The new C.A.R. forms for 2020 are available, and the most interesting is the MLS-exclusion form in light of the NAR Clear Cooperation policy that begins on May 1st.
Last year I asked the C.A.R. lead attorney about their stand on Coming-Soon and off-market listings, and Gov said it is up to the brokerages. Their new form reflects it too – they have left it optional for agents sellers to choose to comply:
The form does a better job disclosing the listing-agent shenanigans, and makes them a choice for the seller. But will the listing agent discuss the choices? Or just write it up and send for sigs? The sellers just want their money – they assume their agent will be implementing the best ideas to achieve top dollar.
On May 1st, the Clear Cooperation policy will be in effect, which was intended to discourage off-market sales. But in paragraph 9A you will see that office exclusives are permitted, which will legitimize selling properties in-house. The realtor shops with the most listings will prosper if they pitch them hard to their fellow agents – and most already have an internal marketing system to facilitate.
There is an argument that off-MLS sales are good for the seller because the buyers are pressured to pay all the money before the property goes on the open market.
But off-MLS sales add some uncertainties:
Did the buyers steal it, or did they over-pay?
Were there other buyers that would have paid more?
Are the off-MLS sales legitimate comps for the next guy (seller or buyer)?
Are we still committed to sharing our listings with other agents?
The MLS will still exist, and be the market of last resort because the best properties with the best prices will be sold in-house, or to the aggressive, professional salespeople.
Richard just procured a new sale for his investor client by calling agents who had sold similar properties recently. One told him that he did have a Coming-Soon that was a 6-cap, and gave him the address. Richard hustled his buyer over to the property and promptly submitted an offer, which got accepted yesterday!
Why are Coming-Soon/off-market sales attractive to listing agents? Because they can save time and money on marketing, and hurry up to the next deal. But that selfishness will change the landscape for buyers and buyer-agents, and both will need to be well-connected to succeed.
The MLS Statement 8.0 Clear Cooperation Policy is ‘a lightweight, middle-of-the-road policy that will just make the problem worse’ because it doesn’t go far enough. It’s so full of holes that it will only exacerbate the problem, and by the time they figure it out, it will be too late to fix it. It might be too late already.
The new policy just helps to define the ways that agents can avoid putting their listings on MLS:
Office Exclusives Are Allowed. Agents will shop around their new listings for days or weeks among their fellow agents in the office. Only once that avenue is totally exhausted will listings find their way to the MLS.
Submitted to MLS Within One Business Day. From now on, all listings will be signed on Fridays (or postdated).
Sellers Can Market Publicly. The listing agent isn’t supposed to publicly advertise the home, but……..
Showings Aren’t Required. Just because a listing is in the MLS doesn’t mean agents can show it. This is the oldest trick in the book. When an outside agents calls to arrange a showing, he/she is told that the property can be seen any time….as long as it’s between 5:00-5:05pm next Thursday.
No Penalties Mentioned. There has never been a MLS police, so any enforcement will be sketchy at best. But realtors love to rat out their fellow agents so complaints will be flying – but what will be the penalty? Most likely it will be the usual, which is a letter in the offender’s file for six months. Will it be that much?
Stop Using the MLS. If it gets too complicated to navigate the rules, agents will just stop using the MLS. This is why being on the right team is so critical now – if all the hot deals are sold in-house, then working at a small brokerage or being an independent broker will be detrimental. Those agents will only see the leftovers as the MLS becomes an afterthought.
Local compliance was first scheduled for March 1, 2020, but they pushed it back to May 1, 2020 so agents have six months to contemplate. Will we be sitting around discussing how important it is that we share our listings with each other via the MLS?
What’s missing is that no one in the industry is demanding that we share our listings with one another because that is what’s right for consumers and agents alike. Instead, our leaders come up with a lukewarm policy full of holes and no teeth. The spotlight will cause more people to find ways around the 8.0, and proudly conduct off-MLS sales because now they are the even-sexier option.
Yesterday, we entered into the final phase of the MLS implosion, with the latest blow being delivered by the National Association of Realtors themselves. Instead of strictly forbidding Off-MLS sales, they have tried to appease everyone by concocting a lightweight, middle-of-the-road policy that will just make the problem worse:
The National Association of REALTORS®’ Board of Directors approved MLS Statement 8.0, also known as the Clear Cooperation policy, at its meeting Monday. The policy requires listing brokers who are participants in a multiple listing service to submit their listing to the MLS within one business day of marketing the property to the public.
NAR’s MLS Technology and Emerging Issues Advisory Board proposed the policy as a way to address the growing use of off-MLS listings. The advisory board concluded that leaving listings outside of the broader marketplace excludes consumers, undermining REALTORS®’ commitment to provide equal opportunity to all. The policy doesn’t prohibit brokers from taking office-exclusive listings, nor does it impede brokers’ ability to meet their clients’ privacy needs.
Here’s the full text of MLS Statement 8.0:
Within one (1) business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants. Public marketing includes, but is not limited to, flyers displayed in windows, yard signs, digital marketing on public facing websites, brokerage website displays (including IDX and VOW), digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public.
MLSs have until May 1, 2020, to adopt the policy.
Rationale: Distribution of listing information and cooperation among MLS participants is pro-competitive and pro-consumer. By joining an MLS, participants agree to cooperate with other MLS participants except when such cooperation is not in their client’s interests. This policy is intended to bolster cooperation and advance the positive, procompetitive impacts that cooperation fosters for consumers. The public marketing of a listing indicates that the MLS Participant has concluded that cooperation with other MLS participants is in their client’s interests.
The National Association of Realtors is attempting to regulate a change in the Coming Soon environment – see above. The way it is written, however, will just take us back to the days when off-market deals were done behind closed doors because they are permitting the ‘office exclusives’.
Coming Soons were the industry’s public admission that we do off-market deals, and to give you a chance to get your piece of them. But now the N.A.R. wants brokerages to pick a lane.
1. Comply with the new rule, and change the name of your off-market deals to ‘office exclusives’, where no one can see them.
2. Don’t do anything, and pretend that off-market deals aren’t happening at your shop.
3. Declare publicly that off-market deals are a vital part of your business, and keep marketing them as Coming Soons to the public, in spite of any changes in the N.A.R. rules. What are they going to do?
Numbers 1 & 2 above are the less-transparent choices, and the easier way to go for the agents who justify their off-market deals by saying the seller got what they wanted.
Number 3 is the fully-transparent admission of the truth – agents like to pad their wallets with off-market deals, and don’t see anything wrong with that.
Off-market deals aren’t going away, regardless of the rules. The existing rules already state that all listings are to be inputted onto the MLS within 48 hours, but it gets ignored and there is no policing or penalties.
It’s better for everyone involved – agents, buyers, and especially sellers – to put every listing onto the MLS to ensure full exposure so everyone can compete. Buyers would feel they had an equal chance to buy, sellers get top dollar, and all agents get a fair chance to earn a paycheck.
But N.A.R. and the industry’s upper management looks the other way. It will take a class-action lawsuit or new regulations from the federal government to bring real change.
It’s inevitable that the amount of the commission paid by the seller to the buyer-agent will be made public.
Because the existing rules forbid the MLS companies from disclosing the commission amount to the public, it sounds like the consumer is being wronged. The lawsuits filed against major brokerages are building their case on the lack of transparency about that commission, and when they settle, it’s likely that this will be among the big wins for them – they got the buyer-agent commission disclosed to the public.
Let’s jump ahead.
Once revealed, the public will come to two conclusions about the buyer-agent’s commissions:
The vast majority of sellers offer a 2.5% commission/bounty/reward to buyer-agents to sell their house.
We’re excited to be hosting our first ever ZOOM meetup with James Harris (Million Dollar Listing Los Angeles & Founding Partner, ThePLS.com). We’ll be discussing Los Angeles real estate market trends for Q2 (and beyond) and James will be sharing his take on things.
There was a CB realtor from Santa Monica who said his market has slowed down, with many price reductions, fewer multiple offers, and longer market times. A discussion ensued – my takeaways:
A. The market is level (at best) and sellers need to be realistic. You can spend a million dollars on advertising, have the best photography and videos, and do open house every day, but if the price isn’t right, it still won’t sell.
B. James thought open houses are a good way to expose a property to the market, and for knowledgeable agents to impress the attendees about the value.
C. James also said that when it’s slower, it’s better to test pricing off-market first. (But wouldn’t it be natural for sellers to say, ‘let’s test the price on the open market to find out for sure.’)
D. When a home is on the open market but not selling, it’s better to lower the price in weeks, not months.
Those sum up the basic fundamentals for today’s market.
I suggested that to enhance the value of private-listing clubs, they should limit membership to the top agents only, but they didn’t want to get into it. They did like my idea of having more webinars where agents can discuss topics and listings.
The club hasn’t made much of an impact yet in the San Diego area. There are only 34 listings county-wide on the website, and some are older and/or already sold. Curiously, one had been on our MLS this year, but expired and is now on the PLS only as an off-market opportunity at virtually the same price.
The other large private listing club, Top Agent Network, is limited to the top 10% of agents in a region (based on volume). They were thinking of opening in San Diego, but I haven’t heard any updates lately:
There may come a day when the private listing clubs have an impact, but it would take their leaders to constantly sell the benefits to agents – and those are people who have become wary about the benefits from the traditional MLS (if any). If an agent wants to pursue an off-market sale, then it’s too easy for them to throw a sign in the yard and wait (if the price is right).
Brokerages are finding new ways to convince sellers to do in-house deals – an excerpt:
According to Charles Williams, CEO of Buyside, “the software we supply to Metro Brokers unlocks the power of their buyer data for agents so they can win more listings, become more profitable and command greater control over their inventory.”
Buyside’s core products include Home Valuation landing pages, which combines multiple automated home valuations with visualizations of real-time buyer intent; Buyer Match™ dashboard, which intelligently pairs homebuyers and sellers within a brokerage; and Real-Time Buyside Market Analysis (BMA), which arms a brokerage’s agents with insights on buyer demand to help them close more listing presentations.
“Our affiliation with Better Homes and Gardens Real Estate provides our firm with outstanding analytics and business intelligence tools that are the cornerstone of excellence in any leading real estate firm today,” says McClelland. “We have tremendous success marketing properties for sale and leveraging the Zap platform for maturing homebuyers. Today’s homebuyers are shopping for about 240 days before closing. When securing a new listing, our agents use Buyside to explain that the likely buyer for that property has already been working with a Metro Brokers agent for months. The value proposition of our firm’s listing presentation is not how we will find buyers, but the number of homebuyers that we have looking for their home today. We don’t believe that any other brokerage in Georgia has more home buyers than Metro Brokers.”
I haven’t seen an article yet where the reporter gets the other side of the story, so I’ll address these fallacies below at green paragraphs. Hat tip to all who have sent in this story!
Why should a home seller have to pay for the buyer’s side of the transaction, especially when the buyer’s expenses include negotiating against the seller?
That apparent conflict of interest is at the heart of an escalating legal battle that pits the National Association of Realtors (NAR) against a group of law firms that filed a class-action lawsuit on behalf of home sellers against the NAR and four large national real estate brokers: Realogy, HomeServices of America, RE/MAX and Keller Williams Realty. As of May 22, the Department of Justice joined the fray when it demanded information about residential estate commissions from CoreLogic, a California-based data analysis firm.
JtR – Why? Because it is in the seller’s best interest to offer a bounty/bribe to the buyer agents.
The fight is forcing into the open many of the hidden factors that dictate how realty agents are paid and common practices that make it difficult for home sellers to effectively negotiate the commissions they pay.
It is standard for multiple listing services — data bases owned by realty agents — to require that the entire commission be paid by the home seller. Typically, the commission is 5% to 6% of the sale price of the property. Then, the commission usually is evenly split between the broker representing the seller and the broker representing the buyer.
That means that the seller directly pays for the transaction costs for the other side — even when, as is common, the other side negotiates for a better deal. The net result is that the seller is forced to pay for those working against him or her. The core of the lawsuit is that “the rules are, in effect, anti-competitive,” said Brown. “It’s a very strange way to run a market.”
JtR – The MLS does not require that the entire commission be paid by the home seller. They require that the listing broker offers compensation to the buyer’s agent, and it can be any amount.
The NAR filed to dismiss the lawsuit, partly based on the fact that it supports many types of business models for its members, said Rene Galicia, director of MLS engagement for the NAR. “The MLS doesn’t set commission rates. That’s left up to individual brokers and consumers, depending on the transaction,” he said. “Consumers should look at their level of comfort with real estate and what they want to accomplish. It’s highly competitive right now. Lay out your goals and find which broker will meet your needs.”
The actual commission structure has not been tackled head-on until now, say real estate experts.
JtR – The commission structure gets tackled every day on the street – without pads and helmets! We should do a better job of disclosing how much commission, and why, to all parties.
The split-commission structure causes confusion when sellers try to negotiate how much they will pay, because any reduction must be negotiated with everybody involved, explained Gary Lucido, president of Lucid Realty Inc., a Chicago broker that offers rebates on commissions. For instance, if the seller’s agent agrees to take less money, the buyer’s agent might not agree to a discount.
JtR – The commission isn’t negotiated with everyone involved. The listing agents decide how much they are willing to pay buyer-agents, and then present the commission package to the seller for approval or negotiation. The buyer-side cut comes out of the total commission negotiated between listing agent and seller – the only choice the buyer-agent has is whether they will show the house.
Also, the baseline costs of selling are not always obvious to consumers, said Lucido, which means that home sellers often don’t have the information they need to effectively negotiate. The cost of listing a house in the MLS, which feeds national listing sites such as Trulia and Zillow, is the same regardless of the asking price. A higher-end property might require additional marketing services and associated costs, such as a drone video or a fancy broker’s open house.
But usually, said Lucido, the additional cost of marketing does not justify the richer commission on a higher-end property. That is why, he said, agents are more willing to reduce their commissions on more expensive properties than on those under $200,000: Once the fixed costs are covered, it doesn’t take that much more work to sell an expensive property than a moderately priced property.
JtR – This is the common ploy by discount agents – that it doesn’t cost that much more to sell the higher-end properties. It suggests that all agents offer the same skill set, which is the true issue that needs to be examined – and maybe in court. Because the supply-and-demand of higher-priced homes is in the buyers’ favor, the sellers should hire agents with advanced sales skills and resources.
The class-action lawsuit and DOJ involvement might be enough to bring Americans in line with the rest of the world in terms of how real estate fees are calculated and paid for, said Timothy S. Becker, director of the Kelley A. Bergstrom Real Estate Center at the University of Florida in Gainesville. “The 6% model is ridiculous compared to how real estate is bought and sold in the rest of the world,” said Becker. “The agencies are set up to work for the transaction and for the agents’ own interests, not for consumers.” Real estate commissions around the world vary, but often are as low as 1.5%.
JtR – The media insists on quoting outsiders incessantly on this topic, but never explores further. You pay peanuts, you get monkeys.
It is significant that the class-action lawsuit is brought on behalf of property sellers, because they are the ones who pay the entire cost of the transaction. “The buyers currently don’t pay anything,” said Becker, “There should be a correlation between what you get and what you pay for.”
JtR – If buyers don’t pay anything and, as a result, can choose any agent to represent them, you’d think they would search out the very best. Why don’t they? The internet has made the homes for sale more available to consumers, but has it educated them on the nuances? No, and the industry is to blame. This lawsuit won’t change it, either.
"Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community... more "
by Ann Romanello
"Jim educated us, helped us find the perfect house, and then negotiated us a great deal. I would hate to be sitting across the negotiating table from ... more "
"Jim is thorough and will be brutally honest about the homes he shows you. He provides great service and follows through until the very end and even ... more "
"I highly recommend Jim as a buyer’s agent. Working with Jim, we closed this week on a San Diego condo. Jim prepared a list of comparable sales to ... more "