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Redfin.com’s Real Estate Consumer’s Bill of Rights: A wolf in sheepskin clothing . . .

I am a hardliner on the subject of reform in the real estate industry. Over the last nine months, I have written at great length about, among other things, the skill-set required to survive in the future of full-service real estate, empowering buyers, dual agency, how the NAR makes war on the free enterprise system, divorcing the buyer’s agent’s compensation from the listing agent’s fee, rebuilding the MLS without the co-brokerage fee, eliminating the IRS safe-harbor for real estate brokers to induce them to take responsibility for managing head-count, and getting rid of real estate licensing laws — or at least the broker’s level of licensing — to promote better competition among agents and better due diligence among consumers in hiring agents. There’s all that, plus much, much more.

Why am I going through my bona fides as a reformer? Because I am about to denounce a failed, flawed, fractured, false reform that is to be proposed today by Redfin.com. At first blush, this “Real Estate Consumer’s Bill of Rights” sounds like a good thing — and it easily could have been a good thing. Instead, it uses a treacly moral suasion and calls for new legislation to ram the corrupt Redfin style of doing business down everyone’s throats.

Start at the beginning. Yesterday, Kris Berg, Ardell DellaLoggia, Kevin Boer and I had this email from Redfin.com CEO Glenn Kelman:

Hope you’re having a good weekend. We wanted to let you know, under embargo until tomorrow at 9 a.m. (or whenever Inman goes live with the news), that we’re launching a program on Monday called the consumer bill of rights.

It doesn’t argue the issue of commission rates; we don’t consider it our business what others charge. It mostly focuses on simple reforms that would ensure that consumers get complete and open access to information about properties and the process of buying or selling properties.

The reason we’re asking you guys about it is that we want other brokers to support these rights. This is something constructive and positive, not antagonizing and negative — which itself is a result of coaching you’ve given us.

Maybe it would seem odd for you to find common cause with Redfin, or maybe you disagree with the rights as we’ve set them out. But if it’s something you agree with, saying so publicly would be a powerful statement to your customers and to the world at large.

The four of you in particular are extremely influential, more than you probably realize.

Anybody who participated in the program would show up on a web page we’re putting up tomorrow morning, www.redfin.com/rights. We’re also designing a nice-looking logo for supporters to post on their website. We have no intention of judging how your business upholds these rights, since we couldn’t pretend to be objective anyway. For us, the first step is just finding common ground in a set of principles we all agree to uphold.

Let me know what you think, but please don’t blog on this until tomorrow morning. Take care.

Who could object to this? Well, I could, inasmuch as this is the kind of creeping Babbittism I was beefing about over the weekend. But, even so, at first glance I thought this was doubly smart: Smart to come up with a statement of principles about highly-principled real estate practices, and smart to approach prominent, reform-minded weblogging Realtors for support.

On the other hand, I believe in my heart that Glenn Kelman is a centipede. He can always come up with another foot to shoot himself in. And, of course, that foot left bloody tracks — in Redfin red — all through the “Real Estate Consumer’s Bill of Rights.”

I don’t dislike everything in the document, but there is quite a bit that I oppose on general principles, and quite a bit more that is simply Kelman trying to foist off Redfin’s cowbird business practices as matters of moral right. This is obscene, as is the attempt to marshall support among Realtors and brokers — who should know better by now.

Let’s take it apart. I’m going to highlight specific language I object to in red.

1. Choose the services you pay for: Laws in more than a dozen U.S. states forbid brokers from refunding commissions to you, or require brokers to provide services you may not want to pay for. These laws protect the industry, not the consumer.

All for it. The more laws we repeal, the better.

2. Know how your agent makes his money: In real estate, the seller pays both his own agent and the buyer’s agent a percentage of the sale; the agent earns more when his client pays more. If a house seems difficult to sell, the seller may even offer buyers’ agents an especially high percentage. Buyers’ agents should be required to explain to their clients how they are paid.

We just repealed laws and now we’re passing new ones. I think agents should disclose how they are compensated, and I think buyers should make a point of finding out. But the idiot real estate laws already on the books are not enforced. Adding another law for feel-good purposes will change nothing. Note that divorcing the commissions will change everything — but not to Redfin’s advantage.

3. Know when you are committed to an agent: Often just showing a property entitles an agent to the commission for representing you, regardless of whether you intended to work with someone else or even preferred to represent yourself. The relationship between an agent and a consumer should always be explicit, so that both parties know when they’re committed to one another.

I have no objection to this as a statement of principle, in the present circumstance, but this is a perfect example of Redfin’s self-dealing. Who has a procuring cause problem? So-called buyer’s agents who impose the responsibility for showing the property onto the listing agent, but expect the full buyer’s agent’s commission. This is an issue we will revisit as we go along, as you might expect. And, of course, this is another problem that would be entirely solved by divorced commissions.

4. Know what services your agent will provide: Much of the work of a buyer’s agent begins after the buyer has agreed to buy a house. This work includes coordinating inspections, repairs, mortgages, title reviews and escrow services. But agents today are paid only to bring a buyer to a transaction. Once that happens, it is virtually impossible to fire your agent. In most cases, this is appropriate, as the agent who puts a deal together deserves the commission. But in becoming committed to an agent, you should know what services the agent will provide as part of that commitment and what recourse you have if the agent doesn’t perform those services. An open agreement between you and the agent protects the agent from being unfairly dismissed, and ensures you get the service you expect through closing.

The sentence in red is legalistically true and is stupid and false in practical reality. Because commissions are not paid by both seller and buyer, each for his own representation, the sine qua non event resulting in earned compensation for the buyer’s agent is introduction of the buyer to the seller. But in fact the buyer’s agent will not get paid if he does not shepherd his buyer through the escrow process. This applies to all buyer’s agents, traditional and discount. The advice to buyers is good, and it would be even better and more meaningful and more easily enforced if commissions were divorced.

5. Have an agent that represents only your interests: Most states allow an agent to represent the buyer and seller in one transaction, and get both sides of a commission. As a result, some sellers’ agents are on the prowl for unrepresented buyers to bring to the seller. It’s a solicitation neither side can easily refuse because the seller wants the buyer and the buyer wants the house. But an agent can’t fairly represent the interests of two parties to the same transaction. An agent should represent only one party, and take commissions for only one party.

Boy, howdy! Who can’t hear enough about Dual Agency? There are obvious problems with this paragraph. First, sellers — including Redfin’s $2,000-a-listing sellers — want Dual Agency. It’s one of the things they’re hiring in a listing agent, the idea of a rainmaker who will bring the buyer himself, ideally with a discount on the buyer’s agent’s side of the commission. I truly hate Dual Agency for many sound reasons, but there is a limit to how far I can oppose it with a seller without betraying the seller’s interests. I would prefer to do as is suggested here, to refer the buyer out. But if I refer the buyer to an agent who proceeds to take that buyer to other listings, I have deprived the seller of a procured buyer. Arguably, I could refuse to represent the buyers, but the likelihood of my creating an undisclosed Dual Agency is virtually certain. It is conceivable to me that there could be circumstances where a Realtor could not avoid a Dual Agency, and, because of that, I went to some pains to devise a rational, real-world-correspondent Disclosure of Limited Dual Representation. In fact, in a Dual Agency, I would prefer to write the Buyer-Broker Agreement with our brokerage named, appending the language “and/or designee,” to allow for the buyers to select their own representation later in the process.

But: All that notwithstanding: What’s really going on in paragraph five is that Redfin is trying to deprive listing agents of the fruits of procuring the buyer in the present commission structure. What makes this issue go away entirely? You guessed it: Divorcing the commissions.

6. Know the commission refund you can get before you buy a house: Depending on the service provided by the buyer’s agent, some sellers vary the commission offered to buyers’ agents. This flexibility is good in theory, but in practice it’s often used to thwart commission refunds: buyers expecting a refund of $10,000 or more from their agent discover on making an offer that the amount has been radically reduced in favor of the seller’s agent. Buyers should know in advance what circumstances let the seller’s agent keep more of a commission for himself. It’s fine to change the price but not at the cash register.

The language in red is all Redfin self-dealing. Why are brokers writing variable commissions into their listings? Because cowbird discounters like Redfin push the cost and legal risks of showing onto the listing agent, then demand full compensation as procuring cause of the sale. Is the variable commission disclosed in the listing? Has to be, by MLS rules. Why doesn’t the buyer know about the variable commission? Because the lazy cowbird real estate brokerage doesn’t even provide that little bit of representation for its buyers. Again, this specious problem is easily solved by divorcing the commissions.

7. See all the houses for sale: Many of the multiple listing services set up to share listings between brokerages forbid participating websites from displaying for-sale-by-owner houses alongside broker-listed houses. As a result, home buyers usually don’t see all the houses for sale, and home sellers have to hire brokers just to get their house on mainstream sites. MLSs should not require exclusive display of listings.

More laws, and the worst possible kind: Forced speech and forced association. This is totally alien to American principles, as exemplified by the First Amendment to the real Bill of Rights. The actual purpose of the MLS is not to advertise properties but to publicize and promise shared commissions on listed properties. For-Sale-By-Owner homes are logically-excluded because the promise of shared compensation is absent. Want to make the problem go away? By now you should be able to guess how.

8. Have an open discussion about a house for sale: On the web, you can openly discuss almost any product for sale except a house. That’s because sellers’ agents “own the listing,” controlling where and how it’s posted for their benefit. The rules of some MLSs discourage real estate websites from publishing independent reviews and preclude owners from distributing MLS marketing materials outside MLS-sanctioned websites. Once a house is for sale, everyone in the market should be able to discuss it.

And don’t think they don’t! The whole paragraph is more Redfin self-dealing, an attempt to do an end-run around MLS rules it voluntary agreed to abide by. MLS members might be forbidden from trashing each other’s listings, but nothing prevents ordinary people from speaking and writing as they choose.

9. See all the information available about a house for sale: Many MLSs make it difficult for buyers to see recent past sales data, how long a house has been for sale, or whether its price has been reduced. Once a house is for sale, you should be able to see all the information available about it on your own, without becoming anyone’s client. The only exception to this rule is information whose publication jeopardizes the seller’s safety, such as when the presence of children precludes a showing.

More Redfin self-dealing. If you don’t like MLS rules, don’t join. Alternatively, if you want to pull the teeth from the MLS, perhaps even replacing it completely, divorce the listing and buyer’s agents commissions. Everything in the MLS turns on the co-broke. Lose that, and reform is very easy.

10. Be sure your agent will show your house to everyone: Some sellers’ agents selectively refuse to show houses to a buyer represented by an alternative brokerage, which hurts the seller and the buyer. If, as part of his service, a seller’s agent doesn’t show houses to all buyers, the seller should know it, and the buyer should be able to contact the seller directly. When agents don’t facilitate showing a house, they should at least stand aside and let buyers see the house on their own.

Another whole paragraph of Redfin self-dealing. What’s the real problem? Redfin can’t make money if it has to provide true buyer’s representation for its buyers. To make a profit — someday, maybe — it has to shove the costs of showing homes off onto the listing agent. Why don’t listing agents want to do this? Because they’re paying 50% or 60% or 75% of the sales commission so that buyer’s agents will show homes to buyers. If the responsibility of showing is to be pushed off onto listing agents, they must either refuse to do it — paragraph ten — or pay less commission — paragraph six. If, on the other hand, buyers paid for their own representation, all of these problems would go away.

I thought I might propose an alternative “Real Estate Consumer’s Bill of Rights,” but there really is no need. The simple reform of divorcing the buyer’s agent’s compensation from the listing agent’s commission will solve all of these problems, plus many more. Such a change would be easy to effect, a simple matter of lenders permitting the buyer’s agent’s fee to be expressed on the buyer’s side of the HUD-1 form. The seller would pay the listing agent on his side of the form, out of the proceeds from the sale. The buyer would pay the buyer’s agent out of his own or the lender’s funds. Practically speaking, the money traveling across the closing table would seem to be identical to the present circumstance. But the buyer would have true representation, and the buyer’s agent would have nothing to gain — or to fear losing — from either the listing agent or the seller.

That would be true reform, of true benefit to the consumer. So why doesn’t Redfin propose divorcing the commissions? Why is it spending so much time and effort chipping away at the mortar between the stones in the MLS edifice, when it could much more easily advocate this simple and obvious reform that could bring the entire MLS commissions-fortress tumbling to the ground?

Why? Because a divorced commission is a negotiated commission. Redfin can’t live without the three-percent buyer’s agent’s commission. It doesn’t want to earn that commission, so we get ten paragraphs of self-serving tap-dancing. But if buyers discover beyond doubt that they have the power to set the fee — and the terms — of their representation, all the cowbird brokerages will be instantly nestless. All of the do-nothing agents will be gone, and the survivors, exceptional-service or deep-discounters, will be very, very business-like. This will be a great thing for consumers, too — but it will be the end of Redfin.

What we end up with is not a consumer’s bill of rights, but a Redfin bill of rights, an attempt to paint the color of rectitude on all of Redfin’s wrongs. Redfin seeks to enlist support for this document not because it wants or expects other brokerages to do business this way, but to rob them of the right to complain when Redfin and other cowbird brokerages dump the cost of representing buyers onto listing agents and yet demand full payment for defaulting on their responsibilities. This is about as wolfish a ploy as anyone could envision — all cloaked in the guise of consumer protection.

Ten paragraphs of specious “reforms,” all designed, in camouflage, to buttress and ratify Redfin’s unprofitable dis-service business model. Or one simple and obvious reform that will cure nearly every ill in the real estate industry overnight. My reform might be too radical for you, for now. Redfin’s “bogus” reform is simply absurd. Don’t make the mistake of attaching your name to this transparent piece of propaganda.

Elsewhere: Inman News, Redfin’s weblog, Kevin Boer, Ardell DellaLoggia, Jonathan Dalton, Joel Burslem, Blue Collar Agents, Inman Blog, NY Houses 4 Sale.

 
The divorced real estate commission file: This is an organic compendium of weblog posts and internet-based articles arguing for and against the idea of divorcing the residential real estate commission — eliminating the co-brokerage compensation from the listing agreement, with buyers contracting for and arranging compensation for their own representation. One way this might be effected: Lenders could permit buyers to expense representation on the HUD-1 form as sellers do now. The entries collected here represent the full gamut of opinions on what may be the most important issue facing Realtors today. To submit additional posts or articles for inclusion on this list, fill out the form at this link.


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  • 40 comments

    40 Comments so far

    1. Jeff Brown April 2nd, 2007 9:56 am

      Greg – Oh, THAT embargo. :)

      Your points are of course, well taken, and impeccably supported. But this whole Redfin dust-up is a whole bunch about much ado about nothing.

      I continue to to implore folks to take whatever Redfin’s CEO says, print it, and shred it. Then spread it evenly over your front lawn. Before you know it you’ll have the greenest lawn in your neighborhood.

      Until, or rather if, Redfin makes a profit for 12 consecutive months, they don’t amount to more than a pimple on the ass of real estate brokerage in general.

      My vote is to let it pop on its own. :)

      Loved the post though. Even as a centipede the guy may run out of feet to shoot. :)

    2. [...] Greg Swann of BloodHoundBlog in Arizona, Kevin Boer of 3 Oceans in the CA Bay Area, Kris Berg and I were contacted by Glenn Kelman of Redfin prior to the Inman anouncement and asked to support The Consumer Bill of Rights on Redfin’s site. The email we received is posted in Greg’s article today. [...]

    3. Brian Brady April 2nd, 2007 10:33 am

      >Redfin can’t live without the three-percent buyer’s agent’s commission

      Their model promises to rebate 2/3 of “what they earn’ to the consumer. redfin.com doesn’t want to negotiate buyer’s side commissions; they want 1%.

      Am I reading this wrong or does that completely go against the Consumer’s Bill of Rights?

    4. [...] Bloodhound Realty: Redfin.Com’s Consumer Bill of Rights … a Wolf in Sheep’s Clothing [...]

    5. [...] Also, take a look at Greg Swann’s, Ardell’s, and Kevin Boer’s view on the Bill of Rights. [...]

    6. Afthird April 2nd, 2007 10:59 am

      In the comments of Redfin’s blog post I’ve suggested Redfin add these three rights. Can anybody argue against them?

      1. Know how experienced your agent is. How many years have they been a real estate agent. How many homes did they personally transact last year. How about the year before and the year before that? In how many transactions were they representing the buyer and how many the seller?

      2. Know if your agent is a local market expert. How many homes have they personally sold in this neighborhood? How about this zip code? How far away do they live? How long have they lived in the area? Have they been around long enough to see the ups and downs of the real estate market? Is your agent involved in the local community?

      3. Know how much expert realty advice you will receive from your agent. Will they use their market knowledge to help you find the perfect home? Will they advise you on if a property is a good or bad investment? Will they tell you to avoid homes that are bad choices based on their experience? Will they personally be on the lookout for a home that meets your needs even before it comes on the market?

    7. Drew Nichols April 2nd, 2007 11:01 am

      This is probably my favorite post on the blog so far this year. I’m referencing your old posts now to discover your thoughts on this.

      My background is in economics (free market) and I must say the MLS as it is constructed today was very surprising to me as I learned how it all worked. I particularly don’t like this bill of rights, though. Thanks again.

    8. Glenn Kelman April 2nd, 2007 11:26 am

      Greg,

      We agree that one way to reform the industry is to change how buyer’s agents are paid. But before determining how to reform real estate, it seemed reasonable to determine what our goals should be in the first place, particularly when such a radical proposal may preclude discussion of more practical measures. Unfortunately it seems impossible to have any discussion about what’s in the consumer’s interest when there is such blinding hostility toward Redfin.

      Your post almost completely ignores the ostensible center of this debate, the consumer.

      The premise of your argument is that if a right benefits Redfin, it cannot benefit the consumer. We do not pretend that our interests are perfectly aligned with consumers’, but there is no basis for concluding that our interests are in every case mutually exclusive with those of consumers. You never actually discuss how any of the rights we proposed would fail to advance consumer interests whereas in many cases, you have noted how these rights hurt our own interests.

      Your suggestion that Redfin shouldn’t join an MLS if we disagree with its rules has the same problem: you are focused on Redfin, rather than on the consumer. For example, it seems indisputable to us that consumers would benefit by being able to visit a website and see all the properties on the market, including those that do not pay a commission. This is an example of a consumer right that would not benefit Redfin, but that we have nonetheless endorsed.

      In fact, by the end of your piece you triumphantly reach a conclusion that we had recognized from the beginning: that many of the changes we are proposing put our business model at risk as much as anyone else’s. This would seem to trump your own argument that this bill of rights is self-serving.

      The truth is that we would rather be an agent of change than a victim of it.

      You are factually incorrect on several points:
      Redfin does not so far have a problem with procuring cause, having never lost a contested commission.

      Redfin was not proposing that a seller’s agent recommend a buyer’s agent to avoid dual agency, only that the seller’s agent not take both commissions. The buyer can hire another agent himself, or a lawyer, or represent himself if he is qualified. There is no need to involve another agent if the buyer doesn’t want to, but the seller should not feel that his agent serves two masters.

      Redfin is not opposed to variable office commissions; we proposed only that the consumer be able to see the terms by which the commissions vary before he makes an offer. As you see it, prominently displaying a variable commission is not in Redfin’s interests, but this is what we have proposed. We have never failed to advise a client who has made an offer that there is a variable commission; but in one case a client has been subject to variable commissions simply by visiting an open house on a Sunday afternoon.

      We are not necessarily proposing laws: we would prefer that the industry regulate itself. Your post has made us feel that such self-regulation may be more unlikely than we had hoped.

    9. Jeff Brown April 2nd, 2007 11:36 am

      Glenn,

      If a French army general were trying to defend his country’s military record for the last century he would sound like youl

      Please come back when your investors have stopped the hemoraging.

      Speaking for myself, I don’t have an emotional stake in your failure or success. I don’t know you personally. But if I was going to choose how to hit a baseball, I’d want to learn from a .300 hitter, not a guy who has gone oh for his career.

      Have some success then come to the party.

    10. Greg Swann April 2nd, 2007 12:02 pm

      > We agree that one way to reform the industry is to change how buyer’s agents are paid.

      There are three matters of consequence that will correct every significant defect in the real estate industry: 1. Divorcing the buyer’s agent’s compensation from the listing agent’s sales commission. 2. Eliminating the broker’s safe harbor income tax withholding exclusion. 3. Eliminating the broker’s level of licensing or eliminating market-entry restrictions altogether. If you’re not campaigning for one or all of those three, you’re not campaigning for reforms beneficial to the consumer. Of the three, divorcing the commissions would by far be the most consequential.

      Everything I say after this amounts to dismissing your caviling. You are not for consumer protection, which will be achieved by the above reforms. You are lobbying — as all Rotarian Socialists do — for special benefits for your own business.

      > Unfortunately it seems impossible to have any discussion about what’s in the consumer’s interest when there is such blinding hostility toward Redfin.

      There is no blinding hostility. I took you apart with cool deliberation.

      > Your post almost completely ignores the ostensible center of this debate, the consumer.

      To the contrary, everything I have written on these subjects works to the advantage of the consumer and to the disadvantage of many practitioners. Your proposal exists to advantage Redfin at the expense of the consumer and other practitioners.

      > This would seem to trump your own argument that this bill of rights is self-serving.

      Nonsense. Your manifesto is devised to equate your business model with the consumer’s interests, thus to silence objections to your egregious behavior

      > Redfin does not so far have a problem with procuring cause, having never lost a contested commission.

      The associations are cowed by the DOJ. You are clearly wrong on procuring cause under current state laws, and you are skating, for now, because you are Big Mother’s special little brat. When the Nanny State turns its back, Redfin will get the thrashing its practices deserve.

      > Redfin was not proposing that a seller’s agent recommend a buyer’s agent to avoid dual agency, only that the seller’s agent not take both commissions.

      Correct. Redfin was trying to contrive a way to deprive a listing agent who either represents both parties or works with unrepresented buyers from collecting both sides of the earned commission. If you can achieve that act of theft — the abrogation of the listing contract — you will be that much safer from procuring cause actions.

      > Redfin is not opposed to variable office commissions; we proposed only that the consumer be able to see the terms by which the commissions vary before he makes an offer.

      Forced speech. The variable commission is disclosed in the listing. If you conceal this information from your buyer, that’s your problem. (And spare me your True Crime anecdotes. If you have a complaint, tell it to the judge.)

      > We are not necessarily proposing laws: we would prefer that the industry regulate itself. Your post has made us feel that such self-regulation may be more unlikely than we had hoped.

      Two of the reforms I have proposed require no legislative action at all. Divorcing the commissions can probably be done by the lenders alone, without involving governments at all.

      (Inlookers, my expectation is that what Redfin is really up to is laying the groundwork for national real estate legislation. This would be a disaster for consumers, obviously, but you can bet it would be a gravy train for Redfin.com and all the other Rotarian Socialists in the real estate industry.)

      Face up to it: I caught you. Anyone could have read what you had written, and you were counting on the fact the people almost never read this kind of feel-good pabulum. Too bad for you. Now take your bat and ball and go home. You’ll come up with another tricky maneuver tomorrow.

    11. Mark Ballard April 2nd, 2007 2:01 pm

      The list is rather broad. It speaks to many considerations, many of them good. But the nature of a list is to try and speak to one theme or category of considerations and this list so varied, and speaking to such diverse client interests, that it might should be broken down into more focused lists or discussions.

    12. Jay Thompson April 2nd, 2007 3:51 pm

      From Redfin’s “Stand Up and Be Counted” page:

      “Once we have validated this information (your “pledge” to support the manifesto), we will post it to this web page, which will become a resource for consumers looking for consumer-friendly real estate services.”

      So if I don’t sign up and support the Redfin Manifesto, then Mr. Kelman implies I am not “consumer-friendly”.

      Interesting.

      So much for the statement in his email of, “This is something constructive and positive, not antagonizing and negative…”

      Greg wrote: “Inlookers, my expectation is that what Redfin is really up to is laying the groundwork for national real estate legislation.”

      And Refin states on their “Stand Up” page: “We are asking consumers to support a petition based on these rights, which we will submit to the National Association of Realtors and to all of the Multiple Listing Services to which we belong”

      Sure sounds like the laying of groundwork to me too…

      I’ve got no problem with a lot of the manifesto. But a lot of it is indeed self-serving dreck.

    13. Charleston Real Estate Blog April 2nd, 2007 6:02 pm

      Redfin’s Real Estate Consumer’s Bill Of Rights…

      The blogosphere is busy once again today with Redfin's announcement of a Real Estate Consumer's…

    14. Benn Rosales April 2nd, 2007 8:52 pm

      The industry does not need to be reformed in such a dramatic way as Redfin describes. The only reform we need is brokers willing to fire agents, willing to give up the commissions that agent would bring at the expense of the “realtor reputation.” Hire agents that are qualified, that give exceptional service, that follow the Code of Ethics, and that go above and beyond the pale for their client whether it is the buyer or seller side. A broker that has the cojones to fire someone regardless of their production value- for not giving 100% service to ANY client- is a brokerage that earns 100% of their commission and should rightfully receive it!

      Case in point: the last time I went to McCormick’s and Schmick’s (steak house), no one offered me half of the steak for half of the price. In fact, not only did I get a fat juicy steak for full price, I got a fresh salad, I got a more than generous amount of alcohol in my margarita, and a waitress jumping through hoops to make sure that the service that I received was second to none. Not only did I pay my $45, but she got a $15 tip on top of that. Why would WE do it any other way??!?!

      It seems to me that we should stop trying to figure out ways to discount our services and find more ways to add value to our services. That’s what we do- we give our clients value. Brokers (not just Greg), ask yourself- are you involved with your agents? Does your brokerage do miscellaneous spot checks on your agents’ listings? Does your brokerage verify that your agents (or their assistants) return phone calls within two hours? What does your brokerage to do enforce customer service standards?

      I am so fed up with this discount brokerage market that I don’t even bother competing any more. In fact, we’ve begun advertising that we are a Full Service Brokerage and for good reason- value. THAT’S a standard.

      Full Service Brokerages will succeed in the long run by giving above and beyond service. We (should) already have a Code of Ethics we follow; all our industry needs to do is to remember our core values we (should) ALREADY have! Real Estate and earning money was never complicated in the first place. Get back to basics! I would recommend that Redfin write a new mission statement and have THEIR broker/agents sign off and mail that out to all of their clients. Raise YOUR standards before you go about setting ours.

      Sincerely,

      REALTOR that earns every penny.

    15. [...] What on earth is going on with the parseltongue utterance from Redfin? Catch up to the plot from Greg Swann, Kevin Boer and Ardell DellaLoggia, they all take different views. Redfin leaked the news to all three and Kris Berg early. No report from Kris as yet – she turns a bigger profit than Redfin though, so she can take her time.  [...]

    16. Todd Carpenter April 2nd, 2007 11:25 pm

      Glenn Kelman wrote, “it seems indisputable to us that consumers would benefit by being able to visit a website and see all the properties on the market, including those that do not pay a commission. This is an example of a consumer right that would not benefit Redfin, but that we have nonetheless endorsed.”

      If that seems indisputable to you, then it’s my opinion that you haven’t really thought things through. To make this work, you’d have to force the MLS to work for free (listing FSBO’s – not going to happen) or take away an MLS’s ownership of the content they are creating.

      If you force real estate agents to give away a key tool in marketing & finding listings between qualified parties, then the tool will loose it’s value. Less agents will bother to list. An alternative technology will spring up to replace the MLS. It might involve file sharing, or email. some sort of digital referral network. Listing agents could simply choose to only market properties from their own web sites, then evoke copyright. The database of homes available to that “one true list” web site will shrink. Consumers will have access to less listings, not more. So no, indisputable is not a word I would use to describe the consumers positive outcome in such an example.

      This may seem implausible to some one from Open Source Land, but commission sales people are capitalistic by nature. They participate in the MLS because it is beneficial for them to work together. Take away the benefit…

      In my opinion, you didn’t think a lot of this “bill” through. I think your consumer’s bill of rights is a great policy for Redfin to follow. But before you asked the rest of the industry to tag along, you might of considered getting their input ahead of time.

    17. Todd Tarson April 3rd, 2007 7:42 am

      Nice work here Greg. I’m not really all that up to speed with Redfin, Glen, and his crew. I think that I am trying to do something similar with my buyers flat fee service, but the huge difference that I am seeing is that when I put a client in that service plan… I am their agent. I show the homes/property, I write the offer and handle negotiation, and see the transaction through. To me it still sounds like Redfin is missing a step in the process.

    18. Greg Perry April 3rd, 2007 8:06 am

      Smoke and mirrors. All this talk about representation and seeing all the houses, protecting the consumer, yada yada. Fact is, Redfin agents are writing offers on houses they have never seen. They fax offers to listing agents, never notifying them that the offer is coming, nor follow up to see if the offer was recieved (happened to me personally). They encourage their clients to lie to listing agents, telling them to say that they don’t have an agent so the LA will be amenable to showing them the property (heard this first hand from a Redfin client). They regularly put their clients at a disadvantage in multiple offer situations, by not being available outside their office hours. I worked for a very successful “Captain of Industry” who established huge retail organizations who regularly said ” You can’t sh_t the public, they’ll always find you out”.

      I’m guessing that Kelman wrote the words. He’s certainly proud of them. The trouble here is that the words do not match the actions of his company. Redfin is a crappy concept. Their “clients” are trained to lie to listing agents. After mutual acceptance, the listing agent is left with the work that a typical Buyers agent would do, such as inspections, etc. Good representation by Redfin is non existant. By posting this sham and asking other’s to participate, Redfin is simply trying to make itself look credible.

      As far as number 8, Open discussion of MLS listings, why would any broker want to do that when Redfin is around? What would stop Redfin from posting a comment like this on their website “too long on the market, the Seller may be getting desparate”on an MLS property onwed by a Seller represented by their broker?. Or how about “the real estate agent who priced this baby, must have been really stupid, he overpriced it by $50,000. Why don’t you come in and make an offer?” MLS broker’s simply cannot allow this as they are agents of the Seller. The problem with Redfin is that they are trying to bully and trample Seller’s rights and their agency relationship with their brokers.

      By and large, limited service brokers are good for the real estate industry. In the retail world the consumer can choose between Wal Mart and Nordstrom. There are some very good limited service brokers in our region. As I see it, Redfin is just a crappy concept. To be true to their actions, their manifesto should simply say, “If you can’t do it the right way, LIE, CHEAT AND STEAL.” Limited service brokers owe it to the public to be honest, just as full service brokers do.

    19. Leigh Brown April 3rd, 2007 10:34 am

      I have to say that I thoroughly enjoyed your take on this ‘bill of rights’.

      Especially in light of the bad taste that was left in my mouth after reading this month’s issue of Wired, where Kelman is held out to be some sort of great visionary.

      I thank you for being so precise and deliberate in your taking apart of this mess.

    20. [...] A lot of people have spent considerable time weighing in. Notable positive reviews include Kevin Boer of 3 Oceans Real Estate and Joel Burlesome of Future of Real Estate. Notable undeclared bloggers are Ardell Dellaloggia of Rain City and Christine Forgione of NY Houses for sale. A thorough and negative review comes from Greg Swann of Bloodhound. All worth a read. [...]

    21. Glenn Kelman April 3rd, 2007 2:38 pm

      Greg (Perry), we can’t respond to every comment made here but if you know of a situation where a Redfin agent encouraged a client to lie, please let us know the name of the agent so we can take action. If you told us the name of the client, we could also address the situation that way. My e-mail address is glenn (at) redfin (dot) com. Thank you.

    22. [...] In his vivisection of Redfin’s so-called Bill of Rights yesterday, Greg stated that many of the issues Redfin raised could be solved through the divorcing of the real estate commission from the transaction – in short, sellers pay their listing agent and buyers pay their buyers’ agent. [...]

    23. Michael Wurzer April 3rd, 2007 6:37 pm

      Greg, if you haven’t already seen Brian Larson’s excellent series of articles on ending interbroker compensation, I commend it to you. In particular, you might find this statement in the second article of interest: “In fact, HUD and Fannie Mae regard a commission paid by buyer to buyer’s broker at closing as a valid closing cost. In other words, to the extent that closing costs can be financed, a buyer broker’s fee can be financed as well. The traditional view is that the buyer borrows money to pay for the purchase price and comes to the closing with the closing costs in cash. Practically speaking now, buyers have the option to come with a piggyback loan ready to cover some of the down payment and closing costs in return for a second lien position on the property. There may even be tax advantages to this approach for the buyer.”

    24. Joshua April 3rd, 2007 10:42 pm

      Great post! It seems that Redfin is just looking to gather up a bunch of sheep to help boost them up to the big kids table…

      Honestly, how many people will buy into this nonsense? It’s so blatant!

      On divorcing commissions, this is the first time I’ve read about this idea. It’s great to know that this is something that is being talked about (and pushed) by an industry professional such as yourself.

      My fear is that some (many?) of your peers will not be so invested in the overall good, and will not help move this initiative forward. Well, I don’t really ‘fear’ it, but you know what I mean. :)

    25. Reuben Moore April 6th, 2007 8:23 am

      Red Herring Real Estate….

      Redfin’s “Real Estate Consumer’s Bill of Rights” and their entire business model is a distraction from the real structural issues in the real estate business. The Redfin goal is not to address the issues in our industry, but to simply take advantage of them.

      I propose we re-christen them, “Red Herring Real Estate”.

    26. [...] The wacky Bill of Rights for real estate consumers. [...]

    27. Nancy Chadwick May 4th, 2007 5:32 am

      Greg,

      I don’t know how long you’ve been licensed (I’ve been RE licensed 25 years), but surely you must realize that the brokerage business needs major overhaul from top to bottom. Proposing simplistic solutions, such as “divorcing the commissions”, won’t cut it. It has taken decades for the industry to flower into its present-day mess, and only decades more or increased pressure from the DOJ, FTC and whoever else will set it on the right course. Requiring buyers and sellers to pay for their respective representation will not, in my view, solve all the problems or even any of the problems, including dual agency, limited dual agency or whatever other euphemism is used to describe double dealing. Brokers and their agents will get principals to consent, albeit not informed consent, and continue to collect from both sides. NAR and their locals will continue to lobby for contorted legislation that says “we’re agents but we’re not really AGENTS” in order to legally collect from both sides.

      But I must point out that your diatribe contains some factual inaccuracies. For example…

      Your comments under #4 notwithstanding (“But in fact the buyer’s agent will not get paid if he does not shepherd his buyer through the escrow process”), surely you know that there are way too many agents out there who should be packing groceries for a living and not selling real estate. Lazy, incompetent and yes, dishonest licensees. I wish I had a buck for every deal I’ve been involved with where the other agent didn’t do their job and I had to do it. And guess what? They got paid. But you can’t whine about it if you’re a professional. When you commit to representing a client, you must do whatever has to be done — even if that should have been done by the other agent. If you’re not willing to do that, then go pack groceries for a living and stop calling yourself a “professional.”

      I have shown my listings for other agents and driven to meet buyers’ agents to facilitate getting offers. Did I have to do that? If I am to be truly furthering the interests of my seller-client…absolutely!

      Under #5, in arguing that sometimes dual agency is OK: “But if I refer the buyer to an agent who proceeds to take that buyer to other listings, I have deprived the seller of a procured buyer.”

      Well, if the buyer wanted to see other properties, then he/she wasn’t really a buyer for your listing, so how is your seller disadvantaged by being deprived of a non-buyer?

      By my count, you spent 4.5 pages ranting and raving about Redfin. You characterized their Consumer Bill of Rights as self-dealing but at the end of the day, you didn’t evaluate the CBOR on its merits. In other words, you looked at the CBOR only as you thought it advantaged Redfin and not as it would benefit consumers, without regard to the brokerage organization that authored the CBOR.

      In short, your critique was about as biased as it gets. Might I suggest that instead of spending your time and energy trying to trash Redfin (or any other broker), that you apply those efforts to representing your clients.

      Nancy Chadwick, Broker-Owner
      Chadwick Real Estate Inc

    28. [...] Gregg Swann from Bloodhoundblg best defined what clients should look out for when choosing a real estate service in his April 2nd blog Redfin.com’s Real Estate Consumer’s Bill of Rights: A wolf in sheepskin clothing . . . Add To: [...]

    29. Redfin - Bad Service - Bad Investment May 18th, 2007 9:37 am

      [...] Of course, response from within the industry has been intense … but somewhat off the mark, it seems to me. Here are some of the blogs … Kris Berg … Greg Swan … Technorati. [...]

    30. [...] Redfin has come out with a Bill of Rights for Real Estate Consumers that is fairly interesting. I must admit that I am reading this with a jaundiced eye as I first learned of it from Greg Swann’s indepth critique of the Bill of Rights, A wolf in sheepskin clothing . . . [...]

    31. First of all it is really annoying that Redfin doesn’t know what a “seller agent is.” The “selling agent” is legally defined as the buyer agent, even if it is counter-intuitive. Even the press get this wrong all the time.

      I require my agents to ONLY use the terms “Listing Agent” and “Buyer’s Agent”

      On another point. What happens when 2 RedFins collide? They sink!

      If you are a Redfin listing agent having to do 10x the number of deals to make the same amount of money, and that Redfin listing agent gets a call from a buyer saying “I want YOU to show me this listing, and I want to use my own separate rebate Redfin agent so I can get 75% back.”

      What will the Redfin listing agent do? Will they be ok with suddenly performing the “SHOWING” role? Even thought they are known for passing the buck to the other agent to take the burden of the workload?

      I guess if this were to happen, they would have enough marketshare to be able to sell the company, before it even makes a dime of profit.

      I’ve attached my company bill of rights (made a month before their bill of rights)

    32. [...] The discount agents and brokers mentioned in Greg Swan’s, Kevin Boer’s and/or Kris Berg’s articles, are even less likely to present offers in-person ~ that would require more time and quite frankly, a skill that was not passed onto them. However, I did recently persuade a discount agent to present his buyer’s offer in person, which was unprofessional and..well..ludicrous. I politely responded to his offer: We missed dinner for this? He explained he “writes lots of offers and sometimes they get accepted,” and added, “even I’m surprised.” The seller and I thanked him and his waiting buyer for their time, and politely showed them the door. [...]

    33. [...] But: My essay is the most comprehensive word in opposition on this subject. I’ve only written one post about the Redfin Consumer Bill of Rights because one was all that was necessary. That one post is richly linked to dozens of other arguments, all of them devoted to true reform in the residential real estate industry. This is not hyperbole: There are 57 links in that post. Because so much of my argument turns on divorcing the buyer’s agent’s commission from the listing agent’s commission, I append links to every major post on the subject, pro and con, published on BloodhoundBlog and elsewhere. [...]

    34. Wayne Long December 21st, 2007 10:11 pm

      One of the big pitfalls for Redfin in my opinion is that the small commissions will only be attractive to Realtors who cannot make it otherwise. The better Realtor will not want to be part of this group so they will only retain lower quality agents.

      The second problem they have is that Real Estate agents or brokerages cannot pay there bills with the commissions they are charging so eventually Redfin will self destruct. Agents may buy in at first but when they realize they could make more at Walmart they will hit the road. JMO

    35. [...] Redfin.com coverage Redfin.com’s Real Estate Consumer’s Bill of Rights: A wolf in sheepskin clothing [...]

    36. [...] discount agents and brokers mentioned in Greg Swan’s, Kevin Boer’s and/or Kris Berg’s articles, are even less likely to present offers [...]

    37. [...] tours would be 32 houses. This is nothing at all like the original Redfin game plan — shoving the expense of showing homes onto the listing agent. What it sounds like, truly, is traditional real estate without the traditional compensation [...]

    38. Matt Warmack March 10th, 2008 3:07 pm

      I think Greg Perry in his April 13th post had it spot on.

      While I think Redfin’s goal of being an agent of change is admirable – I think their business model is flawed in how it works in the real world. It only exists if full service agents do some of their work.

      I have a strong technology background and I’m interested in the intersection of technology and real estate.

      My two biggest issues with Redfin as a full service real estate agent are as follows:

      1) Their business model teaches their clients to lie. It creates less transparency with other agents. We could use more transparency with technology, not less. Example – an individual calls the listing agent to see the property. Since it’s unusual for a listing agent to show a represented person the property – it’s deceiving to say they are unrepresented. I’ve ask two Redfin callers if they are working with Redfin only to find them saying they ARE working with Redfin once inside of the property (they said they were unrepresented on the phone). I’m still going to show them the property of my listing, but it would help better utilize my time if I knew they were working with Redfin and had buyer’s representation at the time of them calling me.

      2) The Redfin business model does not exist without full service agents with appropriate commissions and service level. They are leveraging the full service model for their advantage and without full service agents their business model is gone. (and from the posts here it sounds like the long term profitability is questionable)

    39. RF April 16th, 2008 9:28 pm

      This week I was turned on (and quickly turned off) to the Redfin business platform. My opinion is their business model is full of undermining pretenses playing on consumer’s cheap cynical greed and will implode in due time.

      Matt,

      In paragraph 1 you pointed out Redfin prospects had lied to you about not having representation prior to entering the property. Here is a method Listing Agents might consider trying to establish procuring cause:

      When a prospect calls wishing to view your property, ask them if they have representation. If they say no, immediately document the time/date into your conversation log that they told you they do not have representation. Meet them at the property and prior to entering the premises, disclose to them that you represent the Seller for the property and have them sign a dual agency disclosure form (in California the form is Disclosure and Consent For Representation For More Than One Buyer or Seller) and a standard agency disclosure form. If they hem and haw or refuse to sign the forms, simply ask them, “from a legal standpoint, by allowing you in this home, exactly whose client are you?”

      When they sign the dual agency disclosure form and you have it documented in your conversation log that they told you that they did not have representation prior to entering the premises, you should have some ground to stand on for procuring cause if they come back later with an offer from another agent.

      If they inform you they already have representation, tell them call their agent to show them the property because you will in no way put yourself in a position to interfere with agency.

      ——-

      My thoughts and prayers go out to all professional Realtors during these times!

    40. Robin May 23rd, 2008 3:33 pm

      Jeff brown wrote”If a French army general were trying to defend his country’s military record for the last century he would sound like youl

      Please come back when your investors have stopped the hemoraging.

      Speaking for myself, I don’t have an emotional stake in your failure or success. I don’t know you personally. But if I was going to choose how to hit a baseball, I’d want to learn from a .300 hitter, not a guy who has gone oh for his career.

      Have some success then come to the party.”

      Oh what a difference a year makes! Hmmm..wonder how that went out at Unchained. Kelman is a stand up guy.