Menu
TwitterRssFacebook
More Links

Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

Carlsbad
(760) 434-5000

Carmel Valley
(858) 560-7700
jim@jimklinge.com


Category Archive: ‘Ethics’

Market-Rate Sellers

Marc Davison suggested here that we re-brand the word ‘realtor’:

http://www.inman.com/2017/02/14/the-case-for-killing-the-term-realtor/

He was met with the usual drivel from agents, some of whom mentioned the big difference between a real estate licensee and a Realtor is that we subscribe to a strict Code of Ethics.

But if we’re going to re-brand the name Realtor, then let’s stop the charade about ethics.  Realtors have stood by idly while their fellow agents have fleeced the banking industry with fraudulent short sales.  We intentionally deceive consumers by re-inputting our listings to make them appear like hot new offerings.  We make off-market deals and boast about them in the MLS that they were ‘sold before processing’, when every realtor has signed an agreement to share their listings with each other.

None of that is ethical, and if you participate – or stand by and watch others participate and do nothing about it – then you’re not an ethical agent.

Let’s put an end to it.

Either be ethical, or let’s stop saying we’re ethical, when we’re not.

Because the industry is so fragmented and independent, we’re not going to get a million agents to be ethical when you can double your commission by telling sweet little lies.

But we could educate sellers on the truth, and save our jobs.

The auction format would help to drain the murky cesspool of home selling.  Buyers and sellers would enjoy full transparency, and everyone would have a shot at paying what they think a property is worth.

Auctions would invigorate the marketplace!

But sellers are leery of the idea, and they don’t want to give it away.

Here’s my idea:

The MLS is a dinosaur, and has been complicit in the fraud.  Instead, let’s take this idea straight to Zillow – they already have different categories of listings on their website: Pre-foreclosures, Coming Soons, Make Me Move, etc.

Let’s add a new category: Market-Rate Sellers.

First, we properly educate a seller by having them read and understand the definition of a property’s value.  We give them this disclosure:

A property’s value is defined by how much a ready, willing, and able buyer will pay for it.  After proper marketing, I am willing to sell my property for what the market will bear.  Signed, Seller.

Why don’t we already have this piece of education?  Because sellers think they determine the value, and agents do nothing to convince them otherwise.  Instead, we encourage the idea just to get the listing.  Is that ethical?

If a seller is stuck on his price, then they go into the Make Me Move category.  No problem, I take listings like that – and I might get lucky some day.

But for the sellers who want to control the entire process and move promptly, we will have a solid game plan to get them top dollar now:

The Slow-Motion Auction:

  1. Tune-up house.
  2. Open house for 5-10 days.
  3. Buyers engage in open bidding at the house on X date.

Sellers and buyers deserve to have this full transparency, and the ethics it would impose on agents will save our jobs.

Posted by on Feb 20, 2017 in Auctions, Ethics, Jim's Take on the Market, Listing Agent Practices, Zillow | 11 comments

Ethics Violation

For the first time ever, I’m going to file a complaint against another realtor.  In this case, the listing agent discounted her commission so her buyer would win, even though my all-cash buyer had a higher offer.

It is in the vaunted Realtor Code of Ethics that any different commission deal needs to be disclosed to the buyer-agents:

7.22 Dual or Variable Rate Commission Arrangements. The existence of a dual or variable commission arrangement shall be disclosed by the listing broker by a key, code or symbol as required by the MLS. A dual or variable rate commission arrangement is one in which the seller or owner agrees to pay a specified commission if the property is sold by the listing broker without assistance and a different commission if the sale results through the efforts of a cooperating broker, or one in which the seller or owner agrees to pay a specified commission if the property is sold by the listing broker either with or without the assistance of a cooperating broker and a different commission if the sale results through the efforts of a seller or owner. The listing broker shall, in response to inquiries from potential cooperating brokers, disclose the differential that would result in either a cooperative transaction or, alternatively, in a sale that results through the efforts of the seller or owner. If the cooperating broker is representing a buyer or tenant, the cooperating broker must then disclose such information to his or her client before the client makes an offer to purchase or lease.

Of course, when taking the listing most agents don’t think they are going to discount their commission to screw another agent out of a deal, but once they get into the heat of battle, they lose their mind and forget.

Or they never knew it was against the rules.

The maximum penalty is a letter in the agent’s file for six months, so there isn’t a big deterrent to being unethical.  They say that the reason the MLS exists is to ensure cooperation and compliance between agents, which sounds good – right up until money is on the line.

I wonder how many agents have read the Code of Ethics?

Posted by on Feb 10, 2017 in Ethics, Jim's Take on the Market, Listing Agent Practices, Realtor, Realtor Training | 20 comments

Screaming Towards Single Agency

Zillow and our local MLS provider Sandicor reached the Great Impasse a year or two ago when they couldn’t agree on terms under which Sandicor would keep feeding our listings automatically to Zillow.  Agents complain all the time about Zillow’s inaccuracy, but it’s our own fault – agents have to handle them manually, and many are unaware.

But Zillow out-foxed Sandicor, and went directly to the big franchises and made their own deals to obtain their listings.  Zillow is now reaching out to the little guys too – they called me and offered to upload my listings direct from the MLS, and all I had to do is sign one form.

What’s the point?

Zillow has the killer instinct, and will throw their weight around to get what they want.  They are willing to cross the line occasionally too, evidenced by their $130 million settlement in the Move, Inc. lawsuit, and their frat-house employee lawsuit they settled for around $5 million.

I mentioned briefly that the brokers are attempting to build a portal to rival Zillow, but it’s a waste of time and money.  Zillow already has the eyeballs, and they get it about advertising. Any new portal would have to build a better mouse-trap AND advertise as much as Zillow just to catch up.

Or deny listings to Zillow.

But Zillow has already out-smarted any attempts to block listings, because they have gone to the brokers directly and cut their own deals.  The Zillow Team realtors are going to stick with Zillow, not go to some broker upstart portal.

But here’s the catch:

The Broker Public Portal promises to send leads back to the listing broker.

It is all they have to offer the brokerages, and it sounds tempting, because no listing agent wants the three-headed monster (Zillow’s three outside agents) advertising on their listings.

But such a system would encourage more in-house, dual-agency transactions.

It is where the industry is heading, whether it is ethical or not.  Zillow is already way ahead with their ‘Coming Soon’ ads, and every real estate trainer is prodding agents to ramp up advertising of hot new listings prior to MLS input.  Unfortunately, NOBODY talks about the listing agent’s fiduciary duty to the seller to expose the home to the entire marketplace via the MLS.

I see 2-3 listings per day being inputted as ‘Sold Before Processing’, the realtor marketing sessions tout that ‘deals are being made’ at their private meetings, and most brokerages offer their agents a better commission split if their listing is sold in-house.  The ethics of exposing a listing to the entire marketplace via the MLS is being ignored.

Dual agency is tricky for most, and it can be messy too if something goes sideways – the agent is squarely in the sights of every lawyer.

With the tight inventory, agents don’t feel the need to share their commission with an outside agent – especially one who might make repair requests or screw up the closing somehow.  It will be better to hog the listing, make higher commissions, and have easier closings.

We are screaming towards single-agency, where the buyer will get no representation.  If they want advice, they can pay for a buyer’s agent themselves, or just get dragged to the finish line by the listing agent’s clerks.

Hope you like the price and condition, because if you don’t, the next guy will.

Posted by on Jan 24, 2017 in Ethics, Jim's Take on the Market, Listing Agent Practices, Realtor, Zillow | 3 comments

Realtor Code of Ethics

ethics

While we are poking holes in the Realtor Code of Ethics, let’s don’t forget the old 3-10, which is hard to dispute.

Agents have a fiduciary duty to do what is best for the client.  Listing agents who sell their properties without exposing them to the open market via the MLS would seem to be in direct violation here, but instead the practice is encouraged in offices around the country:

  • Standard of Practice 3-10

The duty to cooperate established in Article 3 relates to the obligation to share information on listed property, and to make property available to other brokers for showing to prospective purchasers/tenants when it is in the best interests of sellers/landlords. (Adopted 1/11)

The Code of Ethics says listing agents are obligated to ‘make property available to other brokers’, which is also part of the agreement for agents to join the local Association of Realtors. I share my listings with you, and you share yours with me.

Of the NSDCC closed sales this year, 4% have a days-on-market of zero, which doesn’t automatically mean that they weren’t on the open market, but the vast majority have remarks like “sold before processing’, a blatant message that this listing wasn’t made available to other brokers.

Though only 4% are successful, I’d guess that 30% to 40% of all listings try some sort of ‘Coming Soon’ pre-market activity.  And how many other deals are put together ahead of time by the listing agent, who then let the new listing sit on the MLS for a day or two just for posterity?

I don’t care which way the game is played, or if there are any rules at all – which, in reality, there aren’t any when commissions are on the line.  I just wish N.A.R. would stop pushing how ethical agents are just because we have a Code of Ethics.

Posted by on Aug 15, 2016 in Ethics, Jim's Take on the Market, Listing Agent Practices | 3 comments

Now You Step Up

635793790839872406-XXX-7185

Now that he is has left the Fed and has written his book, Bernanke says more individuals should have gone to prison:

http://www.usatoday.com/story/news/politics/2015/10/04/ben-bernanke-execs-jail-great-recession-federal-reserve/72959402/

With publication of his memoir, The Courage to Act, on Tuesday by W.W. Norton & Co., Bernanke has some thoughts about what went right and what went wrong. For one thing, he says that more corporate executives should have gone to jail for their misdeeds. The Justice Department and other law-enforcement agencies focused on indicting or threatening to indict financial firms, he notes, “but it would have been my preference to have more investigation of individual action, since obviously everything what went wrong or was illegal was done by some individual, not by an abstract firm.”

Posted by on Oct 5, 2015 in Ethics, Jim's Take on the Market, No-Foreclosure as Banking Policy | 2 comments

Fannie’s 20-Day First Look

fannie

Fannie Mae has been over-pricing their REOs by at least 10% since 2012, and have been getting away with it because buyers think that because it’s a foreclosure, they are getting a deal, and because Fannie provided ‘HomePath’ financing where no appraisal was required.

They instituted a seven-day First Look Program, where only the owner-occupying buyers were allowed to purchase, which helped to whip up the excitement in unsuspecting buyers, many of whom were purchasing their first home.

But in October, 2014, the HomePath financing was terminated, and apparently the REO portfolio needs to be goosed again.

Here the ‘new’ 20-day First Look Program is rolled out by our N.A.R. goons, and presented as a great new idea to help buyers and preserve neighborhoods.  But in reality, it’s extending the period that Fannie can take advantage of unsuspecting buyers:

Posted by on Apr 3, 2015 in Ethics, Jim's Take on the Market, Market Conditions, Mortgage News, No-Foreclosure as Banking Policy | 0 comments

Off-Market-Listing Clubs

From the San Jose Mercury News:

http://www.mercurynews.com/my-town/ci_25718492/off-mls-listings-debated-at-silicon-valley-realtors

An excerpt:

off-marketAccording to MLS Listings, off-MLS activity in the counties of San Mateo, Santa Clara, Santa Cruz, San Benito and Monterey, the five-county area the MLS serves, represented 21 percent of total home sales in 2013, up from 15 percent in 2012, and 12 percent in 2011. By sales volume, this accounted for $4.8 billion of the 2013 market share in the five-county area.

Harrison noted MLS Listings Inc. is, in fact, “the largest private listings club in Northern California,” with more than 16,000 subscribers/members who are qualified licensed brokers/agents and abide by rules of the National Association of Realtors and the California Association of Realtors. The MLS has agreements with other California MLSes to share property and listing information representing about 21 counties and more than 65,000 subscribers, so agents’ listings get the best exposure.

Read More

Posted by on May 8, 2014 in Ethics, Listing Agent Practices, Market Buzz | 0 comments

Escalation Clause

escalationIn the spirit of fair play, this isn’t right.  But in a market where buyers get tired of losing, you can’t blame them for trying alternatives.  Agents should have a standard policy/strategy on how to handle the escalation clause – get good help!

From the Boston Globe:

http://www.bostonglobe.com/business/2014/04/13/buyers-turn-new-bidding-tactic-hot-home-market/7fWqb00kcwY9Zaq0NgE3TK/story.html

Katrine and Stephen Campbell were up against stiff competition from 10 other bidders for the Reading home they wanted to buy. So the couple tried an aggressive strategy to give them an edge: Instead of making a specific offer, they promised to top whatever turned out to be the high bid by an additional $5,000.

The increasingly popular tactic, known as an escalation clause, worked. The Campbells bought the four-bedroom house late last year for $597,000 — or $18,000 above the original list price, including the extra $5,000.

“We must have looked at 50 places before making a bid on a house,” said Katrine Campbell. “We made only one offer — and we got it. The escalation clause gave us an edge.”

In a sign of how competitive the Boston-area housing market has become, the maneuver is becoming part of the area’s bidding war landscape, brokers and other real estate executives say. Some report there hasn’t been this much escalation clause activity since the last house-buying frenzy 10 years ago.

There are several kinds of escalation clauses, but all involve an agreement to top the high bid on a home by a set amount of money — often $5,000, and sometimes more.

Potential buyers who offer such arrangements usually insist on a brief amount of time, an hour or less, to follow through or to back out once a top bid has been established.

Skeptics say the clauses are potentially risky and a needless ploy that could backfire by alienating some sellers. It can also lead to disputes about whether buyers or sellers have complied with escalation clause terms, they say.

“It’s a tactic that’s not going to appeal to everyone,” said Peter Ruffini, a regional vice president at Jack Conway Realty in Norwell and president of the Massachusetts Association of Realtors.

“It sounds a little risky to me. It sounds sort of like issuing a blank check to sellers.”

Read More

Posted by on Apr 15, 2014 in Ethics, Frenzy, Market Buzz, Market Conditions | 4 comments

HUD and Short-Sale Dual Agency

Received today from the National Association of Realtors:

NAR members recently received word that the U.S. Department of Housing & Urban Development would be implementing a new policy on Oct. 1, 2013, that would prevent dual agency agreements in FHA pre-foreclosure transactions.

The National Association of REALTORS® immediately began talks with HUD officials on the proposed change. On Wednesday afternoon HUD officials reported to NAR that they would reissue the July Mortgagee Letter (#2013-23) and remove all dual agency language (Part Three of the PFS Participation Requirements).

The result is that the dual agency policy will not be implemented on Oct. 1, allowing NAR to continue the dialogue with agency officials on a formal solution to the dual agency issue.

HUD had proposed the policy change in response to fraud and abuse detected by the HUD Inspector General in the pre-foreclosure sales process.

NAR, working with state and local association presidents, sent a letter to HUD highlighting the concerns about the policy and the disruptive effect its implementation would have on communities across the nation.

The NAR has applied their considerable political weight to stall the implementation, summarized in the linked letter.  It’s a real hoot, scoring high on the David Lereah Comedy Scale:

1.  It quickly dives into the standard NAR blast:  “NAR takes fraud very seriously. Our members adhere to a strict code of ethics.”

2.  He then plays the naive’ card: “One-hundred years after its adoption, the Code of Ethics continues to be what sets us apart as REALTORS.  If there is evidence of fraud by our membership, we would like to be a part of an effort to develop policies that effectively address these issues.”

Come on, Gary – everyone has known about the rampant short-sale fraud for years, and N.A.R. has done NOTHING to stop it.  Now you are going to play stupid, and forge some phony-baloney compromise with HUD?

All national, state, and local associations, as well as every broker charged with supervising realtors, should take immediate action to stop short-sale fraud.  If we don’t, somebody else will.

Posted by on Sep 26, 2013 in Ethics, Short Sales, Short Selling | 0 comments