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An Insider's Guide to North San Diego County's Coastal Real Estate
Jim Klinge, broker-associate
858-997-3801
klingerealty@gmail.com
Compass
617 Saxony Place, Suite 101
Encinitas, CA 92024
Klinge Realty
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Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

Jim Klinge
Cell/Text: (858) 997-3801
klingerealty@gmail.com
701 Palomar Airport Road, Suite 300
Carlsbad, CA 92011


Category Archive: ‘Ethics’

Risky Off-Market Scenarios

This is how the industry enforces the rules – run an article like this every once in a while that gives tips how to CYA.  We do have a form that absolves agents from wrong-doing, which just begs agents to ignore the rules:

From N.A.R.

If you or your client is interested in proceeding with an off-market listing, be aware of the potential peril of compromising your fiduciary and ethical responsibilities. Here are five scenarios to avoid, along with ways to reduce your risk.

  1. The real estate agent or broker, not the seller, is the one pushing for an off-MLS listing. Ensure the decision is made voluntarily, solely by an informed seller. Have a signed listing agreement that spells out to clients the limitations of not listing on the MLS (such as that it may reduce their chances of getting the highest and best price for their home by reducing its exposure more widely to the public).
  2. “Coming soon” marketing that limits the listing’s availability to a specified group of brokers during the premarketing period. Be certain all brokers and buyers have equal access to the listing.
  3. An agent fails to notify their member MLS when a client opts to keep the listing private. Most MLSs require that after a listing agreement is signed, the agent must file a certification—signed by the seller—noting the listing is not to be disseminated to other brokers using  MLS. Typically the notification must be filed within two to three business days after a listing agreement is signed.  Agents can be fined for failing to do so.
  4. An agent faces accusations of breaching fiduciary duty in order to earn a double commission. Off-market listings can lead to more dual agency transactions, as the agent may actively advertise the property only to his or her clients. While not illegal, the practice can be problematic if the prospect of a double commission is the reason an agent suggested an off-MLS listing. Agents risk being sued by a buyer client, for example, who might believe you didn’t seek the best price since you also represented the seller.
  5. Agents are accused of antitrust or fair housing violations by limiting listing exposure to a narrow buyer segment. Be sure  you are fulfilling your duty to “cooperate with other brokers except when cooperation is not in the client’s best interest,” as stated in Article 3 of the REALTORS® Code of Ethics.

https://magazine.realtor/technology/feature/article/2018/09/5-risky-off-mls-scenarios

Posted by on Sep 15, 2018 in Ethics, Jim's Take on the Market, Listing Agent Practices, Realtor | 0 comments

More on Pocket Listings

For those who ‘specialize in the off-market space’, here’s a new excuse to justify your unethical and probably illegal practices: “some buyers don’t want photos of the home they’re purchasing on the internet”.

http://rismedia.com/2018/09/04/brokers-turn-pocket-listings-rising-markets/

The real estate market has heated up so much in certain regions that brokers are taking transactions into their own hands—or, rather, their pockets. With increasing prices and, seemingly, more buyers willing to pay an amount that’s leaving sellers with nice profits, the question these sellers keep asking is, “Why bother with the MLS?”

While the answer to that question varies greatly depending on who is asked, more and more brokers are saying don’t list on the MLS, or even Zillow, for that matter.

“It’s an opportunity for a savvy agent, who uses his or her network properly, to make more money for their client,” says Jon Paul Molfetta, a broker with Keller Williams Realty in New York and New Jersey.

“If sellers aren’t familiar with the concept of a pocket listing, I would expect that their area/location doesn’t warrant it. Savvy sellers know when they live in a hot market. They understand the value of having a strong broker with a large network. If they contract with the right agent, they can realize top dollar without the hassle of having every nosy neighbor or unqualified buyer through their home,” says Molfetta.

“Agents who lose touch will lose deals (and) miss opportunities,” says Molfetta. “When someone misses out on a property, they might be willing to overpay for the next one. Regardless, people will not underpay for a pocket listing. If you’re a strong listing agent who controls a portion of the inventory, you provide added value to both the buyer and seller. For the buyer who wants into the neighborhood, you offer the unique opportunity of finding a home before it hits the market. For the seller who is ready to list, you provide a pool of qualified buyers from months of successful marketing and proper lead capture. It’s a win-win.”

California seems to be a haven for pocket listings, where sellers are coming to their brokers and demanding it. Lori Steele is a specialist with Beverly Hills, Calif.-based The Agency, which launched a private national off-market platform last summer called The Pocket Listing Service (PLS). Steele says it’s been incredibly popular among sellers who value privacy and speed, and it helps all the agents under The Agency roof generate business for clients and cultivate their networks.

Steele is involved with The Agency’s expansion through Orange County, Calif., and she says The PLS is a big part of the appeal.

“About 40 percent of all of our deals are done off-market,” she says. “It’s important for seller discretion, and some buyers don’t want photos of the home they’re purchasing on the internet.”

Link to Full Article

Posted by on Sep 5, 2018 in Ethics, Jim's Take on the Market, Listing Agent Practices, Pocket Listings, Realtor | 5 comments

No Code?

The State of California doesn’t have a Code of Ethics…..

This article is Part Two of a series arguing for the reinstatement of the Department of Real Estate (DRE)’s code of ethics. If you haven’t already, take a look at Part One, which provides context for the current vacuum in California ethical standards.

Why a code of ethics?

Every public-facing industry, especially one as complex as the real estate industry, is in need of common standards of practice. Presently, the code providing those standards for California real estate agents is far from an ideal set of rules governing an agent’s conduct in service of the public.

The code in question is a generic product of the National Association of Realtors® (NAR), which NAR’s state-level manifestation, the California Association of Realtors® (CAR), has commandeered as its own.

Real estate practice is rooted in state codes, cases and regulations aimed at protecting residents of that state, and as a result, this national code of ethics is frequently ill-fit to the unique marketplace of California. NAR has next to nothing to do with California, where principals might have little to no personal knowledge of the agent representing them (especially in urban population centers), and have no choice but to operate under a general set of expectations for licensee conduct.

Further, the Department of Real Estate (DRE) has continuously pushed the NAR code as an acceptable standard for those California licensees who also happen to be Realtors®. As we discussed recently, the state nixed the DRE’s code of ethics in 1996, and California has consequently been left without a California code of ethics for the real estate industry — a situation the DRE could rectify.

But before we can argue for the reinstatement of the DRE code of ethics, we need to understand what’s in it. What are we arguing for? And maybe more critically, what are we arguing against?

Read article here:

Link to Full Article

Posted by on Jul 11, 2018 in Ethics, Jim's Take on the Market, Realtor, Realtor Training | 0 comments

Listing Agent’s Fiduciary Duty

In hopes of finding some legal clarity on the listing agents who practice the Coming Soons and Sold Before Processings, I came across this example at the DRE website – we see these happen regularly:

The requirements of law governing the relationship between agent and principal is to the effect that the agent cannot be allowed to profit at the expense of the agent’s principal, no matter whether the result is reached by misrepresentation, concealment or other fraudulent device.

In the case of Rempel v. Kells the court held that an agent obtaining profits by fraudulent conduct and concealment from the principal is not even entitled to recover expenses incurred by the agent in connection with the transaction. The duty of a real estate broker to disclose material facts known by him to the seller employing him was again confirmed in the appellate court case, Jorgensen v. Beach ‘n’ Bay Realty, Inc., (1981) (125 Cal. App. 3d 155)

In Jorgensen, the listing broker presented an offer to his seller that was only about 7 percent less than the listing price. The broker presented the offer on behalf of a speculator for whom the broker hoped to act in future transactions. When the broker presented the offer, he informed the seller that he was also acting on behalf of the offeror and was therefore a dual agent in the transaction.

The seller wished to counter offer on the price, but the broker recommended that the seller not do so. The seller followed this recommendation. The sale was consummated. Shortly thereafter the purchaser resold the property through the broker at a 13.5 percent profit.

In reversing a nonsuit for the broker, the appellate court held that the broker did not fully discharge his fiduciary obligation to the seller by simply disclosing that he was acting as a dual agent in the transaction.

It was the broker’s duty to disclose all material facts known to him which might have affected the seller’s decision to accept the offer. The court suggested that the facts known to the broker which might have affected the seller’s decision included (l) the fact that the buyer was acquiring the property for investment purposes and (2) the fact that the broker had a substantial personal stake in negotiating a bargain purchase for the buyer. (Field v. Century 21 Klowden-Forness Realty (1998) 63 Cal.App.4th 18).

Link to DRE (pages 182-183)

Posted by on Jun 21, 2018 in Ethics, Jim's Take on the Market, Listing Agent Practices | 3 comments

More on Pocket Listings

The standard knee-jerk response about pocket listings is to insist that some sellers don’t want to be on the open market for personal reasons, and that’s fine. In reality, those should be limited to major Hollywood icons who are unsure of how much their star-power adds to the price of a home, AND those who are flat-out bamboozling the buyer – like these sellers, who just sold this property off-market for $11,000,000. The buyer’s agent has been in the business for two years and this is his only sale ever on his Zillow profile!

Eight months ago, the sellers paid $7,195,000 for it after 1+ years on market:

If the sellers are fully aware that they are engaging in an off-market deal, then fine. But most are being duped into thinking they are on the open market, but then all of a sudden – whiz, bang, boom, whoosh – and there is an offer on the table that is good enough to get them on their way.

It moves so fast that they never realize they weren’t on the open market.

Posted by on Jun 7, 2018 in Ethics, Jim's Take on the Market, Listing Agent Practices, Pocket Listings, Realtor, Realtor Training | 5 comments

FTC and DOJ Realtor Workshop

The FTC and DOJ conducted a workshop this week about the competitiveness in real estate.  There hasn’t been much press coverage, but Rob has summed up the bulk of it here:

Link to Rob’s Blog

The actual proceedings can be seen here on the FTC Facebook page:

Link to FTC FB

In San Diego County, you can’t say there isn’t enough competition.

There are around 20,000 realtors, and last month we only sold 3,288 houses and condos!  You can list your home for sale on the MLS for as little as $95, and every agent offers their own service/commission package for the consumers who are willing to shop around.

The main beefs:

  1. Commissions aren’t disclosed.  The realtor community will fight hard to keep the actual amount of our commissions private, but it’s not that big of a deal.  The buyer-agent commission is disclosed in every MLS listing, so it’s just the seller-side – which is disclosed, and agreed to, by the most important person – the seller!  But if they were disclosed to the general public, we’d probably find that there isn’t as much difference between traditional and discount agents as we thought.
  2. Commissions haven’t changed with higher pricing. An ivory-tower professor ranted on and on about this topic, and cited two ancient studies of other industries that weren’t applicable. She needs to do a current study of actual commissions taken from the closing statements for accurate comparisons.
  3. Decouple the commissions, and have the buyers pay their own agent.  While this sounds like a great way to lower the buyer-side commission in theory, it ignores two critical facts.  A) Sellers are offering a reward, or bounty, to buyer-agents to sell their home, and should have every right to do that, and B) the likelihood of an agent being able to steer a buyer towards a home just because of a higher commission is extremely remote.  If the FTC didn’t agree, then publicly displaying the buyer-side commission could help, and allowing rebates pretty much covers it – no other change needed.

What wasn’t covered:

A. What you get for the money.  If the FTC and DOJ wanted to impose one thing to help the consumer, it would be requiring that every agent publish the exact services they provide for the money, and their actual recent experience in selling homes.  Realtors have fought every attempt at publishing the sales history of individual agents, but have somehow allowed Zillow to do it openly.  I think it’s time that consumers know the truth.

B. Enforcing the rules.  With no enforcement, there are no rules.  The FTC and DOJ could at least publish their opinions on pocket listings so agents know what is legal, and what’s not.

A couple of people mentioned that they should do another workshop with actual realtors working the street.  I’m available!

Posted by on Jun 7, 2018 in Ethics, Jim's Take on the Market, Listing Agent Practices, Realtor, Realtors Talking Shop | 0 comments

Ethics and ‘Sold Before Processing’

The selling of listings prior to MLS input has happened since the beginning, but in the era of inventory desperation, we’re now seeing companies openly advertising ‘previews’ of their listings before they put them on the MLS.  Before long, the MLS will just become the market of last resort, much like Loopnet is for the commercial brokers.

Home sellers expect and deserve open-market exposure, but nobody in the business wants to give up the hope of double-ending a commission, or making a quick deal and moving on to the next.  Many of these off-market deals involve an outside buyer’s agent, which is really mind-boggling that listing agents are so lazy that they are willing to compromise their fiduciary duty to their own seller just to make a quick buck.

Frankly, this issue is only going to get worse.  Redfin (dozens of times) and other disrupters are doing it too, and we are heading towards having only one agent per sale – which sounds efficient, but will sellers get full exposure?

 

Here’s a solution for those agents who insist on doing it, and a way to ease into a more-ethical era (hopefully):

DON’T PUT THEM IN THE MLS – EVER.

For agents who say that they have to input their listings per the rules, give me a break. You already broke all the other rules, don’t go holy roller on me now.

Here are the benefits of not inputting your off-market sales onto the MLS:

  1. Other agents won’t have to explain to their waiting buyers why they didn’t get a chance to make an offer.
  2. Other agents won’t think you’re a sleazebag.
  3. Other agents won’t be encouraged to do it too.
  4. You won’t leave a trail of evidence for the district attorney.
  5. Help preserve the MLS and our business.

How bad is it? An agent who sells 100+ homes per year recently told me that half of their listings sell before MLS-input!

Did you have special circumstances that required an off-market sale, and you insist on MLS input? No problem – mention the special circumstances in the remarks so others don’t jump to their own conclusions.  But special circumstances are rare – most common and unsuspecting residential home sellers deserve open-market exposure.

We’d like to believe that realtors are ethical – heck, we have a Code of Ethics!  But when tempted to make a quick and sexy off-market deal, most agents can’t resist, even if it’s not in their sellers’ best interest.  I’m convinced that the vast majority of agents don’t even know the difference.

Posted by on May 30, 2018 in Auctions, Ethics, Jim's Take on the Market, Realtor, Realtors Talking Shop | 3 comments

How Buyers And Sellers Get Screwed

Another reason for the industry to commit to full transparency and the auction method of selling homes – our Code of Ethics doesn’t help much:

Q: I submitted an offer for a buyer client that was near the full listing price and asked the listing broker if any other offers existed. The listing broker said no. The next day the broker called me and told me the property sold to a different buyer. Shouldn’t the broker have told us that there were multiple offers when the other offer came in and given my client the opportunity to modify the offer?

A: This is one of many misconceptions about handling multiple offers. The primary provision in the Code of Ethics related to multiple offers is Standard of Practice 1-15, which says “REALTORS®, in response to inquiries from buyers or cooperating brokers, shall, with the sellers’ approval, disclose the existence of offers on the property.” You asked if there were any existing offers at the time you submitted and the answer was, apparently, no. Nothing in Standard of Practice 1-15 or any other part of the Code requires the listing broker to go back to any or all other buyers who made an offer should one or more additional offers come in after your offer was submitted.

While it might seem that listing brokers should be required to go back to all those other buyers if other offers come in, a seller may choose not to take that action and may choose another direction to negotiate a sale. It may also seem that going back to previous offers would always be in the best interest of a seller. But, from the seller’s perspective, there might be both price and non-price terms of the other offers that are more attractive. The seller might not want to risk that the later, better offer may be withdrawn in the time it could take to reinform the other buyers and allow them to change their offers.

One tip for cooperating brokers in multiple-offer situations is to ask the listing broker about other offers on more than one occasion during the negotiations. It’s no guarantee that you will hit the right time, but it might give you more information for your buyer client in the negotiation on high-demand properties.

Link to Article

Posted by on Mar 30, 2018 in Ethics, Jim's Take on the Market, Listing Agent Practices, Realtor, Realtor Training, Why You Should List With Jim | 7 comments

Real Estate Tip Line

Our San Diego MLS quietly removed our complaint button recently.  I’m sure they had heavy volume, but they aren’t the realtor police – nobody is.  Hat tip to SM for sending this in:

VANCOUVER – The province is hoping to make it easier for you to report suspected misconduct in the local real estate market by launching a new tool.

A new anonymous tipline has been launched by the Real Estate Council of BC, as part of, what it describes, a way to protect potential homeowners.

“This is a way for people who have information about potential misconduct of real estate agents, that perhaps they’re uncomfortable identifying themselves, they have this as a tool to report information to the council anonymously,” explains Executive Officer Erin Seeley.

The tipline is one of the recommendations made by an Independent Advisory Group two years ago. “The council set up this group as a way to report on the improvements the Real Estate Council can make in overseeing licensees and in protecting the public.”

This new tool allows people to report things like a conflict of interest, failure to disclose information, or even the mishandling of money.

There is a complaints process already in place and Seeley adds the new tool is part of the process currently available to the public.

“It’s anonymous, it’s more accessible with the 1-800 number, and it’s a secure forum,” she says. “And it allows people, regardless of whether they’re a real estate licensee or a consumer, they can use this to report misconduct and not have a fear of reprisal.”

Seeley says just like the current process, all complaints are investigated and reviewed to determine whether a full investigation is required. “If there [are] grounds for misconduct and evidence, we’ll take action as appropriate through the channels of investigating. We have administrative fairness and natural justice as key parts of our process.”

Processes to resolve complaints are available, and if a case warrants it, Seeley says hearings can be held by a tribunal.

“We have financial penalties, significant penalties up to $250,000 for licensees per infraction under the Real Estate Services Act.”

According to Seeley, the council receives a number of complaints and has investigated claims of significant misconduct in the past.

Link to Article

The only recourse around here is to file a complaint with the Association of Realtors, and have the Ethics panel hear your case.

I did file a complaint recently, which meant I had to compile and submit six copies of the evidence. The agent was found guilty, and received the maximum penalty for a first-time offender – a letter in their file for 12 months.

Posted by on Mar 19, 2018 in Ethics, Fraud, Jim's Take on the Market, Realtor, Realtor Training | 1 comment

Strict Code of Ethics?

Want to know how serious the National Association of Realtors is about our ‘strict Code of Ethics’?  They paid for this ad:

I love Phil Dunphy when he is playing a realtor on the show Modern Family, but this is different – he is representing the agents on the street in these ads.

We have a few seconds to impress upon the consumer how serious we take our Code of Ethics, and that’s the best we can do?

Posted by on May 22, 2017 in Ethics, Jim's Take on the Market, Realtor | 0 comments