that unfairly profited the title insurance industry).

There is a long history of how real estate brokerages have influenced the upward pressure of title insurance costs. In many areas, real estate brokerage firms have become loss leaders for their affiliated ancillary services like title insurance. Consumers are particularly vulnerable to manipulative market practices when it comes to selecting title firms because they rely so heavily on the guidance of their real estate brokers. At the time consumers are presented with the decision of selecting a title firm, they are often overwhelmed with other aspects of the transaction and defer to the Realtor’s recommendation. Rarely is the consumer informed enough to question the drawbacks to the relationship between the broker and their title firm. As a result, consumers do not shop and compare title firms and neither does their Realtor. The vulnerability to price gouging is at its highest for the purchase of title insurance services.

Title insurance firms affiliated with real estate practitioners are bad for our economy for many reasons – they eliminate competition through market manipulations, they increase prices and destroy important safeguards that lead to things like mortgage defaults, consumer bankruptcies and financial crisis’s. Now there is another reason. Price fixing.

When real estate brokers can convene at their trade association’s headquarters and change a “neutral” form that approximately 99% of homebuyers and sellers use and that change creates a market inefficiency that puts an extra 100 million dollars in those brokers’ pockets, there is a problem that needs to be addressed. This situation discloses the temptation level present to unfairly profit from title insurance and the vulnerability of real estate consumers (their clients).

Title insurance is already highly complex and vulnerable to artificial upward fee pressures and premiums (from AfBA’s that do not have to compete for business) that have nothing to do with actuarial data or losses. There is a long history, just in Minnesota, of form changes that have caused Realtors to profit from ancillary businesses or receive unfair liability protections. Regulators should be focused on prosecuting brokers for actions like this and eliminating the mechanisms that facilitate this type of conduct. Title insurance price increases now have everything to do with the inappropriate financial incentives that exist between real estate brokers and their affiliated title firms. Although this inappropriate upward pricing pressure has existed among individual real estate brokerage firms for a long time, the blatant price-fixing that happened in Minnesota takes the situation to a whole new level.

The idea that there is a Realtor sponsored bill proposing to provide preferential treatment to AfBA’s offends logic and fairness. AfBA’s are legally tolerated only if consumers sign AfBA disclosures that provide minimal disclosure of the conflicts of interest and those “disclosures” (designed by Realtors) do not come close to obtaining the informed consent of their clients. AfBA’s are considered to be second-class citizens in the realm of title insurance and transaction protections that consumers should demand by selecting independent title firms. Although the brokerage industry may be powerful lobbyists, no legislator should consider giving these conflict-ridden market manipulators preferential treatment over independent title firms that insist upon conflict-free service.

of this situation with some of the documentation we have collected.

RESPA fines: For Paul Taylor Homes it is a Cost of Doing Business

RESPA: The Anti-kickback Law that Encourages Kickbacks

In the beginning of June, 2013, we were quoted in a nationally syndicated Washington Post story on kickbacks (click here). Follows is our more indepth analysis of this issue that could be serious enough to drive us into the next foreclosure crisis.

“Kickbacks harm consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage,” said Consumer Financial Protection Bureau (CFPB) Director Richard Cordray. “The CFPB will continue to take action against schemes designed to let service providers profit through unscrupulous and illegal business practices.” These were comments made after the recent and highly publicized $118,000 enforcement action against Paul Taylor Homes, a Texas homebuilder.

Unfortunately, kickbacks pervade residential real estate and the latest and highly publicized case against Paul Taylor Homes represents only a tiny fraction of the problem that exists nationwide. Rather than sounding off a warning to would be kickback payers, this enforcement action sends an approval message loud and clear to an industry that is already swarming with profits from illegal kickbacks. It also demonstrates how the CFPB’s hands are tied.

Because of RESPA’s 1 year statute of limitation, the CFPB was only able to prosecute Mr. Taylor on 32 transactions going back to 2010 (one of the slowest construction years in decades). However, Mr. Taylor’s kickback scheme had been in existence since 1999 and had seen some of the most profitable years ever in real estate. Paul Taylor’s website brags of annual sales in excess of $90,000,000 back in 2006. Mr. Taylor likely made tens of millions of dollars in profits from his alleged kickback scheme. To would be violators, a $118,000 fine serves as encouragement to violate the law.

Is There a Difference Between Illegal Kickbacks and Controlled Business?

Builders have been heavy handed in “persuading” buyers to use their controlled business arrangements (CBA’s) like in-house mortgage and title services or the fake versions of those firms called shams. As a result, builders have a capture rate that often exceeds 80%. For about a decade (possibly still going on today), they were offering free $15,000 plus upgrades conditioned upon the consumer using their builders’ in-house mortgage and title services. Since title and mortgage and title fees cost far less than the fake incentives, in essence the builders were punishing consumers and charging them more for the house if they selected their own mortgage and title services.

The industry spin was endless. Builders would proclaim that there was increased efficiency in using their in-house services and then cite the speed at which their deals closed. Legislators fell for the spin and ignored the fact that mortgage and title firms are gatekeepers to the transaction and that speed is not how you measure the value of mortgage and title services. Rather, accuracy at spotting and calling attention to problems that could later plague consumers and lenders is a better measure – a commission and profit killing metric that Realtors and builders detested. Also ignored were the high fees consumers were forced to pay in order to realize the “free” upgrades.

Does it even matter whether the builder’s mortgage and title company is a Taylor Homes sham or a “legalized” controlled business arrangement? Isn’t it true that both hamper fair market competition and increases the costs of getting a mortgage? Isn’t it true that both give the builder undue influence over these safeguard services?

If Mr. Taylor had set up a legal affiliated mortgage and title company he would still have been able to steer his customers to those services, eliminate competition, cause an unsafe transaction environment, and he would have been successful in over-charging for those services. He actually would have had more control over the decision making process of a CBA that he owned, than he actually did in his alleged sham.

If the goal is to have open competition and safer transactions, then it is time to separate safeguard services from those success fee motivated practitioners who only get paid if the transaction closes. If the goal is to avoid another mortgage foreclosure crisis, then it is time that legislators stepped up and cut the cord between the real brokerage and builder industries and the industries that are designed to stop bad transactions from occurring. Consumers should be able to rely upon the fact that the money they are paying these safeguard services is not just an assurance fee to ensure that the builder can close his lien ridden house quickly and charge more for that “service.”

In our opinion there is little to distinguish between illegal kickback schemes and legalized controlled business arrangements. CBA’s allow builders and brokerage firms to actually own these safeguard services and steer their customers and clients into their over-priced and fixed outcome “gatekeeper” services.

Where’s the Data?

We believe that CBA’s and kickback schemes together comprise far more transactions than the industry would admit. A mere search of their websites or marketing materials typically gleans little information about any affiliations. In addition, these arrangements are required to make few and inadequate disclosures to consumers providing them with an untimely notice that serves little purpose. We believe that vulnerable consumers are the most susceptible to being steered into a CBA or a sham, but have even seen the most savvy consumers successfully misled. We believe that CBA’s are responsible for mortgage defaults, reduced efficiencies, higher fees, risk shifting to consumers, and have reaped havoc on competition.

The industry argues that CBA’s improve efficiencies and prices and they quote from expensive self-produced studies littered with data collection flaws collected from their own members. However, their arguments lack logic. Economic theories are unanimous in stating that removing competition causes prices to go up and service to suffer, not the inverse. Why have these industry studies not been challenged?

There are no studies on the role controlled business had in the mortgage meltdown, yet the conflicts of interest and its potentials are obvious. There are no meaningful studies on the capture rate of CBA’s (the industry has an interest in understating those figures). There are no studies on the impact CBA’s have had on the prices of title and mortgage nor on the harm they have caused to competition. In addition, there are no studies on the other bad practices that exist in residential real estate, like dual agency, open houses, pocket listings and bribes that leave consumers without representation on an investment decision that when made poorly has already proven to result in severe sacrifices to individuals, families and communities. However, there are a lot of industry sponsored propaganda designed to spin all these bad things as something that they are not.

The race to the next real estate bubble seems to be starting and consumers are subjected to more atrocious betrayals and self-serving “advice” that affect their investment decisions than ever before. Do we really believe it will help consumers make wiser investment decisions if their highly paid expert is neutered in an agency relationship that suddenly renders the agent incapable of negotiating on behalf of their own client? Dual agency, pocket listings, anti-syndication, price fixing and controlled business are just a few of the highly complex business practices that seem geared towards eliminating consumer safeguards rather than enhancing them. And, very few people understand the significance of these issues.

At the very least, Realtors, builders, and attorneys should not have close relationships with mortgage and title firms. Barriers need to be set up separating the success fee based practitioners from the gatekeepers. At the very least, meaningful data needs to be collected.

The CFPB is Doing a Good Job

We give the CFPB credit for doing the impossible; finding a violator in Paul Taylor Homes within the short one-year statute of limitations. The problem is, only the sloppy kickbacks are going to be found. What about all those other schemes for which there are no paper trails? Bonuses to Realtor managers who have high client capture rates? Better commission splits to Realtors who refer business to in-house mortgage or title? Discounts on rent to Realtors who refer business? There are an endless supply of possible arrangements. So long as Practitioners are in a position to exploit their fiduciary relationships and are permitted to mislead consumers and laws do not prevent them from doing so, this will continue to be a serious problem.

The CFPB’s hands are tied. What good can they do if the laws for which they are charged with enforcing encourage illegal, anti-competitive and unsafe conduct? At the very least, the CFPB should be able to penalize law breakers in a meaningful way. A one year statute of limitations and a $118,000 disgorgement of one year’s worth of profits does not accomplish that when the violator likely made away with many millions of dollars in profits from the scheme for more than a decade.

There is only one thing worse than kickbacks in residential real estate and that is arrangements in which the Realtors and builders actually own the mortgage and title businesses that are in place to stop bad deals. It is their job to stop the bad deals from happening. When done well, they are not well liked by those who make a living only when a transaction closes. Legislators and regulators seem to have forgotten that mortgage and title services are important safeguards to the residential real estate transaction. So long as success fee based practitioners like real estate brokerages and builders have a say (or worse, an ownership interest) in these firms, the more assured our invitation to the next foreclosure crisis becomes.

CAARE Welcomes NAILTA to Minnesota

NEVER USE YOUR REALTOR’S TITLE COMPANY.

A title company investigates and examines title and renders important title and closing decisions. Those processes should never be influenced by conflicts of interests like those that exist with builders and Realtors. When the payment of a large commission or profit is contingent upon a transaction closing do you really want your Realtor or builder involved in the title process?

The National Association of Independent Land Title Agents (NAILTA click here) is a trade association dedicated to preserving the integrity of the most important services of the entire transaction: the conducting of the closing and the examination and insurance of the title. CAARE welcomes NAILTA to Minnesota and wishes them luck in starting a Minnesota Chapter.

CAARE advises that you should NEVER use an affiliated title company in real estate, especially if that arrangement is between your title company and your agent, broker, lender or builder. Not only do these affiliated business arrangements eliminate competition and lead to higher prices for everyone, these arrangements also sacrifice the most important safeguards in the real estate transaction. These arrangements are often “sold” to clients as “One Stop Shopping.”

You are not “rocking the boat” by insisting on selecting your own independent title firm. In fact, you are taking away the power of your real estate practitioner to interfere with your transaction and are typically creating a safer closing environment.

Affiliations in the title lead to price gouging through inappropriate means:

Practitioners direct their clients into over-priced and conflicted service providers.
Practitioners can eliminate competition among title companies by directing business to their in-house firm.
Practitioners cease comparative shopping on behalf of their clients which results in higher prices and poorer title coverage for consumers.
Practitioners influence title insurance underwriters to increase title insurance premiums, which results in higher prices.

Affiliations in title lead to higher risk transactions and more liability for home buyers

Affiliated title companies are encouraged to close riskier transactions in order to preserve Realtor commissions and builder profits.
Affiliated title companies may take their orders from practitioners who have a financial stake in the outcome of the transaction.

Kickbacks in exchange for referrals of title business have become far more subtle and untraceable.

Managers who set commission splits for Realtors are often paid large bonuses based upon their capture rate of title business.
Managers who are supposed to be supervising agents, are often pressuring them financially to steer money into their in-house firms.
Realtors who pay office rent may receive large discounts on their rent in exchange for directing clients into over-priced in-house title firms.
Realtors may have their commission checks paid more quickly if they use the in-house title firm.
Realtors may receive higher commission splits if they use in-house title firms. You are paying for that extra commission.

Tips

Tip: Ask your Realtor if the title company is affiliated with any other real estate service providers like mortgage, brokerage, construction, development, home inspection, etc….

Tip: Realtors are not trained or qualified to advise you regarding title issues. Always hire an independent attorney (one not affiliated with the Realtor or a title company) to review your documents well in advance of closing.

Tip: check with your local regulatory authority to determine that your title company is properly licensed and if they have any licensing complaints.

Tip: Check with the Better Business Bureau to determine if your title company has any complaints.

Tip: Determining marketability or insurability of title requires in-depth knowledge of real estate law. Make sure your title company has an attorney on staff. Tip: Check to see if your title company is a member of NAILTA.

Tip: CAARE’s Executive Director spoke before Congress regarding corruption in the title insurance industry. Click here to read his testimony.

Tip: It is a violation of federal law (click here) for a title company to give anything of value in exchange for referrals of business.

Tip: CAARE has a webpage dedicated to business affiliations in the residential real estate. Click here to access it.

The Website You Are Looking For Has Been Removed Because the Real Estate Industry Does Not Want You To See Realtor Ratings

Donate to support CAARE (501(c)3 public charity dedicated to consumerism with real estate brokers) and join the fight to make Realtor ratings freely available to the public and change how the industry works.

Checklist for Hiring a Realtor

Buyers

Sellers

Learn more about Neighborcity.com’s fight to provide the information you were seeking.

Neighborcity fought hard to protect home sellers’ rights to control their own data. However, the Realtors and their Multiple Listing Services (“MLSs”) brought a war chest of litigation resources against Neighborcity and in our opinion litigated them out of business. We wrote a “friend of the court” (or Amicus Curiae brief) in support of consumers’ interests on this case (click here to read it). Losing this fight means that the real estate industry will attempt to claim copyrights on sellers’ data and use those rights against their own clients. They will use it to monopolize client data, keep innovators out of the industry and charge higher fees.

It has become a common practice for brokers to intentionally exclude listing data from important buyer frequented websites like Zillow, Trulia and Realtor.com to the detriment of their own clients. CAARE was created to help consumers with anti-consumer practices like this.

On the heels of this case, the Realtors and their MLSs around the country are now acting in concert to institute a new policy requiring brokerages to copyright seller client data and transfer those rights to MLS’s. This means that MLSs can require anyone who uses the seller data to follow their licensing terms. For example, in order to display listing data it is required that the listing broker be featured prominently on the site displaying the listing. This practice encourages consumers to use the listing broker to see the home and encourages a double fee being paid to that broker. Worse, this practice strips consumers of their right to negotiate the buyer brokerage fee and their rights to find their own representative. Brokers are using these copyrights for self-serving purposes that cause houses to take longer to sell and sell for less money and subjects consumers to horrible conflicts of interests. Brokers’ and their clients’ interests could not be more misaligned. Brokers have become fiduciary predators.

We have already seen brokers intentionally exclude listing data from the most buyer frequented websites like Zillow, Trulia and Realtor.com. For example, some brokers “advise” their seller clients that Zillow has inaccurate and incomplete data while helping make that self-serving and self-fulfilling prophecy come true by intentionally delaying data feeds to Zillow and other sites and even excluding listing data from Zillow.

When searching for a home, we highly recommend that you use Zillow (they include For Sale By Owner Homes – the others don’t) for your searches and NEVER click on any Realtor who is with the same firm as the listing broker. Instead, use a small brokerage firm that specializes in representing buyers. See our free advice by exploring and searching our website on how to negotiate terms and fees. You might even be able to negotiate a large commission rebate and save thousands.

While it may be counter-intuitive, when selling your home never use the services of a large brokerage firm. Large brokerage firms almost all utilize predatory practices, forms and almost always steer clients into conflictive and over-priced ancillary services for closing and other services. Highly qualified agents at smaller brokerage firms tend to have better resources, they avoid conflicts, they are more likely to negotiate their fees and they often shop and compare independent ancillary services for their clients.

At CAARE we have free advice on how to find an agent, how to negotiate with them, and how to avoid being subjected to unfair and substantial conflicts of interests while working with them. Our goal is to arm consumers with the tools they need to have a successful real estate transaction.

Please Sign Our Petition

Please sign out petition to protect real estate consumers by passing legislation to enforce fiduciary duties of real estate brokers and agents. You can find out petition by CLICKING HERE.

By CAARE Guest Writer

Edina Realty Excludes Key Buyer Frequented Websites From Their Marketing Plan

If you are selling your home and considering Edina Realty, consider this. Edina Realty, a Warren Buffet corporation, and part of a national real estate conglomerate made national news for limiting the market visibility of their listings. They pulled their listings from some of the top 5 buyers frequented websites. Our advice to you is to only list your home with a real estate brokerage that includes a full internet marketing plan.

Here is a clip from the Today Show on the importance of using internet marketing to sell your home:

Visit msnbc.com for breaking news, world news, and news about the economy

Make sure your real estate broker has included your listing on these top websites:

We believe that another reason Edina Realty did this was to collect more double commissions (very profitable for Edina). Commissions are designed to be shared with other brokerage firms representing buyers. However, by limiting the marketing exposure of their listings, Edina likely increased the chances that buyers would contact Edina Realty instead of another firm found on the internet. We believe that this may have resulted in longer marketing times and lower sales prices but will have been well worth it for Edina because it likely increased the frequency of collecting double commissions. We believe that this is clearly an area where Edina Realty and their clients’ interests diverge.

Here is a link to CAARE’s story on this.

DONATE

Author: admin