Buyer-agents are heralding this as the Big Turning Point is real estate because the lawsuit aims to ‘break up the cartel’ and unbundle real estate commissions.
There is a whole legion of agents that offer a fee-for-service menu who think they are doing the consumer a favor. But it is a great dis-service to tempt consumers to select their agent based on their fee. This is where NAR and others have failed us miserably because nobody talks about how important it is for consumers to identify the skill level of agents they are considering.
Agents offer a discounted commission/rebate/fee-for-service because they don’t have the skill level to earn a higher fee. In effect, they ‘buy the business’ with lower cost/less service, and the consumer gets what they pay for.
But if this lawsuit prevails, causing MLS companies to be run out of business and ‘broker cooperation’ to get dismantled (seller paying the buyer-agent fee), the buyer agents will be the first casualty.
On this blog we talk about street-level impact.
Here’s an example that happened to Kayla in Manhattan, where the rental market is so hot that tenants have to pay their broker directly – and the typical fee is two months of rent.
Kayla is showing rentals to her old college roommate plus one other woman. The listing agent is present, and when Kayla goes into a bedroom with one of the women, the listing broker pulls the other aside and says, ‘if you don’t want to pay Kayla’s fee, just go through me directly’.
The two women rented the apartment directly through the listing agent, and burned Kayla.
We’re sliding into single agency, where buyers/tenants will just go directly to the listing agent. They will never know if they saved any money, they won’t know if they got proper representation (unlikely), and they will just take what they get.
The reason disintermediation worked in the travel business because consumers don’t worry about a bad vacation costing them an additional five- or six-figures in resale costs (and major disruption of life) to unwind one.
Without constant reminders of how important it is to Get Good Help, buyers will be left to their own devices and just go directly to the guy who has the product – the listing agent.
Single agency is not what’s best for consumers or agents – yet the market forces are heading in that direction without recognizing the ramifications. Watch what you wish for!
Obviously, my rantings on this topic have done nothing to slow down the trend, so joining Compass was the best way to position myself for my clients.
This scam is very real – confirm with escrow company before wiring funds.
A local family lost their entire life savings to scammers while they were in the process of buying a home after they unknowingly wired their money to a fraudulent escrow account.
Andrew Batson and Erika Urry were close to finally living in their dream home. The just needed to send their down payment. When Andrew received an email from the escrow company asking for a wire, he obliged.
“I did so that day thinking I was under pressure and we were supposed to close in that week,” said Andrew.
However, the next week, Andrew received a call from their real estate agent asking for the money because it was missing and was needed so they could close. It was at that moment when Andrew and Erika realized they had been scammed.
“I had to call Erika to let her know all the money was gone,” said Andrew.
It’s happening everywhere – hackers are stealing funds thought to be wired to escrow companies. It’s a real threat – be careful! Hat tip GW:
James and Candace Butcher were ready to finalize the purchase of their dream retirement home, and at closing time wired $272,000 from their bank following instructions they received by email.
Within hours, the money had vanished.
Unbeknownst to the Colorado couple, the email account for the real estate settlement company had been hacked, and fraudsters had altered the wiring instruction to make off with the hefty sum representing a big chunk of the Butchers’ life savings, according to a lawsuit filed in state court.
A report by the FBI’s Internet Crime Complaint Center said the number of victims of email fraud involving real estate transactions rose 1,110 percent between 2015 to 2017 and losses rose nearly 2,200 percent.
Nearly 10,000 people reported being victims of this kind of fraud in 2017 with losses over $56 million, the FBI report said.
The Butchers, forced to move into their son’s basement instead of their dream home, eventually reached a confidential settlement in a lawsuit against their real estate agent, bank and settlement company, according to their lawyer Ian Hicks.
The problem is growing as hackers take advantage of lax security in the chain of businesses involved in real estate and a potential for a large payoff.
“In these cases, the fraudster knows all of the particulars of the transaction, things that are completely confidential, things they should not know,” said Hicks, who is involved in more than a dozen similar cases across the United States.
Numerous cases have been filed in courts around the country seeking restitution from various parties. One couple in the US capital Washington claimed to have lost $1.5 million in a similar fraud scheme.
Real estate is just one segment of what the FBI calls “business email compromise” fraud which has resulted in some $12 billion in losses over the past five years. But for home buyers, the fraud can be particularly catastrophic.
“In these cases, the loss can be devastating and life-altering,” Hicks said.
Real estate transactions have become a lucrative target for hackers “because they handle a lot of money and because they have employees who are not the most technically savvy,” said Sherrod DeGrippo, director of threat research for the security firm Proofpoint.
Additionally, hackers often do their homework and “sometimes they know more about the business than the employees do,” she said.
People question how big of a problem it is that listing agents withhold their listings and sell them before inputting them onto the MLS – which denies their own sellers the benefit of open-market exposure, and potentially a better offer.
Above is a sample from today’s MLS hotsheet.
There were a total of 51 properties that were marked either pending or sold, and of those, eight were sold prior to MLS input.
Sellers don’t get open-market exposure.
Buyers get robbed of a chance to purchase the home that might be the perfect fit, AND then wonder why their current buyer’s agent isn’t getting those deals for them.
Other agents are denied the opportunity to earn a living.
But the listing agents get to double-end the commission, so it’s allowed – at least by broker management, NAR, CAR, and the MLS itself; the entities who could do something about it – but who look the other way instead.
Those with a paid-off home are only one signature away from losing it. This former attorney was convicted of a similar fraud, gets out of jail and does it again – but worse. Hat tip to daytrip for sending this in:
Authorities have charged a West Hills woman with perpetrating a real estate fraud scheme that netted her $2 million, primarily by duping numerous elderly property owners into transferring over their property titles.
Angela Fawn Wallace allegedly befriended the elderly victims — or found properties where the owners were deceased — then obtained the property titles, the Los Angeles County District Attorney’s Office said, according to KTLA. She then allegedly used those titles to secure herself loans.
Wallace faces 72 felony counts, including identity theft and forgery. She pleaded not guilty to the charges Thursday, and faces up to 40 years in prison if convicted on the top charges, KTLA reported.
Wallace’s alleged scheme lasted from June 2014 to January 2017, and involved four properties and two dozen victims including the property owners, estates, trusts and investment companies.
Wallace took out loans secured by the properties and in some cases sold them off to unknowing purchasers, then kept the proceeds. The district attorney said in one case she rented out several units of a multifamily building and kept the money herself instead of handing it to the estate of the deceased owner.
Wallace was previously convicted of forgery in 2003, and recording false documents in 2007.
The thing that got me fired up was Glenn insisting that portals include a mandatory HTML link back to the listing agent (in fact, Redfin authored the new verbiage to be approved by N.A.R.).
The current rule is that the listing agent has to be mentioned, and Redfin includes the requirement in fine print at the bottom of each listing. On the right, they pitch you hard to tour the home with them, which I’ll live with. It’s their website, and if I don’t like it, I can always build my own.
Why does Glenn want the listing agents to get more exposure?
He says that if there is a link back to the listing agents, they will be more likely to input more listings onto the MLS, instead of ‘pocketing’ them.
He doesn’t supply any evidence to support such an idea, and it is unlikely that the listing agents who want to double-dip the commission will give it up easily. This idea only makes sense as an alternative if we are going to eliminate pocket listings, Coming-Soons, and Sold-Before-Processings.
But nobody is suggesting an end to those techniques.
Since Zillow legitimized the Coming-Soon in 2014, major real estate brokerages and even some MLS companies have followed suit and offer their listings on their website prior to MLS exposure to the open market. The Coming-Soon genie is out of the bottle, and adding a link back to the listing agent isn’t going to change it.
Is Glenn just an out-of-touch CEO hoping to befriend the industry? No, he’s not, and we’ve seen previously that he has the killer instinct. He said this HERE:
“I think he had no idea what kind of savage beast master he was dealing with,” Kelman said. He continued: “We are wild, freaking animals. You can’t sell more houses for less money any other way. You’ve got to fight and claw for it.”
He owns one of the major portals. If he thinks putting an HTML link back to the listing agent is a good idea, then he should do it himself on Redfin’s website to demonstrate his commitment, and see how it goes.
But he hasn’t done that, which makes you think he is up to something else. Just like everyone else in the industry, he wants to double-dip more of his own listings, so he can finally put that nickel in his investors’ pocket.
Glenn Kelman of Redfin has been deceiving the public since the day they started the company, and he gets away with it because we don’t have a watchdog department or any enforcement of truth-in-advertising. We live in a society where anybody can say anything and never be accountable to the truth.
I’ve had enough, and I’m not going to take it any more.
Here are examples:
He says Redfin agents sell houses for $3,000 more than traditional agents. But you can only measure that if we sold the same house on the same day! He is using averages of different sets of homes, which is apples and oranges – yet it was one of their featured statements on their website for a long time.
He says that his sellers save $9,000 over traditional agents. You can say you charge a lower rate, but you can’t calculate the actual savings until you have the sales price. Agents don’t sell houses for the same price – houses sell for different prices depending on the agent’s method and expertise. If I sell the house for $10,000 more than you, then the sellers would MAKE an extra $1,000. It is deceitful for him to make such claims.
He says you will ‘close without a hitch’. A Redfin agent told me yesterday that 100% of his deals have a hitch.
He says they are full service. But then you send out the $50 girl with the least experience of anyone on your team to show buyers around? If you are ‘full service’, then you should have your BEST agents showing homes.
His home-flipping device, Redfin Now, is the biggest conflict-of-interest in the history of real estate. With Zillow’s Instant Offers, at least they send their staff people to give you a quote to purchase your home, and then direct an independent agent to give you a second quote. But Redfin offers the whole package together. But you can’t have it both ways – either you advertise that you are a full service realtor, and thus have a fiduciary duty to get the best deal possible for the seller, OR you are a cash buyer. But they run their flipping platform off their same website.
They know it’s a conflict too, and have a disclaimer at the bottom of the page:
Can you read print that small? Me neither, so I got out my magnifying glass.
This is what it says:
Redfin Now is a separate company owned by Redfin. Agents representing Redfin Now represent Redfin Now only and do not represent sellers in the sale of your home. If you decide to sell to Redfin Now, neither Redfin nor Redfin Now will represent your interests regarding the sale of your home. For this reason, it is recommended that you seek independent representation in the sale of your home. You may be able to sell your home on the open market for more money than Redfin Now’s offer price.
People who are drawn to a ‘full-service realtor’ website should get a fiduciary consultation only – that is what’s in their best interest. If you are running a separate company that buys homes, then it should be on a separate website.
The latest is Glenn saying that portals should include links that direct the consumer back to the listing agent. He says that it will encourage listing agents to stop ‘pocketing’ their listings, and sell them on the open market instead. But Redfin does the ‘Sold Before Processing’ to their sellers too, so you can’t help but think Glenn has an ulterior motive.
Here’s a good example of how sketchy the discounters are being with their advertising. It’s bad enough when they claim that they provide the same service as traditional agents, without providing any proof.
But this video – produced by Purplebricks themselves – gives you a great snapshot of their real integrity. When asked, “Don’t I have to pay with the possibility of my property not selling”, the expert says, “No…..not really.”
But the answer is yes – you have to pay $3,699 whether the home sells or not. It takes more prodding by the questioner to get her to deliver the right answer, but it’s still vague and evasive:
The local Purplebricks agent told us that the reason he went there was because he couldn’t hack it anymore as a regular realtor – he needed the salary to live.
If what you got for the money was transparent, the consumer would be better served. But instead, we get peppered with even more lies and deceit paid for by VC money in an attempt to win over the consumer before they figure it out.
The diverting of money being wired into escrow accounts to close real estate transactions is a real problem, but the authorities are on it – they have recovered $350 million! Unfortunately, they also mention here that $3.7 billion in losses have been reported:
Federal authorities announced today a significant coordinated effort to disrupt Business Email Compromise (BEC) schemes that are designed to intercept and hijack wire transfers from businesses and individuals, including many senior citizens. Operation Wire Wire, a coordinated law enforcement effort by the U.S. Department of Justice, U.S. Department of Homeland Security, U.S. Department of the Treasury and the U.S. Postal Inspection Service, was conducted over a six month period, culminating in over two weeks of intensified law enforcement activity resulting in 74 arrests in the United States and overseas, including 29 in Nigeria, and three in Canada, Mauritius and Poland. The operation also resulted in the seizure of nearly $2.4 million, and the disruption and recovery of approximately $14 million in fraudulent wire transfers.
BEC, also known as “cyber-enabled financial fraud,” is a sophisticated scam often targeting employees with access to company finances and businesses working with foreign suppliers and/or businesses that regularly perform wire transfer payments.
The same criminal organizations that perpetrate BEC also exploit individual victims, often real estate purchasers, the elderly, and others, by convincing them to make wire transfers to bank accounts controlled by the criminals.
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