Category: News

Consumer Alert – Los Angeles consumers

Consumer Alert – Los Angeles Realtors are delaying distribution of sellers’ listing data to online real estate sites.

A Realtor controlled MLS in the Los Angeles area is intentionally delaying data feeds of property listing data to the top buyer frequented websites in the United States. Based on the information that we have reviewed, real estate agents and brokers, through their Realtor Association and MLS have acted in concert to thwart the successful business models of www.Zillow.com, www.Trulia.com and www.Realtor.com by tainting the data they send to them with an intentional 48 hour delay. This practice is harmful to consumers and competition.

InmanNews released a story on this in which we were quoted (click here to read that story).

We have a really hard time with this policy for a number of reasons. First, we really like the business models of www.zillow.com (which takes For Sale By Owner listings) and to a lesser degree Trulia.com and Realtor.com (which do not) because they are consumer friendly and help sell homes. The crazy thing is that each of these online businesses actually help Realtors do their job better (many Realtors love these free online services) and they do it for free. Realtors are not out any money if Zillow finds a buyer because the Realtor still gets paid the listing portion of the commission.

So why would some Realtors not like them?   Get ready for this – because many Realtors and brokers want to collect a double fee even if it harms their own clients.  It is not good enough that Zillow gets the house sold, some Realtors and brokers (mostly the mega brokers who control the local Realtor Associations) believe that they are entitled to interfere with their clients’ interests in selling their home in order to improve the chances of collecting both the listing commission and the commission offered to the buyer’s broker (a double fee).

Realtors are conservators of their clients’ data and must serve their clients’ best interest above all others (especially their own). Realtors have exclusive access to client data only because of a state licensing privilege. We believe that violating those client and state duties to collect a double fee may constitute a fraud on both the consumer and the state licensing board. To do so in concert with the entire Realtor Association may be a form of price fixing and anti-competitive activity that would hopefully interest the U.S. Department of Justice, Antitrust Division.

When a Realtor undertakes to sell a client’s home, they pledge to sell that home for the highest price and in the shortest time possible. They do not pledge to manipulate the marketing of their client’s home  in order to pocket a double fee. When the broker collects both fees they also strip both the buyer and seller of their right to the broker’s representation in negotiations (click here to learn more about problems with dual agency).

Unfortunately, brokerage firms and Realtor Associations around the country have engaged in complex manipulations to fix or increase the chances of collecting double fees for years. The Los Angeles Realtors have taken this to a new level by involving the entire Realtor Association to act in concert to undermine online real estate sites. This does not just hurt Zillow, Trulia and Realtor.com, it harms the quality of the data that consumers rely upon to buy homes. Somehow we do not believe that the California Department of Consumer Affairs, Bureau of Real Estate intended brokers to use their state privileges to intentionally taint property data.

For years, Realtors and MLSs all over the country have engaged in another similar anti-consumer and possibly illegal practice of conditioning access to listing data to anti-consumer requirements. For example, most MLSs will only allow access to “their” data (its the sellers’ data) if the online sites agree to steer buyers back to the listing broker of the property. What consumers are not told is that practice improves the chances of a double fee for brokers and the forfeiture of broker representation for both the buyer and seller. That means do it yourself home buyers who click on the listing broker do not save money, but instead forfeit their right to representation without so much as a “disclosure.”  We believe this practice is also a misappropriation of state licensing authority.

Realtors have the opportunity to list in real time their clients’ listings for free on a multitude of websites with very little effort. These sites often have far more technologically advanced software than Realtor Associations and provide a real service to Realtors and sellers. We recommend that all consumers demand that their brokers immediately list their properties (that means no delay) on Zillow, Trulia, Realtor.com and the other major online free real estate portals so that they get great national and local exposure of their properties. 

Here is a video from the Today Show ON HOW NOT TO MARKET YOUR PROPERTY.

Advice for real estate consumers who are victims of this practice:

1. Contact us and tell us your story (especially if you would like to be a plaintiff in a class action lawsuit)

2. File a licensing complaint with California Department of Consumer Affairs (click here to access their webpage)

3. Add language to your listing contract requiring to list your property on Zillow and the other online sites immediately and to provide you with proof that was done.

4. Use this as a negotiating point to negotiate a lower commission.

 

Minnesota Consumer Alert – Edina Realty

Consumer Alert – We found the following problems with Edina Realty’s listing practices contained in a 2011 listing contract provided to us (we appreciate a newer copy if you would like to send us one). This list is not meant to be comprehensive.

1.  Anti-consumer Marketing Practices. Edina Realty excluded most of their clients’ listings from Zillow.com, Trulia and Realtor.com (the top buyer frequented websites in the country) for three years. We believe they may still be doing this on many of their properties. This practice increases the chance that Edina Realty will collect a double fee while likely sacrificing their clients’ interests in selling their homes for the highest price and in the shortest time possible. Click here to watch a short video from the Today Show on How Not To Market Your Home Online.

Edina Realty includes the following boilerplate language in the listing contract we have:

2. Pocket Listings. This is the practice of intentionally withholding listings from all marketing websites, including the MLS. Agents may advise their sellers that it is a good idea to test market the property just within Edina Realty for a few weeks in order to gain information about the price and how well it shows. They may provide other reasons. However, it is rarely a good idea to intentionally limit the market exposure of a property – especially the most valuable asset a client is likely to own. We believe Edina Realty routinely engages in the practice of pocket listings and we highly recommend that you avoid this practice. Here is a short article about pocket listings: Pocket Listings.

3. Closing Services Notice is incomplete and self-serving (in our opinion). Title companies investigate and examine title and make extremely important closing decisions. They provide consumers with an incredibly important safeguard service. Edina Realty wants you to use their title company and persuades many people to pick their title company by causing them inconvenience if they do not. Instead of providing their clients with a list of impartial title firms and their fees, Edina Realty provides their clients with a choice that puts the onus on the client to go figure out how to compare title firms: pick Edina Title or go find your own title companies the only two choices. Does Edina Title rubber stamp deals so that Edina Realty can collect their commission? Is Edina Title looking the other way and saddling their clients with title defects? Are they capturing their clients and charging them more than other title companies? We do not know, but the conflict exists and we suggest that you do an internet search to compare Minnesota title companies and find one that is independent of affiliations. 

4.  Edina Realty Home Warranties are being sold to clients in the listing contract. Home warranty products are often cited as generating more consumer complaints than any other service product on Angies List and other respected resources. Yet Edina Realty pushes them in its listing contract because they collect a portion of the fee. Here are links to two stories in Angies List about home warranties: Why Home Warranties are No Guarantee and Home Warranties.

5.  Edina Realty claims a copyright on their clients’ listing data. By taking a copyright on your data this gives Edina Realty the right to sue third party websites that include your listing information on their websites. We believe this is wrong and that Edina Realty should be doing everything they can to make sure your listing data is widely marketed regardless if they are to get a double commission. Here is an older clause that we saw in their contract. 

6.  A mandatory Arbitration Clause designed to eliminate class action lawsuits and binds clients to arbitration even in claims of fraud. Extremely harmful to consumers:

7. Junk Fees.  Many real estate brokerages started charging junk fees on top of their enormous real estate commissions (we recommend to not agree to pay these). In comparison these fees don’t seem like much. But an extra $400 or more is a lot of money and Edina Realty charges both their buyer and seller clients approximately this much.

 

Thank you Minnesota State Bar Association for making your Forms Free to the Public

The Minnesota State Bar Association just made their purchase agreement forms available free to the public.

Minnesota Standard Residential Purchase Agreement Forms Now Available to the Public (click here to access)– The Minnesota State Bar Association (“MSBA”) just made their Minnesota purchase agreement forms available free to the public. Unlike the local Minnesota Realtor Association forms which are cluttered with self-serving provisions, the MSBA forms are well balanced and thorough. We recommend that you use an attorney to draft it though (it is your house at stake if you do it wrong).

The Minnesota Association of Realtors purchase agreement forms are exclusively available to Realtors and are typically the only form Minnesota consumers ever see (and they are not available to the public). For several decades there has existed a better set of purchase agreement forms that offer better protections to consumers. The Minnesota State Bar Association just made those forms available free to the Minnesota public. Next time you are buying or selling a house, insist that these forms be used. It is likely illegal and a violation of licensing laws for a Realtor to refuse to accept an offer on these forms.

 

NAILTA Study – No In-house Title

The National Association of Independent Land Title Agents (NAILTA)  has just released a consumer survey that sheds light on what is important to consumers in selecting a title company.  This survey Executive Summary2013 is extremely important because it is the first of its kind to ask important questions that are designed to provide accurate results. Prior industry-sponsored surveys have misled consumers and Congressmen about the dangers of affiliating these safeguard services (like title firms that provide title insurance and closing services) with industries dependent upon the transaction closing in order to get paid. “One Stop Shopping” is the real estate industry’s term employed to disguise these conflictive and dangerous arrangements. “One Stop Shopping” does not even accurately describe a benefit that a consumer will receive. Instead, the term describes the real estate firm’s financial benefit that comes with being able to capture their clients’ title business, control the outcome of the title examination and overcharge for those services. Current laws and regulatory efforts continue to support bad real estate practices that could easily have played a role in the mortgage foreclosure crisis.

What CAARE likes about this survey is that it was done by an organization whose membership is comprised of title firms that choose to avoid the conflicts of interests (and profits) that come with “one-stop shopping.” We hope that this survey leads to more research into the role these arrangements played in the financial crisis, the elimination of laws that legalize these types of inappropriate relationships and a better education among consumers, lenders and other industry participants as to the dangers this business model presents to the financial integrity of real estate transactions.

Some important findings:

  • 93% of respondents said it was important that their title agent be a neutral third party in determining and disclosing what matters may affect their land title, including adverse liens or other interests that may restrict their use and enjoyment of their property.
  • Over 62% of respondents said that title insurance agency could not remain objective, as it pertains to title insurance matters if they shared ownership with a referral source.

Sampling of News and Blog Articles in Which CAARE was quoted (new section)

1. Should you buy a home through a seller’s agent (click here to read). By Marcie Geffner at HSH.com

2. FHA PFS Program Changes (click here to read). Biggerpockets.com

3. HUD postpones the ban on the dual agency in FHA short sales (link removed from host site). This is one of many reposts of the Inman story.

4. Dual Agency Hot Potatoe (click here to read). Real Estate Legal Services

5. 10 things real-estate listing sites won’t say (click here to read). By AnnaMaria Andriotis of MarketWatch.

6. Federal regulators probing real estate kickback schemes (click here to read). By Kenneth Harney of the Washington Post (nationally syndicated writer) This article appeared in numerous papers across the nation. Also appeared in Mortgage Professionals of America and other sites.

7. Are Open Houses a Waste of Sellers’ Time? (click here to read). Fox News

8. Pocket Listings Might Be the Hottest Controversy in Real Estate Today (click here to read). By Marcie Geffner

9. Affiliated Business Arrangements – more insight (click here to read) Eagle Land Title Agency Blog.

10. Pocket Listings limit buying pool and pricing potential (click here to read). Newsday, Yahoo! Finance and Bankrate.com

11. Real Estate open house: Doorway to trouble? By Marilyn Lewis. MSN Money

12. Homebuilders put buyers into credit boot camp. Reuters and in blogs

13. Class-Action Suit Highlights Dirty Business of Home Warranties. By Kenneth Harney (nationally syndicated)

14. Open Houses – One-sided Benefits for Agents. By James Kimmons. About.com Guide

15. How to Negotiate the Best Deal on a Home. By Tamara Holmes of Black Enterprise

16. Have Minnesota home buyers overspent by $63 million since 2010? By Andy Mannix. CityPages.com

17. The Affiliated Business Arrangement Addendum – What it really means to you. Rants and Ravings from your Maryland REO Title Expert (a blog)

18. MLSs mulling copyright enforcement group to go after “data pirates.” Lotus Real Estate Advisors

 19. No consensus on the real estate dual agency, double-ending. By Andrea Brambila, Inman news.

20. Survey: Open houses still have their place. InmanNews

21. MRIS injunction against NeighborCity applies only to photographs. InmanNews

22. Numerous stories in RESPANews and other affiliated online trade journals. No links because this is a pay for the content site.

Is NAR Running HUD?

HUD Bans Dual Agency on Tuesday

On Tuesday, HUD announced that is was banning dual agency on short sale transactions (transactions involving distressed homeowners) in order to help achieve its goal of an “arms-length transaction.” Dual agency is a business model employed by mega real estate firms that sacrifice their clients’ right to representation in exchange for a self-dealing opportunity to collect a double commission. Dual agency is illegal in every other profession because it rarely can be performed without some sort of fraud (or appearance of fraud) and it almost never results in an arms-length transaction. Ever heard the saying, “you cannot serve two masters?” Dual agency is the opposite of the definition of an “arms-length” transaction.

NAR Talks With HUD  – Ban on Dual Agency Lifted on Wednesday

On the same day HUD announced its ban on dual agency, the National Association of Realtors (“NAR”) wrote a letter to HUD and apparently “immediately began talks with HUD officials on the proposed change.” We wrote our letter yesterday, but apparently, we were too late. According to NAR’s webpage (click here to access), “On Wednesday afternoon HUD officials reported to NAR that they would reissue the July Mortgagee Letter (#2013-23) and remove all dual agency language….”  

HUD’s Definition of an “Arm’s-Length” Transaction

 “All doubts will be resolved in a manner to avoid conflict of interest, the appearance of conflict, or self-dealing by any of the parties (e.g., a real estate agent shall never be permitted to claim a sales commission on the sale of his own property or that of an immediate family member….)”

Perhaps HUD’s new definition of an “arms-length transaction” should be, “All doubts will be resolved in a manner to avoid conflict of interest, the appearance of conflict, or self-dealing by any of the parties so long as the party is not a large corporate real estate broker or a safeguard service affiliated with a real estate broker.” Conflict of interests harm consumers and there can be no special exceptions for businesses that choose a business model that profits from those conflicts. Dual agency is the absolute worst conflict of interest possible in a fiduciary relationship. It almost always devolves to the undisclosed dual agency (common-law fraud) and self-dealing (theft by swindle). One of the most important remedies often available to victims of undisclosed dual agency is rescission of the contract – because dual agency transactions rarely involve an arms-length transaction.

NAR’s Letter Was Not Factual

HUD capitulated on this issue based on discussions that they had with NAR. We are unaware of any conversations with consumer groups. We are aware that NAR’s letter was not factual.

Read our Letter to HUD here (we specify some of NAR’s factual deficiencies).

 

 

Sign Petition – No Copyrights on Client Data!

Please Sign Our Petition: No copyrights on client data! MLSs are claiming copyrights on seller data and then using those “rights” to limit market exposure of properties.The unfortunate result is that consumers lose their right to representation and houses are not freely marketed the way that should be. Brokers get a double commission.

 
Examples of MLS and data abuses.
 
MLS data is gathered by listing brokers who owe duties to their seller clients to sell their houses for the highest price and in the shortest amount of time possible. Unfortunately, by limiting access to MLS data, those brokers increase the opportunity to collect a double commission and in so doing reducing demand for their clients’ properties.
 
1.  MLSs are suing firms that freely redistribute MLS data (click here to read our story). MLSs are only willing to license their data if the redistributor helps brokers collect a double commission. They are claiming copyrights on this seller data. 
 

 

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

  1. 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.
  2. 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.