Archive for the 'Dual Agency' Category
Which home is the right one for you? Coldwell Banker says it’s the property for which Coldwell Banker will get paid double.
Is this home the right one for you and your family?
No, sorry. That’s an exclusive listing. Your trusty, ever-faithful Coldwell Banker broker won’t get paid if you buy that house.
So is this the perfect home for you?
Oh, no! This home has serious systemic defects, the worst of which is… it’s a fizzbo… Not only will there be no doughnuts at the closing table, your trusty, ever-faithful Coldwell Banker broker won’t get paid if you buy that house.
But this — this is the ideal home for you and your family:
Why? Because your trusty, ever-faithful Coldwell Banker broker will not only get paid, she’ll get paid double, once for suckering the seller into listing with Coldwell Banker and once more for suckering you into a dual agency.
Here’s the full clip:
When you say “yeah” you are conceding my argument. When you say “but” you are contradicting yourself. If this commercial is not a sleazy hustle, what is it?13 comments
I’ve been a bit quiet on BHB due to some personal issues I’ve been working through. But, I was very happy to see Greg’s latest post on challenging everything! I had a little holiday brainstorm today and wrote a post on my local Lake Chelan blog on a Real Estate Declaration of Independence for the consumers of services from Real Estate Professionals.
I want to share it here on BHB and get your thoughts on what I missed, should add or could have said better! So, without further ado here is my Independence Week start to the Real Estate Declaration of Independence:
Real Estate Declaration of Independence
We, the people who buy and sell real estate, hold these truths to be obvious:
- We the people believe that information on real estate for sale should be readily accessible without surrendering our private information. We reject having to register on a web site in order to view listings in an area. We value our time and will contact a real estate professional when we are good and ready for their services.
- We the people reject all policies of the National Association of Realtors that are not in the best interest of the real estate buying and selling public. Limiting our access to information, restricting our ability to a free and open market through regulation and limiting our market choices are all examples of policies we reject that are designed to line Realtors pockets at the expense of the public.
- We the people reject “Dual Agency,” where a real estate agent has an inherent conflict of interest with his agency and fiduciary duties by attempting to represent both the buyer and seller in order to earn a larger commission on our transaction. If the agent is truly delivering value, both parties of a transaction have an equal right to that value without a conflict of interest and each party deserves their own agent in the transaction.
- We the people reject the practice of real estate agents trying to “Buy the Listing” by telling a potential seller an above market price in an attempt to secure a listing. This practice costs sellers time and money while their home sits on the market as the agent waits for the seller to cut the price to where it should have been to start.
- We the people reject the practice of real estate MLS systems that limit a home seller’s exposure to potential buyers in an attempt to control access to a market. A listing agent’s responsibility is to market a property to the best of their ability and limiting the exposure of our home costs us money.
We the people are independent in a country that still allows us to make market choices. We the people demand better service and will exercise our freedom of choice and only choose Real Estate Professionals who deliver better value.
You might want to have a look at the entire post and give me feedback on it as well. Feel free to use it as your own if you agree to it and I would truly love suggestions to improve it.7 comments
Okay, I don’t like dual agency. The more I’ve thought about it, over the years, the more I see that it cannot possibly done in a manner that it is actually fair to both parties. And that ignores the perceptions of the principals.
The one little bit of glue holding the Rube Goldberg machine of dual agency together is the fact that very few consumers even know what it is. Many times, I have had to explain dual agency to people who were either going through it or had in the past. Not surprisingly, none of them had been fully-informed by their agent about the risks of dual representation — although many of them suddenly understood what had smelled fishy to them.
My argument would be that no fully-informed consumer would embrace dual agency, but there are exceptions: People who want to take unfair advantage of the other party. There is a name for the role you would play in that scenario, as the Realtor: Shill.
Not only is dual agency exceptionally good for cheating one of your clients — normally the buyer — it’s also excellent for leaving the impression in the minds of both buyers and sellers that you yourself are a cheater, a liar and a person of egregiously low character. That’s some first-rate marketing, Jasper!
Here’s my take: As a very easy baby-step on the road to raising your own standards for the benefit of your clients, swearing off dual agency can’t be beaten. There’s a lot more you can and should do, and BloodhoundBlog is full of ideas for raising your standards. But there is nothing else you can do that will communicate to your clients your commitment to putting their interests first as compelling as renouncing dual agency. And no matter what else you might do, if you do not renounce it, you’re still going to look like a snake to anyone who actually understands dual agency.
So as a step toward informing consumers about what is really going on in a dual agency transaction, I thought I would make a commercial about it. The spot would feature a bunch of Realtors extolling the benefits of dual agency — to them. At the punch line, the video would link to a landing page explaining dual agency in detail.
[Two or three of our contributors are in the web site business. If one of y’all wants to build this landing page/landing site, I have ideas. For example, it could feature a “pledge” page for Realtors. Agents would pledge never again to do dual agency, and the site could reward them by linking back to their own sites. You could offer a badge for those who pledge, also, earning a link back. A site like this could hit PR5 in no time.]
Anyway, here is the beginning of a script for this commercial. I’m posting it here to induce you to add to it.
- I like dual agency because… buyers don’t have to go to the trouble of finding their own agent.
- I like dual agency because… communication between sellers and buyers is so efficient.
- I like dual agency because… busy home-buyers don’t have to waste time looking at other houses.
- I like dual agency because… it just cuts down on the confusion.
- I like dual agency because… I get paid double!
And like that. The premise is simple: You’re a Realtor selling dual agency on the basis of its advantages to you, not to the consumer. If you want examples to draw upon, the comments threads to every post on dual agency are ripe with puerile rationalizations for facile self-dealing.
There’s an even more fun step after this, but you don’t get to play at that level unless you suggest ideas for the commercial script. So get writing.17 comments
Kicking this back up to the top. I wrote this on November 19th, 2006, but nothing has changed since then. But, as it happens, our friends at Agent Shortbus have taken up the topic of dual agency, albeit without reference to anything rigorous or dispositive. We have a whole category devoted to dual agency, and some very interesting Bloodhounds have weighed in on the topic, over the years. I think I’ve written more on the subject than anyone — possibly more than anyone, ever — but this one post is the giant-killer on dual agency.
So: While our #RTBar-buddies are telling are telling you that dual agency feels just as good to them as a healthy bowel movement, this post explains — in painstaking detail — why disclosed dual agency cannot possibly be effected without persistent, repeated, egregious agency violations against both principals to the transaction.
Don’t doubt my gratitude, though. I love the #RTB marketing message: A “professional” Realtor won’t do open houses, but he will take a double dip when the opportunity presents itself. I cannot think of a better way of selling our own high standards than for our competitors to be so forthcoming about their self-serving “professionalism.” Very nice.
Anyway, even though every bit of this is painfully obvious, here is why even a properly disclosed dual agency is unethical.
Addressing Jeff Brown’s claim that Dual Agency is more about perception than reality, and Russell Shaw’s contention that clients do what they intend to do, rather than what their agents advise them to do, let’s go buy a house and see what happens.
I’m going to split my personality in thirds (I have plenty to go around). Realtor Gregory is going to represent the buyers. Realtor Stephen is going to represent the sellers. Then we’re going to reexamine events from the point of view of Dual Agency, with Realtor Swann representing both parties in a Disclosed Dual Agency.
So: Realtor Gregory is out showing homes with his party and they settle on one they like, listed by Realtor Stephen. Because it’s a buyer’s market, and because the buyers aren’t very well-prepared, they don’t write a contract right away.
What’s the best day to write an offer? Tuesday, in principle, but the absolute best day is the first Tuesday after the first of the month. The buyers have never given this a second thought, but it’s Realtor Gregory’s job to know.
He sends them to Logan Hall of SallieMae Home Loans. Why? Because, although they have good credit and good incomes, they have no cash. Logan can write a fast 80/20 loan with very low closing costs.
When they finally write the offer, Realtor Gregory recommends a structure like this: List price less five percent with an additional three percent coming back to the buyers as closing costs. (Who actually pays those closing costs? The buyers. They borrow three percent more than they would have if they had taken the whole discount off the price.)
What’s the closing date? Again the buyers have never, ever thought about it, but it’s Realtor Gregory’s job to know. The buyers are in a lease until the end of January, and obviously they would want to limit the number of days they pay for two homes. But: Mortgage interest is paid in arrears. If the buyers close very late in the month, they will pay a small amount for those few days of interest, and then their next payment will not come until March 1st — a nice breather. Closing too late in the month is bad because things can slip through the cracks and spill over to the start of the month — which means almost a full month of interest payments in advance. And Realtor Gregory likes to skip Mondays to avoid hangovers and sick days. Ideally, he wants a Tuesday, seven to ten days from the end of the month.
But wait: The buyers are taking three percent in closing costs. Who cares about pre-paid interest? The buyers might not know to care, but Realtor Gregory cares. Logan Hall’s closing costs are so low that he might be able to apply a big chunk of that three percent to buying down the interest rates, leaving the buyers with extra money in their pockets with every monthly payment.
How much in earnest? Five hundred dollars right now, and a free bullet to shoot yourself in the foot with. This is another thing they might do with that three percent seller contribution: Refund the earnest deposit to the buyers at Close of Escrow. They can’t take more money off the table than they put on it, but they can take back every dollar they did bring. And Home Depot will be eating all of their cash for quite a while.
Now this is not a hugely aggressive offer. Buyers are always afraid they’re going to lose their dream house, so rarely are they willing to push things as hard as they might. But: What aggression there is in this offer was put there by Realtor Gregory, not by the buyers. Most of the very subtle ideas the buyers will have known nothing about, until Realtor Gregory explained them.
That’s agency — real, not perceived. It was caused by the agent, not by the clients, who really had no idea how to construct an offer for a home.
Want proof? What could Disclosed Dual Agent Realtor Swann have done in that circumstance? The pricing advice is a violation of the Dual Agency, as is the recommendation to go for closing costs. The advice on when to write the offer and when to close is a violation, as is the advice on how much to offer in earnest. The referral to the lender might be clean, but any direction Realtor Swann give to lender Logan Hall is probably a violation.
Do you see why? Anything that Realtor Swann does to the advantage of his buyers is necessarily done to the disadvantage of his sellers. What’s the best day for them to get an offer? Friday. What’s the best day for them to close? On or before the first five days of next month.
Everything that Realtor Gregory might do, as sole representative of the buyers, Realtor Swann must not do, as Disclosed Dual Agent. This is not a matter of perception, this is a real difference in performance. The buyers can direct Realtor Swann however they wish, but he cannot advise them as to what is to their advantage, and for the most part they do not know. If Realtor Swann is faithful to the limitations of Disclosed Dual Agent, the offer the buyers make for the house will necessarily be substantially worse than the offer written by Realtor Gregory.
Now let’s switch sides and work with Realtor Stephen as he and his sellers weigh what to do about the offer. It might suck eggs, they reflect, but at least it doesn’t suck rotten eggs. They’ve been waiting for four months for an offer, so they know not to scare away a bird in the hand. On the other hand, it’s a long closing period, and the buyers are clearly only marginally qualified. What if the sellers accept the offer, wait two months and then have it fall apart anyway?
Enter the non-refundable earnest deposit. The price is what it is, and the sellers are resigned to either accepting it or staying put for a couple more years. But Realtor Stephen suggests a way to at least take the risk out of taking the offer: Counter, bumping the earnest deposit to $2,500, and making it non-refundable to the buyer at the mutually-satisfactory completion of the repair negotiations. That way, the sellers either cash out in two months or they get $2,500 in compensation for holding the property off the market for those two months.
Inviting Disclosed Dual Agent Realtor Swann back on stage, is the proposal suggested by Realtor Stephen to the advantage of the sellers? You bet. Is it to the disadvantage of the buyers? Hugely. Could Realtor Swann suggest something like that to the sellers? Absolutely not. Is this is real difference, not a matter of perception? Oh, yes. Is it something that sellers are likely to come up with on their own? Not hardly.
Would the buyers be better represented by Realtor Gregory or Realtor Swann?
Would the sellers be better represented by Realtor Stephen or Realtor Swann?
I don’t think there is any counter argument to be made to this. By this demonstration, it is slam dunk obvious that separate representation is better for buyers and sellers, considered separately, than a Disclosed Dual Agency. The only workable way even to achieve Disclosed Dual Agency is by repeated, overt agency violations against either the buyer or the seller, or each in their turn. In other words, you would have to hint at them what to “order” you to do, and each one of those hints would be a betrayal of the interests of the other party.
I don’t think you can gloss over this. I think the pro Dual Agency argument is toast. Disclosed Dual Agency cannot possibly be effected — in reality — without repeated, overt agency violations…
Don Stewart posed an interesting question this morning about whether real estate is changing top-down from the broker or bottoms-up from the agent. In a post about how Redfin sees the real estate industry changing, Don suggested we had focused too much on the laws, the brokers, the MLS data sharing rules and the system by which sellers pay buyer’s agents:
I think that many agents are becoming more client focused, less afraid of discussing value for money, and are happy to be judged by their performance. They are not just trying to grab commissions, they want to build a professional practice. Real change happens from the ground up, not the top down and I see some very encouraging signs.
Don’s right. When I first got into this business, Redfin focused on structural ways we could make real estate better: by surveying customers and publishing responses, by paying agents at least in part based on survey results, by sharing as much data as possible with consumers.
But the most profound change has probably come from our agents. I’m not sure if we attracted the most progressive agents, or if those agents were in fact what made us progressive in the first place. But the longer I’m in this business, the more I’ve come to realize that what I think doesn’t matter as much as what our agents do every day.
What do you think? Is change coming via the agents or the brokers?14 comments
Google News plopped a link to a Blog post on SFGate.com (The San Francisco Chronicle’s Web site) about dual agency in front of me today.
It’s always interesting to see a discussion about what Greg calls “…the insane way we compensate buyer’s agents in the residential real estate market” in the MSM, even if the arc of the dialog is predictable (“Agents are whores and criminals!”, “No we’re not”, “The traditional Real Estate model is dead!”, “No it isn’t!”, ad nauseum)
Discussions in the Real Estate blogosphere on this topic have a certain navel-gazing quality to them. That is not the case when regular people, many of whom have been involved in a recent transaction have their say. My favorite comment from the thread:
No conflict here. Just get the highest price for a seller and the lowest for the buyer at the same time. This is great!
The way the Realtors, some of whom identify themselves and some of whom just embarrass themselves by shilling for the status quo in such an obvious manner that their identity is transparent, jump all over these discussions just adds fuel to the fire.
The Realtors doth protest too much, methinks.23 comments
I haven’t had a good rant in a while… and unfortunately, I don’t have enough time to have one right now – so the Reader’s Digest condensed version will have to do.
Most agents who have been in this business a few years or more know when something doesn’t look right. We’ll see something – and although we don’t know the underlying logic… we instinctively know it’s just not right.
This morning, I was perusing some rental properties for a client. As with listings for sale, it’s not uncommon to find some agents who are offering a ridiculously low co-broke. This morning was no different.
This particular agent is offering a 10% co-broke if you show the property. Since many brokerages charge transaction fees – the co-broke on this listing could easily be less than the transaction fee. Kinda gives “co-broke” a whole new meaning.
Now don’t get me wrong – a 10% referral fee for sending the client to a property shown by the listing agent is just fine. But 10% for bringing the tenant and showing the property is a non-starter – I don’t care who’s doing the paperwork.
Just for giggles and grins – I pulled up this agent’s recent history. One sold listing and more than sixty leased listings. Every single one of them offered a measly 10% co-broke… and all but two were leased out by – drum roll please – the listing agent.
[snarky comment] What an unexpected surprise! [/snarky comment]
Of course, both of those co-oped listings rented out for full asking price… while nearly every single one of the double-ended listings involved a rent reduction… sometimes several hundreds of dollars in rent reduction.
Now maybe you think that I’m just whining about some agent who is too greedy to offer a more generous co-broke – that’s fair. Maybe you think that I believe that a co-broke of 25% is more appropriate. I will tend to agree with you on both counts.
But there is an underlying ethical problem here.
When you list a property for lease and offer a ridiculously low co-broke – you are denying your client the best possible chance for achieving a quick lease at the highest possible rent.
And therein lies the rub.
If you are an agent who practices this kind of real estate – you should be ashamed of yourself. This behavior may not be illegal… but like any other kind of criminal, merely changing the law probably wouldn’t deter you from being a dishonest cheat.
If you’re a home owner who has run out of time to sell your home in a declining market, and you’re considering renting your property to stop the red ink from flowing – it’s time to wise up.
Listing your property with an agent to get it rented quickly is a good idea – but if you don’t know your agent well enough, maybe you should remove the incentive for them to be disloyal. Make sure your rental listing agreement includes language that guarantees a reasonable co-op brokerage fee is offered.
Without it, you might get an agent like the one I found this morning who would rather your property sit vacant than lose 15% of one months rent in commssion.
I put a call in to an agent who has a rental listing. Here’s the exact conversation
“Hi this is Zack”
“Hi Zack – Doug Quance with Solid Source Realty here… how are you?”
“I’m doing well, Doug – how are you?”
“I’d be doing better if you told me your rental listing on Bonaventure was available and that you’re offering more than three dollars on the co-op”
“That’s what I’m offering.”
“Are you serious?”
“Yes, I’m serious.”
“You have a nice day.”
Three dollar co-broke on a $2500/mo rental property! My client got a big chuckle out of that.11 comments
Before beginning in earnest, let me take a shot of addressing what surely will be the first comments made concerning disintermediation. Have there been instances of this happening in other industries? Sure — the ‘go to’ is almost always travel agents. I maintain the average person still uses travel agents when arranging anything more involved than visiting Grandma or a business trip. How many of us will arrange a two week tour of Europe on our own? Not me. You?
The point remains — any industry requiring real expertise and which must produce results of real value to their customers/clients, will not — cannot — be replaced by the mere act of clicking. The concept is absurd on its face.
Of course, the jury is out on whether or not I’m in the minority or majority. Opinions are just that. Certainly my opinion isn’t taken from Divine Inspiration. Empirical evidence drives me to my conclusions here. The marketplace has decided, at least so far, the experienced agent producing consistently excellent results by way of superior expertise is the dominate choice of buyers and sellers of real estate.
Russ Shaw and I must be the last remains of the species long thought to be extinct — Trirealasaurus Rex. Apparently we just don’t get it, and are on our way out. Everyone’s eatin’ our lunch, or soon will be. Techno-Geeks who could study what Russell does for a year and still not know what he’s forgotten, insist their way, (whatever the hell that is — they argue among themselves) will eliminate him just like the meteor crashing into earth wiped out dinosaurs.
Last time I checked, he’s not feeling very threatened.
Every time I read something telling me how I’m on the verge of extinction, I consciously avoid going into Dad’s default mode, which was to extend his favorite finger in the direction of the offender. I’d rather learn what the smartest guys in the room have to teach. They’ve taught me how to apply their Geekinology to my Old School ways. I’ve been walking that talk now for quite awhile, coming up on two years. I blog, have a website, am fairly computer literate (kinda sorta), and employ as much technology as my brain can assimilate. This includes marketing, both Old School and 2.0.
It’s the intelligent combining of the tried and true with the new and improved that has produced for me. I’ve yet to meet a commissioned real estate agent who makes seven figures yearly exclusively from traveling the 2.0 Geekinology Freeway. Yet those same geeks deserve our utmost respect and rapt attention, ‘cuz they’re showin’ us new tools, many of which actually produce results. What we now are learning is that the machine still needs a human operator.
Disintermediation in real estate is a great conversation generator, but not much else.
I’ve been hearing for over three decades how the discount broker was gonna rule the real estate world. We’re all still waiting. And yes, in the spirit of transparency (another overrated and much abused concept), I’m about to roll out a new business model here in San Diego which will in effect lump me with the discount guys. I won’t be disintermidiating anybody.
Even with my new approach, investors will choose to hire me for two basic reasons — Results and Expertise. And yes, my experience is a significant factor, as it should be. It’s the same reason Phoenix home owners choose Russ over the myriad other agents on their list. They went to him in the good times, and they’re still choosing him now, in the worst of times. The first three reasons folks list their homes with agents like Russ is: 1. He’ll sell their home. 2. He’ll sell their home. 3. He’ll sell their home.
Not only does he sell it, but more quickly than his competition. Go figure.
Results and Expertise will not be disintermediated.
Segue to what works.
Isn’t real estate brokerage like every other business since the concept of commerce hit mankind thousands of years ago? The more things change the more they stay the same.
MLS books no longer exist, they’re online. 50 years ago real estate brokers charged 5-7% to sell a property. Go to any city and tell me that’s changed. It hasn’t, and it won’t any time in the near future. Will niches rise up and take a share of the market, charging less than 5-7%? You bet. They won’t disintermediate anyone. The changes in our business have been mind boggling. You and I could make a long list of incredible differences between now and even 10 years ago.
Yet, the agent still goes to the house, makes a presentation, whips out the contract, and lists the home. It still calls for a 5-7% commission way more times than not. And for the record? The seller would have to move up two rungs on the ‘I care’ ladder to even be apathetic about whether their agent double-ends his home or not.
He wants to see results.
I’ll speak for myself now.
Whenever possible I incorporate new concepts into my company’s operation. As mentioned above, I’m trashing how I used to charge, at least on the listing side. Ironically it means my San Diego clients won’t pay 5-7% commission. But it’ll be for a wholly different reason than you think. They only get to pay a discount commission on the listing side when they’ve agreed beforehand to become an investment client, exchanging tax deferred under my guidance, out of California.
They’ll be going for results their current agent just can’t deliver because they don’t have the expertise to produce the kind of results my firm can, and does. In the end, they won’t hire me ‘cuz of the reduced listing side fee. They’ll hire me ‘cuz they’ll retire sooner and with more income.
Now someone tell me who is gonna disintermediate that?
Who is gonna disintermediate Russ?
For folks to believe Russ and I will be replaced by the new real estate Geekinology, they’ll have to buy into the concept that home owners and investors will decide en masse to forgo factoring in expertise and results in their decision making equation.
Not frickin’ likely.17 comments
Life is good — I’ll be going to the Master’s next week. It’s been a few years since I’ve gone. A friend has some family connection with passes and if one of his business clients back out, he gets me in. Business is picking up also. I just got a contract on one of my “flips” before I even finished and put it on the market, so now I’ll change hats and be a buyer for a while looking for another one.
Leads are coming in on a regular basis, a mixture of strong leads, not so strong and weak. They are all possibilities. I’ve even had time to browse the web and see all the distinctions without much difference being made. As topics run thin we tend to make finer and finer distinctions to prove….what? Superiority? Most likely. Hell, I always think I’m superior. Well, not really, I just like to think I am a lot of the time. In my better moments I realize I’m perpetually on a learning curve. Just as soon as I’m ready to crown myself as “Expert” I hear something from left field that sends me back to the drawing board, to tweak, re-think, adjust.
Perhaps that’s the highest value of this great learning environment called the internet, we’re contantly evolving and becoming better, never crowned for long as “Expert”. However, the more we learn the closer we get to being knowledgable enough to know what we don’t know and how to find the missing pieces.
One thing that fires my imagination and pulls me into the good and the bad of the internet is the growing “conversation”. From Maine to Florida and from Georgia to Oregon, to Canada and overseas, people typing away, posting and responding, creating conversations that for certain specific interests like real estate become Great Conversations with various ideas and concepts being woven throughout. There’s no central authority managing the conversation, there’s no hierarchy of experts, only diverse voices growing, hopefully, not into a Tower of Babel but in different directions of movement and progress until the best ideas and concepts begin forming a great change for the better.
It’s a such a great opening up and so much more comprehensive than when agents had their board approved continuing ed with different experts droning on about traditional, staid subjects that had little impact on competence and excellence and innovation. We can now be in tune with the heartbeat of the real estate industry around the world, connected to all the ideas and concepts popping up all over. And we can be a part of the change with our little voices being given a microphone and an audience — “Hey, me down here in Mississippi, I have an idea.” — “Great idea Mississippi, I’m from Idaho, and I think…” — on and on goes the Great Conversation.
The self-proclaimed experts who weren’t voted in by the internet voices grumble and call it rabble as they are pushed further and further into the wasteland until their voices are a distance squeaking sound. Some of them see what’s happening and join in, the rest think of ways to create a counter-revolution to control it. It’s out of control — it has been for years, only now more and more people are recognizing it and enjoying the freedom. However, freedom is frightening to many in the beginning and radical changes are resisted because they’re uncomfortable — “But what if I can’t make it in this free real estate market? Isn’t it better to have protection, to group together and let central control protect us from chaos?”
Freedom requires flexibility, quick change, constant adjustment, nimble minds, strong spirits — it’s not for those looking for safety and protection. I might be wrong, the mood might turn and the whole industry migh hunker down in a defensive mode to fight the barbarians of change at the gates, but it seems unlikely. What seems likely is that this movement of change and freedom created by the internet will roll over the whole industry and nothing will be quite the same. There will still be a need for service but how it’s delivered, charged for and paid for will be changed. Too much is happening too quickly for things to remain the same. The scary part of all this for me is not the freedom and the change, but the lobbying efforts that will no doubt take place for government intervention.
When things change too quickly and too many in entrenched power are affected there is a cry for regulation. I believe one of the defining issues of our industry in the coming years will be how far freedom can be pushed on the internet before government tries to control it — the isuue being will they and should they and which side the majority in our industry will fall on, freedom or control? Will new ways of marketing, selling and buying real estate be created by internet companies that dismantle our industry as we know it, for good, and will agents and companies adapt easily and willingly to the changes or will they fight it?
I’ve purposefully avoided any concrete predictions of what the changes might be. We already see some of them, and we’ve talked about the possibilities of others like compensation, representation, super teams, companies adopting buiness 2.0 models, rating systems, licensure, discount brokerages, cafeteria services, do-it-your-selfers, RE site innovations.
The big question is how we will react when it really breaks loose.5 comments
Practical dual agency in real life: It is possible to have a fiduciary duty to your sellers — that you cannot get away from — that feels like a complete betrayal of your buyers. What then?
There is a debate on dual agency going on at VARbuzz. This is my contribution to the conversation.
I abhor dual agency — notoriously so. I make no distinction between one licensee or two in the same brokerage, and I am more than prepared to be suspicious if there is any relationship that might seem more important to the practitioners than the fiduciary relationship to the client.
Even so, Russell Shaw convinced me in person that there could be circumstances in which I might have to do a dual agency, like it or not.
Like this: I’m at open house at my listing, some buyers come in, fall in love with the house and insist they have to put it under contract right away. I would prefer they got their own representation, but my fiduciary duty to my sellers is clear: I owe them the best possible chance at these buyers.
The question is, what duty do I owe to the buyers? The state and federal governments have so gummed up the process of transferring real property that ordinary people cannot competently represent themselves. Moreover, the due diligence process demands expert oversight and advice.
In short, if both parties are unwilling to countenance the idea of separate representation, I’m stuck. I cannot betray the seller’s interests, and I cannot in good conscience permit the buyers to betray their own interests. (And it is plausible to me that I have created an Implied Agency with the buyers in any case.)
This has nothing to do with compensation, and, if we ever have to do this, we will probably split the buyer’s agent’s commission three ways — a point each to the buyer and the seller, in consideration for suffering with limited representation, and a point to us for the extra work. But even that would be at Close of Escrow. My Buyer-Broker Agreement would specify that the buyers could obtain separate representation at any time, even down to the last minute, and I would joyfully pay the buyer’s agent’s commission.
But wait. There’s more. We had a multi-party debate about dual agency at BloodhoundBlog, and, while I would not rate that as having been a great success at promoting mutual understanding, I was able to explore my own positions in a way that I had never done before.
The only workable way even to achieve Disclosed Dual Agency is by repeated, overt agency violations against either the buyer or the seller, or each in their turn. In other words, you would have to hint at them what to “order” you to do, and each one of those hints would be a betrayal of the interests of the other party.
A modern real estate transaction is too complicated for sellers and buyers to direct the actions of a marionette-like, putatively “neutral” dual agent. The agent would have to advise the parties as to what to do, and, in offering that advice, would necessarily be putting the other party at a disadvantage. In other words, the NAR’s idea of disclosed dual agency is a complete bill of goods. It cannot possibly withstand a court challenge by a smart attorney.
It’s a problem, ain’t it? There can be circumstances where you cannot avoid dual agency. And yet, to practice a disclosed dual agency as we are advised to do by the NAR and our state associations is impossible in se: We must either do nothing in consultation with either party — which is not practicable — or we must serially advantage each party to the transaction, to the disadvantage of the other — which constitutes serial violations of our agency agreement with each party. We must either do as we cannot do or as we must not do — an impossible mess.
So what do we do?
Think harder, that’s what.
Here’s what I came up with: I rewrote the dual agency consent form, specifying in advance that I will be helping each party, possibly to the detriment of the other party, but that I will keep the confidences of each party from the other. In other words, I rewrote the form to acknowledge what is going to happen anyway:
The major changes, from what you’re accustomed to, are these:
Definitions and Disclosures:
Dual Representation, also known as Dual Agency, is a mutual agreement among the Buyer and the Seller that either the Listing Real Estate Broker or one or more Licensees of the Listing Real Estate Broker will advise both Buyer and Seller in the sale of a particular piece of real estate. While Dual Representation can afford Buyer and Seller certain advantages, there is substantial risk in a Dual Representation. These risks are disclosed in detail below.
1. In the normal course of events in a complicated real estate transaction, the Licensee working with the Buyer or the Seller may suggest certain plans, procedures, tactics or stratagems that may advance the interests of the Buyer or the Seller. In a Dual Representation, that same Licensee or another of the Broker’s Licensees may then in turn advise the other party as to how to respond to these overtures, in turn suggesting other plans, procedures, tactics or stratagems that may advance the interests of the responding party.
2. In all such cases, in a Dual Representation, Broker and Broker’s Licensees will zealously protect the confidences of both Buyer and Seller, and in no circumstance will any suggested plans, procedures, tactics or stratagems betray any confidential information shared by Buyer or Seller.
3. While Buyer or Seller might perceive that such suggestions of plans, procedures, tactics or stratagems to the opposing party in this transaction might work to Buyer’s or Seller’s disadvantage, in fact both Buyer and Seller retain their full rights to direct the actions of Broker and/or Broker’s Licensees, to include, in accordance with the terms of the Purchase Contract, the unilateral right to cancel the transaction.
4. The intent of this disclosure is to acknowledge, ratify and grant Buyer’s and Seller’s mutual consent to Broker’s efforts to assist both Buyer and Seller in identifying and obtaining the best attainable results for each party in this real estate transaction while simultaneously protecting the interests and confidences of each party.
5. If you are not completely comfortable with this disclosure of Dual Representation, you are encouraged to obtain separate representation in this transaction.
Duties and Limitations: The Broker now represents both Buyer and Seller equally but separately. Both parties understand that Broker or Broker’s Licensee(s) may advise each party separately as to how best to proceed with this or any subsequent negotiations, subject to the restrictions delineated below, even though such advice may be perceived to be disadvantageous to the opposing party. Both parties understand that Broker or Broker’s Licensee(s) will be working actively and equally for each party, with no bias toward either party, to help each party obtain the best attainable, mutually-satisfactory outcome from any negotiations between the parties.
All we’re doing is taking account of and getting explicit consent for what is already happening in real life.
Caveats: I am not an attorney. I am a broker, but I am not your broker. This form language is intended to be used in Arizona. Your state laws may vary — wildly. Even so, if you want to see my full and final language, you can download my Consent to Dual Limited Representation form as a PDF file.
The good news is, we’ve never had to use this form. We make all of our sellers sign it, just in case. But buyers, god bless them, are smart enough to seek out their own representation.
But the better news is, if we ever have to do a dual agency again, we’re prepared to do it in the way that real estate transactions are actually conducted — and not as the NAR wants to pretend they are done.
I think I first realized we exist in a quirky, if not passionate and divided adult society when I found myself in a lecture hall observing an assistant professor and a fellow graduate student nearly coming to blows over a Henry James excerpt from the aptly titled, An International Episode. I watched on as a confederacy of my peers and elders; some undergrad, some doctoral, some by proxy—chimed in from the gallery seats as the two went at each other, a coffee breath’s apart. Before long, the entire crowd seemed to join in, taking sides on what does and does not constitute a cultural faux pas and whether James himself, a man already dead for 72 years, was a genius or an ass.
It was like a Pulitzer prize fight gone wild, only everyone was wearing turtlenecks and corduroy. I was proctoring the lecture to make up some lost hangover hours from another class. The whole Henry James dialectic was over my head to begin with, so who was I to judge, one way or another, who had the longest literary wiener? I fancied myself a sports writer, a true reporter of facts…(as I understood them, of course.) That was more than 25 years ago and the memory all but faded away…
…only to resurface this week as I got sucked into the Comment Section vacuum of a thousand faceless internet voices. I think we all know of what I speak so no more linkage. It intrigues me when I witness, walking past the bar of course, the same, aforementioned ardor present in, let’s say… the wide-screen crowd watching a televised sporting event. I’m always curious as to why these raving fans, dressed in home team regalia; scream, curse and cheer for or against a particular team or athlete (or candidate, for that matter) who doesn’t even know they exist. Like the Chazz Palminteri character, Sonny, says to C, in A Bronx Tale,
“Why you care about Mickey Mantle? He don’t care about you…” Willing suspension of disbelief can be, well…disbelievable, I guess.
I played sports, albeit Division III, well into adulthood and I’m here to reiterate what the majority of us should already know; most noble opponents, whether professional, amateur or literary, leave it at the field once the game has ended or the last shot has fired. It’s the fans, the observers, the commentors, if you will, who generally keep fanning the flame of division after the final score or vote is tallied. I’m not originally from Chicago but they tell me that Packers fans can’t stand Bears fans. (You should try growing up in Philadelphia where sports fans can’t stand each other, period.) I don’t know why this is.
I suppose it just goes with that part of the territory, outside the sidelines and up in the cheap shot seats, in this case, the comment section of at least a half dozen blogs, where everybody with equal halves of brain and opinion mix it up on a daily basis. First they attack the players and then they attack each other, and before you know it, even the likes of poor little dead Henry James is getting knocked around….just like in those upper decks in Philly. This is why real estate in the nosebleed section is sub prime, to say the least.
Having said all that, my favorite comment this week in the blogiverse is from The Bubble Sitter, a person (entity?) who I silently disagree with about 90% of the time but whose comments I’ve never considered ‘unsubscribing’ from…
“Bunch of drama bitches…Shouldn’t you all be out trying to make 6%?”
Pretty f-ing funny, if you ask me. And no need to comment. I rarely respond anyway.8 comments
What if sellers could list with anyone and everyone and what if only the party that brought the buyer got paid? Online listing search paralysis: no agent will disclose the address to a buyer unless they can show it.
Sounds like the ideal place to go direct-to-sellers to list their house on the web; they’re already distributing their listing all over the place.
It also sounds like agents really provide no service to help consumers get more for their listing there; no staging, pricing advice, etc. They’re just trying to find buyers and get it sold. Note to Spanish agents: the internet eats information withholding middlemen for lunch. Provide valuable services or die.10 comments
Sound crazy? That’s how rentals work in New York. A renter typically pays 1 month rent to the broker listing the apartment.5 comments
I have to agree with the FTC ‘s initial action but for all the wrong reasons. And I don’t agree with them now pursuing the case further. A few days ago a Judge dismissed the complaint filed by the FTC against a Detroit area Multiple Listing Service. The position of the FTC was that it was “hurting consumers” for Realcomp to deny brokers using an “exclusive agency listing” the right to be on Realtor.com and other public websites. The brokers who were up against the FTC decided it would be easier to just stop doing it so the judge dismissed the complaint. The FTC officials plan to pursue the case further (making a “Federal case out of it).
From Inman on December 13th:
This policy, which was adopted following the FTC’s complaint against Realcomp and other MLSs, provides an exception that allows MLSs to ban the transmission of listing information if the listed property’s street address or a graphic display of a property’s location is publicly displayed and the seller displays a for-sale-by-owner sign on the property or another sign or notice that indicates that the seller is seeking direct contact from buyers.
Meanwhile, Albert Hepp, a flat-fee broker who serves as president of the American Real Estate Broker Alliance, a national alliance of flat-fee brokers, said he is disappointed with the judge’s decision and NAR’s stance on the issue.
“We are disappointed in the ruling and urge the FTC to appeal,” he said. “Anyone who truly understands the MLS knows that this is a clear-cut case of an MLS hiding the listings of discounters to harm consumer choice. Once again, the NAR has unfortunately chosen to fight competition while claiming to promote it.”
For example, an attachment to the judge’s decision details an agreement by Realcomp and the FTC over a contested “search function policy” adopted in 2003 that defaulted to a search of exclusive-right-to-sell listings and required MLS users to specifically search for exclusive-agency listings to view those properties. That policy was changed in April 2007, and the agreement provides that Realcomp “shall … cease and desist from adopting or enforcing any policy, rule, practice or agreement … that treats exclusive agency listings, or any other lawful listings, in a less advantageous manner than exclusive-right-to-sell listings with regard to the search function in the Realcomp MLS.”
I disagree with Albert Hepp’s self-serving statement as well. I think the problem that the brokers at that MLS had – and stupidly tried to fix by attempting to downgrade the way “exclusive agency listings” were handled has nothing to do with harming consumers or discriminating against brokers who charge less.
The original purpose of the MLS was to offer compensation to other brokers for bringing an acceptable offer to them on their listing. Period. This is still what it should be about today. Having “listings” that offer no real compensation to a cooperating broker or are nothing less than an attempt to list a for sale by owner property so the owner can sell it directly to a buyer himself or “listings” from brokers who are not really going to be doing anything but having entered the listing into the MLS – this is the kind of crap those brokers were attempting to solve. But because of the busy-body, know-best lawyers at the FTC it seems they can’t just come out and say that. I can. That is the real problem. These people are parasites and contribute precisely nothing. The industry does not have “a problem” with brokers who charge less. Charge whatever you want but if you are going to list properties in the system don’t try and shove your work over to the other agent and cry out “we want to help consumers”, because that just makes you a damn liar. You want to help yourself. I don’t believe any of the altruistic blather that spews forth from any of those people.
I’ll tell you why I had to agree with the original motion. All of my listings are exclusive agency listings. They have been for the past fifteen years. I give all of my sellers the right to sell their home themselves and pay nothing and also to fire me at any time. Therefore, all of my listings are exclusive agency. Letting all other agents know that in the event they write an offer on my listing they could (in a hot market) be competing with the seller. In all the years we have had this policy we have had very few problems. Very few. I believe all listings should be exclusive agency. The idea that people are “stuck” to each other, who don’t want to be stuck to each other isn’t an arrangement I want to promote. Thankfully, the people who sit on the board of directors for ARMLS never even thought of doing anything as stupid as the Detroit MLS.
If it had been necessary for me to take legal action I would not have thought of that kind of discrimination as “anti-consumer”, it isn’t. It is anti-agent. Having certain types of listings not show up – as a default – in the MLS probably IS anti-consumer. But not having them on the “public websites” has nothing to do with “offering compensation to brokers”, as it is in fact advertising. Advertising is not the purpose of the MLS.
Just because someone working at the FTC had to sit through all those classes in law school is no reason they shouldn’t be able to grasp this simple concept.8 comments
The (un)intentional arms race continues.
Seemingly every week brings another contributor, but to what end?
The writing has inarguably elevated the conversation. Two years ago the “divorced commission” concept was one that made sense, but had not congealed on a national level. Now, to a much greater degree, it has. I believe that there may be an end to Dual Agency in my lifetime, thanks in large part to the conversations held locally and nationally – again, due to these national blogs. The disagreements and debates are of a higher level than found almost anywhere else. The intensity with which writers and commenters argue is frequently fierce and typically civilized.
There is authenticity found here that isn’t found elsewhere. We’re not doing it for the advertising revenue. We’re not doing it for the salaries or the bonuses. We’re not doing it for all the “leads” that come our way. We’re doing it because we believe in what we do and seem to share a collective passion.
My immediate goal for BloodhoundBlog is to make it the best-read, most-rewarding real estate weblog in the RE.net. Further out, I want for our contributors to be so well known that they can pursue other opportunities: Public speaking, freelance writing, books, seminars, television shows, etc. I don’t know that we will attain this, necessarily, but the goal itself is definitely attainable: Witness Glenn Reynolds, the Instapundit.
For now, I’m interested in growing our talents to see where they can take us. I think we benefit each other more together than we would apart …
At least six Bloodhounds are speaking at Inman Connect in January; if that’s not a form of acceptance, I don’t know what is. Look at the list of speakers – Presidents, CEOs, Directors … bloggers! The numbers of bloggers is phenomenal. Gaining acceptance and influence is a journey, and each day, week, month brings another convert – and another reader/listener/follower. In response to a recent email – the people in Chicago are reaching out; the RE.net is too large and influential to be ignored. Influential and powerful groups all started somewhere.
The vast majority of consumers don’t care about what we talk about here; they care about the price of their respective homes and how they can buy or sell better – be it more efficiently, cheaper, faster … divorcing the commissions is something many find to be a no-brainer. It’s up to us to influence those who can make the changes. Realtor ethics? Sure, consumers believe that this ethereal, mystical concept exists, but many more see that reality is something much different than what the Code of Ethics says one must do. (I have argued before that if you need 8 pages to explain ethics, rather than a simple code of honor, you just might need too much guidance). The blogs give an opportunity to talk the walk.
To answer Jeff’s question from a recent comment – this is how we give out samples, but we do it to other professionals.2 comments