by Jim the Realtor | Oct 22, 2023 | Realtor, Why You Should List With Jim |
This topic came up in my 45 hours of continuing education, and Donna agreed that rarely do listing agents comment on their seller’s disclosures – do they even read them? A focal point as we transition into single agency:
To complete the disclosure process, the seller’s agent filters property information provided by the seller before it is provided to the prospective buyer.
Accordingly, all property information received from the seller is reviewed by the seller’s agent for inaccuracies or untruthful statements known or suspected to exist by the seller’s agent. Corrections or contrary statements by the seller’s agent necessary to set the information straight are entered on the disclosure forms before the information is used to market the property and induce prospective buyers to purchase, collectively referred to as fair and honest dealings.
The extent to which disclosures about the physical condition of the property are to be made is best demonstrated by what the seller’s agent is not obligated to provide. Everything else adversely affecting value and known to the seller’s agent – material facts – are to be brought to the attention of prospective buyers as a matter of law.
As a minimum effort to be made before handing a prospective buyer information received from the seller, the seller’s agent is to:
- review the information received from the seller;
- include comments about the agent’s actual knowledge and observations made during their visual inspection of the property which expose the inaccuracies or omissions in the seller’s statements; and
- identify the source of the information as the seller.
by Jim the Realtor | Oct 20, 2023 | Jim's Take on the Market, Realtor, Realtor Post-Frenzy Playbook, The Future, Why You Should List With Jim |
Currently, every listing agent is required to offer some sort of buyer-agent compensation on the MLS. Zillow and Redfin publish those commission amounts on every listing now, so they are all out in the open.
Today, there are 79 homes for sale between La Jolla and Carlsbad in the $2,000,000-$3,000,000 price range. Thirty percent of those listing agents are offering less than 2.5% commissions to the buyer-agents.
Outsiders who see that will assume that commissions are finally starting to drop, after all these years.
But the vast majority of those listing agents are probably still taking 5% to 6% commissions, and offering 2% or less to the buyer-agent (and more for themselves).
If the listing agent is supremely talented and brings special skills to the transaction, then it would be understandable. But I’ve been a buyer-agent on listings that are offering less than 2.5%, and they’re not different. Virtually every listing agent still practices the Three-P marketing plan: Put a sign out front, Put it in the MLS, and Pray.
There are hundreds of multiple listing services in America. So far, only a few have removed the requirement of offering a buyer-agent commission. But the NAR lawsuits are going to change that, and soon every MLS will permit 0% commissions to be offered to the buyer-agents (hoping buyers will pay their own agent).
The listing agents who have little or no repsect for the buyer-agents will keep offering them lower and lower commissions. Eventually, their rate will get down to zero or close.
Will sellers figure it out?
Sellers focus on the total commission. They don’t do enough transactions to know that the amount the listing agent pays to the buyer-agent will impact the sale. It is a bounty offered to encourage the sale of the house, and when market conditions are soggy, it is better to pay buyer-agents more commission, not less.
In the lawsuits, they will discuss agents steering their buyers to homes that pay higher commissions. It’s why the search portals publish the commission rates now so buyers can track whether their agent shows any bias based on the commission rate being offered.
It’s why the industry will be racing towards 0% commissions offered to the buyer-agents.
Eventually, the DOJ will probably step in and insist that ALL sellers pay 0% commission to the buyer-agents to insure there is no chance of steering. Instead, listing agents will just offer them spiffs under the table in a softer market or when the house is ‘unique’.
Until then, the listing-agent teams are going to keep offering lower and lower commissions (if any) to the buyer-agents – who will then try to get their buyers to pay them something….anything!
At the same time, the listing agents will be encouraging buyers to avoid paying a buyer-agent commission altogether by coming direct to the listing agent instead. Their in-house assistant-agents will attempt a faux representation of the buyer but it will just be a novice clerk who processes their paperwork.
Boom! The seller didn’t have to pay a buyer-agent commission – making these lawsuits worth it – and instead the listing agent keeps the whole commission. If buyer-agents can somehow wedge themselves into the deal, then great, but will the buyer pay them too, when it doesn’t seem necessary?
Mark my words – this will be standard fare in the next year or two.
by Jim the Realtor | Oct 19, 2023 | Realtor, Realtors Talking Shop, The Future, Thinking of Buying?, Thinking of Selling?, Why You Should List With Jim |
People are asking about the NAR lawsuits – hat tip to Susie, Gerry, and Carl!
The lawsuit that began this week contends that realtors force sellers to pay a commission to the buyer’s agent. Two defendants, ReMax and Anywhere (Coldwell Banker, Sotheby’s, etc.) have already come to settlement agreements, though they haven’t been approved by the judge yet. The other two brokerages, Keller Williams and Berkshire Hathaway, plus the National Association of Realtors are the remaining defendants. Their attorney started the proceedings by declaring that the plaintiffs have the burden of proof, and the defense may not call a witness. It is that type of arrogance that got them into this mess!
A summary:
In their trial brief, the plaintiffs in the suit allege that NAR’s Participation Rule, which they refer to as the Mandatory Offer of Compensation Rule, is “a market-shaping and distorting rule” that stifles innovation and competition.
“The Rule requires every home seller to offer payment to the broker representing their adversary, the buyer, even though the buyer’s broker is retained by and owes a fiduciary obligation to the buyer (who may be told, falsely, that the services of the buyer broker are “free”),” the brief said.
They argue that the current practice of the seller’s agent splitting their commission with the buyer’s agent, who typically negotiates for a lower selling price for their client, works against the seller’s interest and only exists due to the alleged anticompetitive rules. The plaintiffs also note that the NAR rule in question requires a blanket offer of compensation for the buyer’s broker regardless of their experience or the level of service they provide the buyers with, and that the compensation offer was only visible to the buyer’s agent and not their clients, until very recently.
“This artificial and severed market structure created by Defendants’ conduct deters price-cutting competition and innovation, resulting in inflated commissions,” the brief states. “The Mandatory NAR Rules impede the ability of a free market to function in the residential real estate industry, and the plain purpose and/or effect of the Rules is to raise, inflate, or stabilize commission rates.”
In the brief, the plaintiffs claim that the other defendants in the suit colluded with NAR to enforce this and other NAR and MLS policies.
“The Corporate Defendants compel compliance in multiple ways, including by requiring their franchisees, subsidiaries, brokers, and agents become members of NAR; writing the NAR Rules into their own corporate documents; and requiring that their franchisees, subsidiaries, brokers, and agents become members of and participants in the Subject MLSs — entities that compel NAR membership and adopt the mandatory NAR Rules,” the brief reads.
The brief notes that Craig Schulman, the director of Berkeley Research Group and professor of economic data analytics at Texas A&M University, will be an expert witness for the plaintiffs at trial. In studying transaction data from NAR and other parties, the brief states the Schulman has concluded that “(a) the NAR Rules have anticompetitive effects; (b) the NAR Rules caused a seller to pay his adversary (buyer broker) and that, but for the conspiracy, a seller would not pay the buyer broker; and (c) all class members were impacted.”
The brief also notes that Schulman will testify that NAR’s rules have stabilized commission rates at an “anticompetitive level,” noting that commissions have remained at 6% for several years.
Unfortunately, none of the reality of what happens on the street will get introduced during the trial. Instead, it will be ivory-tower guys hoping to persuade the judge and jury (one of which has to breast-feed her infant every 1.5 hours) that the whole commission thing is out of control and someone is to blame.
But the defendants have a good point:
NAR also argued that the plaintiffs do not have the ability to sue for damages —which some believe could reach as much as $4 billion in this case — because under federal and Missouri antitrust law, only “direct purchasers” can be allowed to sue and the plaintiffs have not bought anything directly from NAR or the other defendants.
“And, according to those same Model Rules and listing agreements, Plaintiffs did not directly pay cooperating agents, NAR, or the other Defendants; sellers only directly pay their listing agents and only directly receive services from their own agents,” the brief states. “Therefore, at best, Plaintiffs might claim that they paid their listing agents (who are not parties to this case) who, only then, paid Defendants. But such an indirect claim is prohibited by Supreme Court case law.”
Home sellers pay the full commission to the listing brokerage. It is the listing agent who declares in the original listing agreement of how much of the full commission they are willing to pay the buyer’s agent. None of this will be discussed during this trial, but it’s the most important part!
The plaintiffs should be suing the individual listing agents – good luck with that!
In the end, the defendants might be found guilty, and they will appeal for years – the American way! Or it’s more likely that they will settle in the next couple of weeks because the ReMax and Anywhere settlements were only $55 million and $85 million, which is pennies.
Part of the settlement package will be that the MLS will no longer be obligated to display ANY commission to be paid to the buyer’s agent. It will cause two things to happen:
- MORE steering by the buyer-agents to the homes that are paying a healthy commission (bounty).
- Buyer-agents trying to convince their buyers to pay them the buyer-side commission.
Kayla is faced with this dilemma in New York City. Did you know that 2/3’s of the population in Manhattan are renters? It’s a big business! But the listing agents don’t offer a tenant-agent commission, which means Kayla has to get paid by her tenants upon finding them new home to rent.
The results:
- She has had the landlord’s listing agent pull aside her potential tenant and tell her to ditch Kayla and save the money, and go through him directly. Apparently they aren’t concerned with their reputations!
- She has also had her potential tenants be reluctant to sign an tenant-agent agreement because they see apartments being advertised by the listing agents. They want to reserve the right to go direct to the listing agent, and usually they do. As a result, Kayla only works with those who appreciate her advice.
The idea that home buyers will hire and pay their own buyer-agents is a great idea…..in theory.
The reality is that buyers will go direct to the listing agents when they see an interesting new home for sale. Those listing agents will be advertising to those buyers directly, and flat-out encourage them to get a better deal by going through them.
The buyer-agent is a dead man walking.
by Jim the Realtor | Oct 12, 2023 | Realtor, Realtors Talking Shop |
They wait until the week that the trial starts? She should have said ‘regularly defraud MORE clients’.
The National Association of Realtors laid out a doomsday scenario for the industry in the case home sellers prevail in two landmark antitrust cases.
The group warned that a ruling in the plaintiff’s favor could render buyer’s agents unaffordable, block equal access to listings and restrict buyer choice, NAR’s general counsel Lesley Muchow said. The trade group held the online webinar five days before Sitzer/Burnett, the first of the two closely watched suits, is slated to start trial in Kansas City.
“This would be bad news for consumers,” Muchow said. She added that if NAR isn’t allowed to continue with some of its practices, “we would be forced back into the 19th Century or what we see as the Wild West, where unscrupulous people could regularly defraud clients.”
Muchow argued that if the lawsuits’ results upset local MLS systems, buyers would have fewer homes to choose from and sellers would lose exposure to their properties.
“Buyers would have to visit every single broker in town in order to see all of the available inventory that is out there for them,” Muchow said.
This scenario would likely lead to outdated and inaccurate listing information, she said, and would cost brokers more money if they have to pay to feature their listings on third-party platforms.
Jury selection will begin on Friday.
Both of the landmark lawsuits center on NAR’s “participation rule,” which critics claim violates antitrust laws by inflating commissions charged to home sellers.
The rule’s interpretation was largely understood as requiring listing brokers to offer compensation to buyer’s agents, but a spokesperson for NAR said that it only “requires participants to communicate an offer of compensation to other MLS participants and that offer can be any amount, including $0.”
by Jim the Realtor | Oct 1, 2023 | Jim's Take on the Market, Realtor, Realtor Post-Frenzy Playbook, Realtor Training, Realtors Talking Shop |
I have mentioned repeatedly that the buyer-agent is a dead man walking. All forces within the industry are combining to push the buyer-agent out of the equation, and home buyers will be worse off because they will only have faux representation when buying directly from the listing agents.
Everything is negotiable……well, except the buyer-agent commission. From the Code of Ethics:
The Code of Ethics Standard of Practice 16-16 prohibits buyer-brokers from “using the terms of an offer to purchase to attempt to modify the listing broker’s offer of compensation.” Thus, the buyer-broker cannot attempt to condition the purchase of a home on the seller-broker’s agreement to adjust the amount of compensation offered to the buyer-broker.
Second, the Code of Ethics’s Standard of Practice 3-2 requires that any modification in the compensation offered to the buyer-broker “must be communicated to the [buyer-broker] prior to the time that [buyer-broker] submits an offer to purchase the property. And once a buyer-broker “has submitted an offer to purchase the property, the listing broker may not attempt to unilaterally modify the offered compensation.”
Third, Case Interpretation #16-15 advises that any negotiations regarding the buyer-broker’s commission “should be completed prior to the showing of the property.”
The buyer-agent is NOT allowed to negotiate their commission during the offer process!
What’s worse is that any negotiation of the commission must happen BEFORE the home is shown to the buyer. How many listing agents will agree to pay more commission before the buyer sees the home? The answer is zero.
The pending lawsuits against realtors are all about the seller being required to pay the buyer-agent’s commission. Miraculously, ReMax and Anywhere have already settled, and the whole thing could get resolved shortly. But it has been univeral among observers that the end result will be that home sellers will not be required to pay ANY commission to the buyer-agents. It will be optional instead.
Two things will happen:
- The buyer-agents will be even more likely to steer their clients to where they can get a commission.
- There will be even more shenanigans by listing agents.
Rob lays it out here, starting around the 26-minute mark:
https://www.vendoralley.com/2023/09/28/industry-relations-podcast-the-re-max-settlement-and-what-happens-next/
It means that the buyer-agents will have to either live with the commission that the seller is offering (if any) and steer their buyers to those homes, or have an agreement with their buyer to be paid directly by them. While that sounds nice, it is a complete change to the business and most agents won’t be able to justify being paid for their services. When buyers can just go direct to the listing agent for free – which the listing agents will be advertising – they will be very reluctant to be contractually obligated to pay a buyer-agent.
by Jim the Realtor | Aug 30, 2023 | Realtor, Realtors Talking Shop |
This is for the realtors out there.
First we learned that the CEO of the San Diego Association of Realtors embezzled $1,000,000+, and now we hear that the National Association of Realtors is full of scumbags. The NY Times ran a story over the weekend that accused the NAR president of sexual misconduct and he resigned this week – but denied any wrongdoing, of course.
More stories have come out this week from various insiders, summarized here:
https://nowbam.com/we-deserve-better-a-rallying-cry-from-the-industry-following-nar-presidents-resignation/
They collect around $300 in annual dues from realtors, and it adds up. They reward themselves well:
We are independent contractors. We don’t need to fund a $300 million per year enterprise that does nothing for us.
Bob is retiring next year. With his departue, I say we just shut the whole thing down.
by Jim the Realtor | Aug 14, 2023 | Realtor |
The grifting at the San Diego Association of Realtors continues to unwind, and as a result, I have switched back to being a member at the North San Diego County Association of Realtors.
Rob wrote a blog post about the original swindler, Mike Mercurio, who embezzled over a million dollars while being CEO of the SDAR. His article caused insiders to respond to him with even more details, including the involvement of Mercurio’s replacement Cory Sheppard, who used to be the general manager of Coldwell Banker West.
And then when you think it couldn’t get any more slimy, it turns out that Cory still feels for CB. Rob asks:
Furthermore, in the video, you say to Peter Mendiola, President of Coldwell Banker West, that you want to do everything you need to do to support him and CBW and its agents over an “extended period of time.” To which Peter adds, “Like forever?” And you both laugh… seemingly in agreement… then you add, “For as long as you want.” Would you clarify to your members who are not with Coldwell Banker West how they should understand that statement? How can they be assured that there will be no favoritism shown to your former company and former agents since you agreed to do everything you can to support them “for as long as you want” which might in fact be “forever”? And how can your members trust you given the fact that this video was sent to CBW agents on May 2nd, while the rest of the membership didn’t know jack diddly until August?
The situation reeks of favoritism and outright theft, and you would think that criminal charges should be forthcoming. In the meantime, I’m not going to have anything to do with them.
If you have any insider information, contact Rob. Here is his latest blog post on the subject with one bombshell after another:
https://notoriousrob.substack.com/p/questions-for-cory-shepard-sdar-car
by Jim the Realtor | Aug 8, 2023 | Frenzy, Open House, Realtor |
I hate when realtors say, “Price it right”.
It makes it sound like we know something you don’t – that our price is the right price.
Realistically, you can only say you priced it right if a house sells during its first week on the market. The frenzy made every listing agent look like a rockstar when most of the time it was due to the demand being so high that many listings were selling in spite of its agent and price.
How good are agents about price?
In the first half of 2023, there were 1,377 detached-home listings between La Jolla and Carlsbad. Of those, there are 896 that have sold or are now pending, which is 65%. Hmmm.
Let’s just price them attractively, which isn’t as specific as ‘right’. Put a price on it that causes people to want to come take a look, and then when they arrive, be a good enough salesperson to handle the rest.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
One way an agent can stay sharp about pricing is to see homes in person. The frenzy prevented us from doing the broker previews on Tuesdays and Wednesdays, and those were the best way to easily view the new listings.
Buyers go to open houses on the weekends, and shouldn’t we know as much as them?
It’s easy to shrug off the broker previews if you don’t have any waiting buyers for the homes on the list. But seeing homes every week also helps to keep an agent sharper about pricing in general – and also build better relationships among the agents who are on the tour.
I’ll have my Aviara Drive listing on broker preview tomorrow from 10:00am to 1:00pm with food. I told the sellers that my over/under on agent attendance is 15, which doesn’t sound like many when there are 1,000+ agents working in the area.
Anyone who attends tomorrow and mentions the blog will get a bubbleinfo t-shirt – non-agents included!
https://www.compass.com/app/listing/7141-aviara-drive-carlsbad-ca-92011/1364510398054940729
by Jim the Realtor | Aug 4, 2023 | 2023, Jim's Take on the Market, Realtor
It’s good to see that last month had more sales (159 vs 147) than in June – which also had two more business days! Let’s combine the two months to soften the July drop median sales price and compare to previous years.
The plunge in sales has to be discouraging to potential buyers who can now only expect 2-3 chances per year to buy a desirable home in their preferred area of choice – and you can count on being beat out by a crazier buyer on at least one of those, and be victim to realtor shenanigans on at least one other. It happened again this week when the listing agent grabbed the first offer within 24 hours even while allowing other showings to motivated buyers, but then denied them a chance to submit an offer.
With that much frustration in the air, the pricing will likely stay elevated.
by Jim the Realtor | Aug 2, 2023 | Realtor |
Lovely……why isn’t he in jail?
Collecting hundreds of thousands of dollars in unearned vacation pay, and tens of thousands in purchases on association credit cards which were then posted on eBay and deposited into a personal bank account; these are only a few accusations lobbed at the former CEO for the San Diego Association of Realtors, Mike Mercurio.
In a newly filed 110-page lawsuit, four former high-level executives at the San Diego Association of Realtors (SDAR) say they were fired after investigating what they claim was a long-running scheme by Mr. Mercurio to funnel SDAR funds into his personal account.
The San Diego Association of Realtors is a large and powerful lobbying group that is funded by annual dues from its 20,000 or so members.
However, more than a million dollars in those member dues were diverted from lobbying efforts into the pocket of former CEO Mercurio, says the lawsuit.
The plaintiffs, which include the association’s former Chief Operating Officer, Director of Human Resources, Controller, and Marketing Chief, claim Mr. Mercurio, “engaged in massive embezzlement, stealing over $1 million from SDAR, and further directed, and participated in, the falsification of financial documents, extensive personal use of company credit cards, payroll fraud, and tax evasion.”
(more…)
