Neighborcity was a great consumer-friendly business that was innovative and challenged the real estate cartel. The owner of that firm now runs the web design firm (click here) that donated this website to our non-profit charity, Consumer Advocates in American Real Estate (CAARE.org). We are the only organization in the U.S. dedicated to protecting consumers from the real estate and title insurance industries. Our site is over 200 pages deep and is filled with advice and assistance for residential real estate consumers.
Category: News
It’s Unanimous – 3 Trade Associations Support Change To RESPA
We approached three real estate trade associations and asked if they would support our movement to fix a mortgage fraud law called RESPA (Real Estate Settlement and Procedures Act). All three trade associations have now given us their support. What makes this significant is that all three of these trade associations’ members are regulated by RESPA. Sign our petition by clicking here. The proposed change? To increase the statute of limitations (or look back period) from one year to six years (read more about this by clicking here).
We believe that a one year statute of limitations encourages bad conduct, rather than deterring it, because it almost eliminates the risk of prosecution. We believe, and so do industry professionals from the real estate brokerage, title insurance and mortgage industries, that this law needs some teeth in the form of a longer statute of limitations.
If you want to help stop mortgage fraud, improve mortgage disclosure enforcement actions and stop illegal kickbacks in residential real estate, then please sign our petition to increase the statute of limitations to 6 years.
Thank you to our most recent supporter, the National Association of Exclusive Buyer Agents (NAEBA). The other two trade associations are the National Association of Independent Land Title Agents (NAILTA click here for our post) and, the National Association of Independent Housing Professionals (NAIHP).
For the next stage of this project, we will be approaching consumer advocates and non-profit consumer organizations for their support.
The Regulated Regulating the Regulators?
ARELLO (The Association of Real Estate License Law Officials) is an organization of real estate licensing regulators. They are comprised of governmental regulators who regulate real estate licensees. They recently appointed a real estate broker as their CEO.
ARELLO (The Association of Real Estate License Law Officials) is an organization of real estate licensing regulators. They are comprised of governmental regulators who regulate real estate licensees. They recently appointed a real estate broker as their CEO.
The current CEO of ARELLO®, William John Michael Wald, is a licensed real estate broker and used to be the Senior Director of the Chicago Association of Realtors. The Chicago Association of Realtors is a trade association comprised of real estate licensees (the people who are regulated by ARELLO members). Mr. Wald is a licensed real estate broker whose credentials continue, “Previously he was the Senior Director, Business, Professional Development, and Standards for the Chicago Association of REALTORS® a position he has held since 2009. He was also the Managing Broker of the Northern Illinois Real Estate Information Network (NIREIN), which holds over 580 Illinois Real Estate licenses.”
ARELLO is supposed to be a highly respected group of governmental officials as their website indicates, “ARELLO® is comprised of the official governmental agencies and other organizations around the world that issue real estate licenses or registrations in addition to regulating real estate practice and enforcing real estate law.” Their mission is: “Support jurisdictions in the administration and enforcement of real estate license laws to promote and protect the public interest.” And they appoint a real estate licensee to run their organization?
We thought it was strange when ARELLO previously appointed Debbie E. Campagnola as their CEO because she used to be the CEO of the Colorado Association of Realtors. We are noticing the continuation of a disturbing trend that was first brought out by the Consumer Federation of American in this report.
Sign Petition to Improve This Mortgage Fraud Law
The mortgage fraud law called RESPA (Real Estate Settlement and Procedures Act) has only a 1 year statute of limitations. That means that someone intent on violating this law has very little risk of being held accountable. Lawyers representing consumers in mortgage foreclosure or mortgage fraud situations are reporting that by the time consumers realize that they need help, that far longer than 1 year has elapsed and there is often no recourse.
The mortgage fraud law called RESPA (Real Estate Settlement and Procedures Act) has only a 1 year statute of limitations. That means that someone intent on violating this law has very little risk of being held accountable. Lawyers representing consumers in mortgage foreclosure or mortgage fraud situations are reporting that by the time consumers realize that they need help, that far longer than 1 year has elapsed and that there is often no recourse. The Consumer Finance and Protection Bureau (CFPB) enforces RESPA and their hands are tied on most consumer fraud cases involving RESPA because of this limitation. If we are going to have this mortgage disclosure and anti-kickback law, then it needs to exist so as to make enforcement practical. As it stands now, the law provides bad actors related to mortgage finance an opportunity to break the law with impunity or at least very little deterence.
If you want to help stop mortgage fraud, improve mortgage disclosure enforcement actions and stop illegal kickbacks in the residential real estate process, then please sign our petition to increase the statute of limitations to 6 years.
Click here to see an example of how a one year statute of limitations limits liability and deterence.
Our petition is supported by two national trade associations which are regulated by RESPA. National Association of Independent Land Title Agents (click here for our post), the National Association of Independent Housing Professionals (NAIHP) and the National Association of Exclusive Buyer Agents (NAEBA).
Dual Agency Plagues Boston Luxury Homebuyers and Sellers
Luxury home buyers and sellers are certainly not immune to the problems of dual agency. Commissions on luxury homes often exceed $50,000 so why would anyone give up such important services as assistance with negotiating a price or negotiating terms of the transaction? When homebuyers use the listing agent to buy their homes not only are they giving up their right to representation on a million dollar asset, they are rewarding the agent for this betrayal with a double commission.
Here is a sampling from the blog post and a link to it:
“Looking at single family homes sold over $900,000 in one community, we were stunned to discover that 70% of one well-known listing agent’s sales were in-house; and in more than one in four sales, the MLS listed her as both listing agent and sales agent.” Click here for a link to the story. The story first appeared in the Boston Globe (the story is no longer online).
Will more Realtors pull MLS listings from Trulia & Zillow in 2012?
Recently, Edina Realty made national news by pulling their sellers’ listings from two of the most popular websites frequented by home buyers, Realtor.com (the number 1 real estate website in the country) and www.Trulia.com (in the top 4). Both of these sites are free and provide valuable information to consumers. Industry critics and real estate consumer advocates like CAARE believe Edina Realty did this to capture more double-sided commissions (called “hoggers” or “double dipping”). Although that may be great for Edina Realty, the inherent conflict of interest is very bad for real estate consumers – both homebuyers and sellers.
What would you do? If you were interviewing Realtors to sell your home, which agent would you pick: One from a firm that has a marketing plan that includes placing your home in the most popular (and free) real estate portals in the nation or one from a firm that excludes those sites?
Ironically, if Edina’s plan works, they could get paid about twice as much while hiding their listings from potentially millions of potential site visitors per month. If buyers find Edina Realty listings on Edina’s website they will be directed to an Edina agent. If they use that agent to buy an Edina home, Edina will pocket a whopping double commission and expose both clients to dual agency. Dual agency is the worst conflict of interest an agent can impose upon their clients. It means that both the buyer and seller would forfeit their right to an advocate and representation, at the exact time when they need them most – when they are ready to negotiate. When the buyer selects an Edina agent, he does not just forfeit his right to representation, he neutralizes and forfeits the seller’s as well. Dual agents are prohibited from negotiating price or terms (negotiating advice is one of the top reasons consumers hire Realtors). That means less work for the firm and a lot more money. It also means less service from Edina’s agents; and potentially less PROFIT for sellers and less potential SAVINGS for home buyers.
By forgoing potentially millions of eyeballs on two leading real estate portals, one could argue that Edina is betting the “double dip” they will get from dual agency transactions will more than make up for the loss in visibility — a loss that could increase market time of listings and loss of clients who DO want wider distribution of their home. Still, if they play their cards right, consumers will never notice the change and Edina will see a lot more hoggers. Even worse is if the speculation pans out that HomeServices of America, Inc. (Edina’s parent company) is using Minnesota as a testing ground for the rest of the country. If other brokers see that Edina is profiting from double dipping, their conflict of interest (and self-dealing?) could spread across America as other brokers follow suit.
www.Trulia.com, www.Zillow.com, and www.Realtor.com do not just provide great market exposure for sellers, their business models help reduce the risks of encountering dual agency (zero representation). Through links, banner ads, and agent directories including buyer agents, consumers using Trulia, Zillow and even Realtor.com are given a choice of agents to work with, rather than simply being directed to the listing agent. The result, hopefully, is that fewer buyers are trapped in a dual agency situation without their consent or knowledge.
BOTTOM LINE: Home buyers should ALWAYS select an agent from a brokerage firm unrelated to the listing so their advocate can negotiate tangible financial benefits. That is possible when buyers use real estate portals which allow them to choose a real buyer agent without a conflict of interest. By pulling their listings from Realtor.com and Trulia.com, and funneling them through their own website, that is not an option with Edina.
Edina Realty should be concentrating on giving sellers the best possible representation, rather than how to reduce their seller’s properties’ market visibility. In this day of monumental real estate mistakes, do we really want to have consumers unrepresented? And then charge them twice as much to do it? Does Edina really think buyers and sellers will miss the obvious conflict of interest in the cartoon above?
Home buyers and sellers, if you are confused by broker babble and fine print about dual agency, designated agency, and other forms of counterfeit buyer agency, ask your buyer agent to sign this Pledge of Allegiance to reveal if he is really on your side!
Note: If you have a home listed with Edina Realty and are not pleased with this situation, you may want to have your listing agreement reviewed by an attorney.
CAARE says: Sellers should ALWAYS review marketing plans of prospective listing agents and make sure that plan includes listing their property in all the free websites that buyers frequent (www.Trulia.com, www.Zillow.com, www.Yahoo.com, www.Realtor.com etc…). In addition, review CAARE’s consumer-friendly LISTING CONTRACT for ideas in terms to include in your contract. Buyers should avoid websites that are affiliated with brokerage firms and choose independent websites so that they are not automatically directed to an agent that will cause them to forfeit their right to representation. Finally, if you are an Edina Realty agent, please address this matter with management.
This story was submitted to CAARE by Bill Wendel. Bill is an exclusive buyer agent (EBA) from Boston. In order to avoid conflicts of interest that come with dual agency, his firm only represents buyers and will not accept listings.Bill also is a strong advocate for the negotiation of buyer brokerage fees and is included in our LIST of brokers who discount.
His website: www.realestatecafe.com and can be reached at RealEstateCafe@gmail.com
Petitions
1. Click here to sign petition – stop mortgage fraud and kickbacks. Want to read more about our petition first? Then click here.
2. Click here to sign petition – make Realtor fees negotiable in these states. Read more by clicking here.
Invitation to the Real Estate Industry to Change RESPA
This is an invitation to the real estate industry to strengthen the Real Estate Settlement and Procedures Act (RESPA). We challenge anyone to defend the current one year statute of limitations of RESPA as being reasonable. We believe that a one year statute of limitations encourages dishonest industry participants to engage in illegal conduct with little prospect of being caught in time to be prosecuted. A one year statute of limitations provides zero deterrent to dishonest industry participants. We are appealing to industry participants to support change that will make the business of doing real estate better for both consumers and business.
It is time for everyone connected to the real estate industry to take a stand and stop the illegal kickbacks and other illegal activity defined in RESPA. RESPA is a worthless statute without a meaningful statute of limitations.
We will post the names of the trade associations that support this change on our website. We hope to send out invitations directly to these trade associations the week of March 5th, 2012. Some organizations are already indicating their support before the invitations have even been sent out (see below).
Trade associations that wish to announce their support of this change only need to send an e-mail to ChangeRESPA@caare.org. The e-mail needs to come from an authorized representative of their trade association and state that they wish to see the RESPA statute of limitations increased to six years. They may alter the term if they like. However, the only issue we are addressing is the statute of limitations.
We also encourage them to send e-mails to their membership encouraging them to sign the petition which can be found here: SIGN PETITION (CLICK HERE)
The Following Trade Associations Support This Change
The National Association of Independent Land Title Agents ()
The National Association of Independent Housing Professionals (NAIHP)
National Consumer Alert – Avoid National Open House Weekend
National Consumer Alert – for Buyers and Sellers
Avoid Nationwide Open House Weekend
CAARE is releasing this consumer alert to warn home buyers and sellers to avoid the Nationwide Open House weekend being promoted by the National Association of Realtors (“NAR”). Open houses are proven consumer traps for both buyers and sellers and they substantially increase sellers’ exposure to criminal activity. Open houses are great for brokers and rookie agents to find new leads on clients not interested in the specific open house.
Seller Warning
Security Risk to Sellers
It is well documented that theft and even violent crimes often occur at open houses. Publishing an open house is an invitation to criminals and provides a unique opportunity for criminals to case a home for a future crime or commit a crime while someone else distracts the onsite Realtor. NAR does not mention this risk in their promotions. Realtor listing contracts exclude liability for thefts that occur at open houses.
Open Houses Do Not Sell Houses
“Only a small percentage of homes are sold through open houses 1.” NAR’s survey unfortunately combines their “statistics” on open house “signs” with yard signs. The problem is that yard signs alone are a very successful tool to sell houses and open houses are not. The NAR survey inquires about open house “signs,” rather than the open houses themselves, which creates ambiguity in the results. On a scale of 1 to 5 (with “5” being very effective and “1” being not effective at all), top real estate agents rated yard signs as the top selling tool (above the MLS) with a rating of 4.68 and placed open houses 10th on the list with a score of 2.88 2. Together, yard signs and open house signs accounted for 10% of how buyers found their homes (See exhibit 3-9 below 3. ). We suspect that open houses account for less than 1% of home sales. One of our members attended a continuing education class in which the instructor proclaimed that open houses serve one purpose – to find buyers to buy other houses.
Buyer Warning
According to NAR, “Potential home buyers rely on open houses to help them find the home of their dreams. ” We find this statement misleading because most home buyers do not find the home that they are going to purchase by visiting open houses.
Open Houses are Traps
Buyers who enter an open house are often unknowingly giving up their right to hire a buyer broker of their choice. That means that they lose the right to have someone provide important negotiating advice on price and terms. If the seller’s broker feels that they are the procuring cause of the sale, they can refuse to share their commission with your buyer broker. Since buyer brokers get paid from the seller’s broker, that creates a problem for buyers.
Rookie Agents from Mega Firms Work Most Open Houses
Open houses are often training grounds for rookie agents who possess little expertise. Most open houses are run by large listing firms that have conflicts of interests that negatively affect buyers. Buyers should not use open houses to find an agent.
Do It Yourself Buyers
Some buyers want to find their home themselves and visit open houses as part of the process. Unlike sellers who save thousands of dollars if they sell their house themselves, buyers save nothing unless they know how to negotiate for the commission offered to buyer brokers. Sellers brokers love do it yourselfers because they often turn them into a double commission pay out. See CAARE’s Open House Form (click here).
[1] Home Sellers Handbook – Minnesota Attorney General’s Office
[2] Survey Slams Door on Open Houses. CRSs Pick Favorite Listing, Selling Techniques
[3]
Maryland and Designated Agency
Today CAARE wrote a letter to the Senators considering a licensing law change to the Maryland Real Estate Brokers Act. To see our letter click here.
Maryland’s current statutory scheme is contradictory in that it embraces the notion that designated agency can exist in a two tiered licensing scheme where the brokers are responsible for supervising their salespeople. Here is an excerpt from our letter:
“Section 17-530(d)(1)(v)1] of the Act allows salespersons to exceed the limits of the broker’s legal relationship with the client – an impossible result. This part of the Act addresses the situation where dual agency occurs and the broker is legally prohibited from negotiating to the detriment or benefit of either party. However, this section of the Act is incorrectly constructed in that it actually allows the salesperson, in a dual agency situation, to do exactly what the broker is prohibited from doing – negotiating price and terms. How can a sub-agent of the broker (the salesperson) be allowed to negotiate on behalf of the broker’s client, when the broker is legally prohibited from doing so? They cannot.
How can the broker fulfil their licensing responsibility to supervise their salespeople when their salespeople are engaging in acts for which the broker is prohibited? If the salesperson consults their broker about the legality of certain negotiating terms, how can the broker advise their salespeople when doing so will violate the Act. The current statutory construction is logically flawed and needs to be revised.
Although we understand how profitable dual agency is for large brokerages in that they get to keep a double commission, at some point we must balance the integrity of the licensing scheme and consumers’ interests. The current Act does not do that.”
1] §17-530 (d)(1)(v) Establishes that “An intra-company agent representing the seller or buyer may provide the same services to the client as an exclusive agent for the sell or buyer, including advising the clients to price and negotiations strategy, provided that the intra-company agent has made the appropriate disclosure to the client and the client has consented, as required by this section, to dual agency representation.”