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Posted by on May 17, 2012 in Ethics, Fraud | 31 comments | Print Print

Reasons To Be Ethical

The main point of the article published in Realtor magazine was to spotlight how shady, fraudulent dealings by realtors are bad for the market. Specifically, I’m talking about when listing agents sell a new listing to their own buyer before inputting it onto the MLS.

Realtor fraud is bad for business, yet nobody talks about it.  Shady shenanigans are allowed to exist, and in some circles they are encouraged, for one reason – to pad the wallets of agents.  When you see some of the finest realtors in town doing it, you know you got a problem:

I usually don’t direct any blog material towards agents – can the regular bubbleinfo audience can be patient while I try to make a difference?  Thanks.

31 Comments

  1. Puuuulease make a difference! Efforts are appreciated.

  2. Partially off-topic…. but this is a letter to the editor of the Economist from NAR regarding an article they published a couple of weeks ago. The Economist strongly criticized the way the US real estate system works because transaction costs are two or three times higher than the rest of the civilized world.

    This NAR guy is really a spin doctor.

    http://www.economist.com/node/21555520
    ——————————————-

    SIR – Your one-sided article on selling property in America was unfair in its portrayal of real-estate professionals and misunderstood the nature of competition in the industry (“The great realtor rip-off”, May 5th). First, the term “realtor” is not a generic term for all real-estate agents. Only licensed members of the National Association of Realtors can call themselves realtors, with the additional oversight and strict code of ethics that membership entails.

    Second, you did not mention that commission rates are negotiable based on the level of service received. Close to 70% of people selling their home discuss and negotiate the commission they pay. Agents can sometimes spend six months or more working with a client before a deal is closed and any compensation is received. If the transaction falls through agents do not receive a commission. And comparing commission rates in America with those of other countries is like comparing apples and oranges. Property transactions are handled differently abroad and there are many variables that influence commission rates.

    Finally, it is not true that large brokers dominate the industry. In fact, the real-estate industry consists mostly of independent contractors and small firms. Eight out of ten realtors work as independent contractors for their firms.

    You misread the property business, which is dynamic, entrepreneurial and fiercely competitive. The industry has always encouraged innovation and competition and favours no single business model.

    Moe Veissi
    President
    National Association of Realtors
    Washington, DC

  3. Jim, nice try. The agents today just want money. They will be out of the business soon, hopefully due to a client who sees the way they work, and files a good old misrepresentation case. Do you think Keller Williams started this mess? It seemed to have begun when they came to SD.

  4. why is there such lax enforcement of laws in real estate? The business is getting a real bad reputation.

  5. JA,

    The sellers are where the problem is – they aren’t very demanding on how they select their listing agent.

    In most cases they have pre-conceived ideas on who their favorite agent is, based on the glossy flyers sent every month. Thus, the successful listing agents are those who spend $10,000 to $50,000 per month on mailing solicitations that pump up their image, more than educate the consumer.

    Have you seen many – or any – blogs like this? No.

    Have you seen real video tours of listings? No.

    It’s because sellers don’t investigate like buyers do.

    They have enough crap being mailed to them that influences their decision, and they select their agent based on quality of the mailers.

  6. Jim,

    Glossy flyers are eye catching, but what’s also eyecatching is the cheapo 20lb paper B&W flyers that have started to warp due to sun/moisture and don’t reflect the home’s asking price.

    So of the 10k – 50k per month this successful agent spends on marketing, how much of that is per home? What should I expect you or any good agent to spend marketing my home? Is it based on asking price?

    Let’s say my home is worth $2 million, what do you, as a successful agent, think my expectations should be from you in terms of marketing and services from you, the agent?

    Also, I heard in the past that if the buyer’s agent’s co-op is lower than 2.5%, most agents won’t even show their clients the property, what are your thoughts on that?

  7. Whenever you are dealing within a system where informational advantage (gate keeper, broker, middle man, I call them smelly orifices, etc.) is present, then fraud / shady dealings will be common and you are on your own and need to educate yourself or you will suffer bad outcomes. This is true the world over in many different industries. Law enforcement? Please, they barely have time to investigate homicides.

  8. “Realtor fraud is bad for business, yet nobody talks about it.”

    Everyone “TALKS’ about it, however few DO ANYTHING about it, including your Great Buddies at Yun & Co.

    IF ‘they’ did, a whole new era of incarceration would blossom.

    You must feel dirty when you write a check to the NAR.

  9. The financial crisis started with shady practices throughout the industry from realtors, to appraisers, and to bankers. I’m surprised that little regulatory reform has been implemented to clean up this mess. If we as a nation are to clean up this mess we’re in, we need to implement reform. Otherwise, the financial crisis will happen again. Realtors can’t do it themselves. We need enforcement that bites back.

  10. Marlo #6, allow me to answer for Jim…

    He will price your home properly so that expensive marketing is not required. You will have people beating a path to your door, and will probably end up with a bidding war on your hands.

    The end.

  11. Kwaping #10, so what are the successful agents spending 10-50k/month on?

  12. You would love South Africa Jim! 7% commission (negotiable of course)paid by the seller, there are almost no buyers agents, no MLS and the deeds office now runs at least 6 months behind sales so comps are always 6 months out.

  13. And hate Great Britain, lawyers (solicitors) are allowed to be realtors (estate agents) as well as practicing law and commissions run at 1.5-2%

  14. The listing agents sucker you in with convincing you that the reason you have to pay such a big commission is because of all the more they spend on advertising.

    But the advertising is designed to promote their image more than anything.

    It is an insider joke that agents waste money on Dream Home magazine advertising just to stroke the sellers’ ego only.

  15. Nice try Jim. This practice goes on everywhere and agents like you are to be commended for trying to point out this very real problem. But ethical agents (and there are some) appreciate your comments and your efforts. Keep up the fight.
    Unfortunately most RE associations including NAR are about as efficiently run as the Congress.

  16. The ethical question won’t fix itself, so it’s good to bring it into the forefront. I personally see 3 potential drivers to get it fixed although I don’t expect to see it happen.

    1) Increase the barrier to entry. A shady sweet talking used car salesman can be a real estate agent with a little bit of effort. I’m not a fan of big government but regulations such as apprenticeship time for a real estate agent similar to the way appraisers are licensed might do something. If you’re trying to make a quick buck you aren’t going to want to spend a bunch of time going through the process.

    2) Aggressively prosecute the fraud. If you had some decent high profile cases of people getting locked up for committing fraud you might put some fear into the shady agents. Of course it’s difficult to prove and the DAs office has limited resources.

    3) Figure out the platform and technology that replaces the traditional Realtor role. Plenty have tried the high volume low commission approach but it hasn’t taken over. The average buyer/seller probably still needs some of the emotional support and hand holding that a Realtor offers. How many people are really ready for the Amazon Real Estate department. Press the checkout button on a $500K home and fill out the loan forms.

  17. Jim, I think your “asking nicely” routine is brilliant.

    You and I know that isn’t going to work, but eventually you are going to get the attention of the banks and eventually they are going to realize they are getting screwed and they aren’t going to ask so nicely when they decide to pursue the matter.

  18. In fact, I’d add to your list of reasons “do you really want to be F-ing w/ a bank ? Really ?”

  19. I was in the Oceanside area and I saw a sign from a Listing Agent pointing out where their open house it and it had a outline of a person’s head and if you read it say “Its about you, not me.” I wish I took a picture of it to show you all.

  20. Come to Phoenix, where fraud short sales are the norm!

  21. Jim, here in Sonoma County criticizing another agent is a cardinal sin. No public criticism, period.Think big fines…BIG fines. IF you have ironclad proof of malfeasance you go to your Broker and then the two of you go to the ethics panel. IF your Broker will back you and your proof is well beyond a reasonable doubt then the ethics panel might take action. Unless the party you are complaining about is a big dog, in which case you should probably find another line of work or move to another county.

  22. Why be ethical? I’m too old to change.

  23. If an agent wants to make a complaint against another agent in San Diego, they have to collect all the evidence themselves, and then try their case in front of an ethics panel. Who is going to bother?

  24. More on listing agent duties.

    If the goal is to show the seller that you waste a lot of money on print advertising that does nothing to sell their house but might stroke their ego, then $1,000 to $5,000 would be impressive.

    If the goal is to sell the house, then sellers should consider the facts.

    The last check I did showed that 85% of sales in NSDCC were co-brokered – meaning the buyer was represented by a different agent.

    Listing agents should demonstrate their marketing game plan to reach other agents. Remarks in the MLS that describe the potential buyer are helpful (we know it has granite counters and stainless appliances by looking at the photos!!!!) and a full compliment of pro photos are a must. Either spend $2,000 on a quality camera and do them yourself, or hire Jakob at $400 to $600 a house and get pro lighting and photoshopped pics. The photoshopped pics are not universally accepted as the best – some buyers have said that they distort the reality.

    To capture the other 15%, listing agents should demonstrate how they reach buyers directly. The correct answer is by aggresive internet advertising, and real youtube video tours to get them excited enough to then come by a conveniently-scheduled open house. Hardly any agents do this. Then check their salesmanship by calling them to see who answers the phone, and if they are quality salespeople.

    These are things that every seller should do, but they rather trust their gut and go with the agent who has impresed them with the best image via mailers.

  25. As my homie once sang, ” Its a hard rain gonna fall”

  26. Jim, in addition to what you mention I recommend a seller do the inspections themselves and have their agent post those documents on the MLS. Pest, well, septic and complete home inspections. Fewer contingencies means fewer failure points. I’m in a much smaller market and the local broker’s meeting is a very important part of marketing here, announcing an upcoming listing and having a broker’s open house ensures a lot more attendance at your regular open houses if the property is well priced. Qualified buyers with their feet on the floor is the purpose of marketing.

  27. JTR,
    You are correct. The sellers are stupid. I thought thats why they hire agents to sell the house. Its just the agents are stupid and unethical. The sellers are only stupid.

  28. On a side note, I do like the “Dream Homes” magazine. ;-)

  29. I applaud your efforts.

  30. Jim,

    Thanks for expressing your feelings about our fellow Realtors. You made the call during the boom times about fraudulent agents and now the same thing is happening. It is even worse in the short sale world where the listing agent has complete control because the seller and their bank just don’t give a damn.

    If anyone at ethics committees or DRE just opened their eyes, the misdoings are blatantly obvious. But they just don’t seem to care. It makes me sad to call myself a Realtor because of the public’s perception from the actions of others.

    Keep calling it the way you see it and may you live long and prosper.

  31. Eliminating dual agency (or at least the same AGENT in each sale) would go a long way towards removing the specific type of conflict of interest Jim is mentioning. I can guess which well known realtor he is not naming in the post as I’ve seen this agent’s shenanigans for years. It’s so sad as the client has no idea. This person somehow convinces the seller to sign the listing contract but not allow any showings from coop brokers until a future date. The agent, then markets the home online and brings a buyer to the seller before the home can be shown to other buyers…Although dual agency is legal in CA, I have for years, written into all my client contracts that I only represent one client’s interest in a transaction; either the seller OR the buyer; not both. As a listing or selling agent, I contractually remove myself from any potential conflict of interest right up front. I know of a few other realtors that do the same.

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