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 The seller might not want to risk that the later, better offer may be withdrawn in the time it could take to reinform the other buyers and allow them to change their offers.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.
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.
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.
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:
Open house for 5-10 days.
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.
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?
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.
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.
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.”
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:
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