Who Works for Who?

What good are Realtors who solicit home buyers with promises of representation when they have to stop representing those buyers once the buyer is ready to negotiate price and terms? When Realtors’ representation is influenced by dual agency, bribes and anti-consumer laws, consumers end up with such a diluted form of representation that it isn’t representation at all. 

The real estate industry spends an enormous amount of money misleading consumers about the services that they provide while at the same time lobbying for laws that eliminate more and more consumer rights in this area.  While CAARE does not engage in lobbying, we are perhaps the most knowledgeable non-profit consumer advocacy group that can provide real answers and information on this topic.It is our goal to educate consumers, regulators, legislators and the media about these issues.

Where Did the Safeguards Go?

What good is an appraisal, home inspection, legal advice or title examination if the proprietors of those services are not impartial?  Those professionals each provide key safeguards in residential real estate transactions. However, those safety roles conflict directly with those of the success fee based professionals who refer them business. Worse, many of those safeguard providers are even under the same ownership and roof of these commission based providers completely neutralizing any hint of impartiality. These misguided arrangements are actually marketed to the public as “One Stop Shopping” – a term intended to disarm people into thinking it provides a benefit. Consider these situations:

  1. A Realtor referred home inspector who advises a buyer not to purchase a home (the Realtor won’t get paid).  Many home inspectors work in fear of boycott if they interfere with the commission of their referror.
  2. A Realtor who wants to recommend an independent title company when his manager earns a bonus based upon using the over-priced and conflicted in-house title company.  The consequences of guiding his client to an independent company that may cost less and provide better service could be a direct impact on the Realtor’s ability to earn a living.
  3. A Realtor referred attorney advising his client not to pay a real estate commission.  Even attorneys work in fear of being boycotted from Realtors because they get most of their residential referrals from Realtors.
  4. An attorney negotiating with the title insurance company on title insurance coverage and cost when the attorney is issuing the title insurance.

Whether you are a consumer or an investor loaning mortgage money, you should take care to verify that your service provider is not conflicted.  You should insist on impartiality in every step of the transaction.

CAARE has examined the faulty reports and studies provided by the industry and submitted to regulators and legislators in support of eliminating the safeguards in residential real estate.  The industry changed the legal name of these business interests from Controlled Business Arrangements to Affiliated Business Arrangements to avoid the negative connotations associated with the word “controlled.”   No matter what you call these relationships, they are bad and lead to bad transactions.

More About Residential Real Estate Problems (click here)


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