Home listing syndication is big business

home listing syndication
Home listing syndication (infographic via trendmls.com)

Your home listing is a hot commodity!  Not just to home buyers looking to buy, but to those who buy and sell information on the internet.  MLS home listing information syndication is big business.

Much of what you see, hear, and read on TV, radio, and the internet is syndicated and distributed through a broad network of affiliated outlets.  The purpose is to have as large of an audience as possible.  The larger the audience, the larger the advertising revenue.  Syndicating and distributing media content has been around for a very long time, and has been very a lucrative industry for those involved.

Internet syndication is no different and has become sophisticated, such that websites will pay for licensed content.  The content attracts visitors and generates revenue via ads and/or pay-per-click.  Needless to say, internet syndication has developed to become a multi-billion-dollar industry.

When you think about making money in real estate, you probably think about buying and selling property, not the internet.  Most people don’t realize that real estate information generates $billions on the internet.  Real estate portals generate revenue by publishing content that attracts home buyers and sellers.  The sought after content, of course, is your home’s MLS listing.  Websites generate income by selling real estate and other professionals access to consumers who visit their sites to view your MLS listing.

You may not know this, but your home’s listing is copyright-protected by your agent’s Multiple Listing Service.  The content is licensed and syndicated to internet real estate portals and other publishers for a fee.  How much do websites pay for MLS licensed content?  Heck, you’d be hard pressed to find that information, much less acknowledgement that there is a fee paid at all!  And I suspect that information is not readily disclosed because consumers would be up in arms if they knew.

However, an article by Natalie Sherman appeared in the Baltimore Sun on January 27, 2015 (MRIS looks to partner with Zillow) gives a hint about the monetary relationship between MLS boards, syndicators and publishers.  Ms. Sherman wrote:

“Under the current system, Zillow pays to receive listings from Listhub.com, which has agreements with hundreds of multiple listing services, including MRIS, to provide syndication services to sites such as Zillow. Earlier this month, Zillow and Listhub said their existing deal would not be renewed.

A representative for Zillow, which has been working to establish more direct relationships with brokers and listing services for years, said a new deal would help keep the site more up to date.”

The article refers to the 2015 shakeup of real estate listing feeds to specific websites, such as Zillow.  At that time, Zillow sought direct deals with individual MLS boards, such as our local MRIS (now part of Bright MLS), to get MLS home listing feeds.

Chances are that you are unaware that the information about your home that is uploaded to the local MLS (including pictures of your home) become the property of the MLS.  Much less, you may not know that the information is licensed to others for a fee to be used on other websites.

Even though the MLS boards charge subscription fees to agents for the privilege of uploading and viewing content, they might argue that the fees generated by licensing and selling your information helps maintain the MLS system.  However, not disclosing this aspect of the real estate listing poses some ethical questions that must be addressed.

Of course, there are real estate brokers who have opted-out of syndication of their MLS listings.  These brokers want to retain control of  home listing information to ensure accuracy and maintain professionalism when presenting your home to the public.

Copyright© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Demand better consumer financial protection

consumer financial protection
Consumer Financial Protection and Dodd-Frank (infographic from CreditUnionTimes www,cutimes.com)

In an effort to reform the Consumer Financial Protection Bureau (consumerfinance.gov) to become a better steward of consumer protection, H.R.5983 – Financial CHOICE Act of 2016 was introduced during the last congress.  The effort to compel oversight on the now embattled agency, as well as provide for a panel of decision makers (in lieu of a single chairperson), is unfortunately highly politicized.  As financial consumers, we should demand a better and fair protection agency serving without political motive.

From the Executive Summary of the The Financial CHOICE Act
Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs:

SECTION THREE: Empower Americans to achieve financial independence by fundamentally reforming the CFPB and protecting investors.

  • Change the name of the CFPB to the “Consumer Financial Opportunity Commission(CFOC),” and task it with the dual mission of consumer protection and competitive markets, with a cost-benefit analysis of rules performed by an Office of Economic Analysis.
  • Replace the current single director with a bipartisan, five-member commission which is subject to congressional oversight and appropriations.
  • Establish an independent, Senate-confirmed Inspector General.
  • Require the Commission obtain permission before collecting personally identifiable information on consumers.
  • Repeal authority to ban bank products or services it deems “abusive” and its authority to prohibit arbitration.
  • Repeal indirect auto lending guidance.

Some have hailed the CFPB because it was created out of good intention. There is no question that the CFPB has done a great job in collecting and publicizing consumer complaints.  The announcements of consumer complaints seem to be a public airing of consumer grievances, which sometimes signaled forthcoming action from the agency in a specific financial sector.

However, critics contend that the CFPB rules have made lending more burdensome for both lenders and consumers by increasing bureaucratic red tape.  It has also increased the cost of lending to consumers by adding levels of compliance measures that are now embedded within the lending process.  Critics have also complained that the CFPB’s enforcement is not fair and unequal in focus.

Critics are becoming increasingly vocal, not only because of the sometimes invasive rule making, but more recently of how offenders are chosen and penalized.  Jacob Gaffney’s article for HousingWire (Former CFPB attorney pretty much just confirmed the worst fears of the mortgage industry: housingwire.com; January 3, 2017) earlier this year discussed two genuine concerns about the CFPB:

1) “The CFPB targets lenders for enforcement action based on opaque internal decisioning;” and

2) “Monetary penalties seemed determined by revenue, not equalitarian application of said enforcement action.”

Gaffney quoted Ronald Rubin, a former enforcement attorney at the Consumer Financial Protection Bureau, (from a December 21st 2016 piece “The Tragic Downfall of the Consumer Financial Protection Bureau” published online nationalreview.com) as confirming these concerns.  For example, the Wells Fargo fake consumer account scandal, one of the most egregious consumer scandals post financial crises, was not addressed by the CFPB (until it was too late) because Wells Fargo was allegedly “not a target of the agency at that time.”

Referring to the complaint database, Rubin stated:

The CFPB’s complaint database contained grievances against almost every financial business. Enforcement targeted the companies with the most revenue…rather than those with the most complaints.”  He further stated: “Targets (of the CFPB) were almost certain to write a check… Even the size of the checks didn’t depend on actual wrongdoing — during investigations, Enforcement demanded targets’ financial statements to calculate the maximum fines they could afford to pay.

The recent PHH Corp v Consumer Financial Protection Bureau case highlighted some of the alleged abuse of power by an agency with no oversight.  US Appellate Judge Kavanaugh wrote in his opinion:

That combination of power that is massive in scope, concentrated in a single person, and unaccountable to the President triggers the important constitutional question at issue in this case

…This is a case about executive power and individual liberty. The U.S. Government’s executive power to enforce federal law against private citizens – for example, to bring criminal prosecutions and civil enforcement actions – is essential to societal order and progress, but simultaneously a grave threat to individual liberty.”

We’ve followed the career of the CFPB since it was established in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  Shortly after the financial crisis, we eagerly anticipated the new agency to help those who were the target of abusive lending and foreclosure practices.  Since its inception, however, controversy has embraced the agency.

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Transforming real estate – whom do agents really represent?

transforming real estate
Real estate transformation over time (infographic from movoto.com)

The continuously transforming real estate industry continues to change because of two forces, consumers and real estate professionals.  It would seem intuitive that the forces should be complimentary, but a deeper analysis might suggest conflicting interests between consumers and real estate agents. Whom do agents really represent?

Efficiency, although not openly stated, is a main goal of both home sellers and real estate agents.  Home sellers want to sell their homes efficiently (as quick as possible and for the most money); while the real estate agent may be focused on collecting the most commission in the least amount of time.  A.W. Jenkins’ ground breaking research looked into why consumers continued to use brokers in a transforming real estate environment as a means of buying and selling a home.  Jenkins determined that the only reason why consumers did not use a more efficient “used house dealer” is because they don’t exist (Home, Sweet Home: Real Estate Brokerage in Canada, Vancouver, Canada: The Fraser Institute, 1989).  Jenkins discussed the incentive for consumers to sign commission based broker agreements, even when there are more efficient means of buying and selling a home; including a used house dealer, sell the house on their own, or even pay a flat listing fee.

Anglin & Arnott furthered Jenkins’ line of questioning and came to the conclusion that although a used house dealership (like the used car dealership) may be the most efficient means of buying and selling a home for the consumer, it is not an efficient business model for residential real estate professionals (Residential real estate brokerage as a principal-agent problem; The Journal of Real Estate Finance and Economics; 1991, vol 4, no 2, pp 99–125).  The cost of maintaining a used house inventory for the dealer is prohibitive because home resale usually takes longer than reselling an automobile.  Another reason for non-existent used house dealers is government regulation: The sale of residential real estate by individuals other than the owner is highly regulated and sets standards for real estate brokerage.

Furthermore, they hypothesize that there may be broker “collusion” in maintaining existing business models:

…Collusion, we argued, is particularly easy to sustain and enforce in the residential real estate market because transactions require cooperation between the buying and selling broker…

As the transforming real estate industry continues its journey, the notion of efficiency has taken a substantial turn in favor of the real estate agent.  The advent of buyer agency and dual agency has allowed agents to leverage their name and reputation to other agents through a “team.”  Much like the medical office business model of luring patients through someone’s name and reputation, only to see the lower techs; the real estate team has become a popular business mode because an agent can leverage their time by having other agents do their work.  To further the confusion, in some cases there are teams within teams. But to understand the structure of the real estate team concept, think of a Russian nesting doll.  The team is a smaller nesting doll which is embedded in the larger nesting doll (the broker); and the team members are even smaller nesting dolls embedded within the team nesting doll.  To be fair, there are various team models in use today; some are better than others with respect to transparency.  The transforming real estate industry has moved towards real estate teams, which essentially operate as a brokerage within a brokerage.

Real estate team advertising and disclosure have become the focus of regulation in recent years, but has not entirely thwarted unscrupulous advertising that intends to mislead the consumer.  Furthermore, agents who are independent contractors and sub-contractors of brokers and other agents, can not only muddy the waters of agency, but can further distance the agent’s incentive and duty to their client.

In his article about the dual agency controversy (From subagency to non-agency: a history; inman.com; Feb 27, 2012), Matt Carter reminded us about a 1993 treatise by the former National Association of Realtors general counsel William North titled “Agency, Facilitation and the Realtor.”  The essay was written at a time when transforming real estate was about acknowledging buyer agency.  Agency relationships between Realtors and their clients were under scrutiny.  North was questioning whom agents really represent and if agents actually knew their role.  To make it easier for agents to know to whom they have a duty, North made an argument for eliminating the independent contractor status that prevails throughout the industry.  He stated:

An approach more difficult of acceptance by NAR membership would be the abandonment of the independent contractor status…The prevailing independent contractor relationship between broker and salesperson encourages “quantity” over “quality…It is clear from the letters which have been received by Realtor News on the Agency issue that far too many Realtors and Realtor Associations simply have no concept of what an agent is, does or cannot do or that their status as an “independent contractor” vis-à-vis their broker has nothing to do with their obligations, as an agent, to the seller or the buyer.  It only compounds the public confusion as to the status of a Realtor when Realtors themselves do not understand who and what they are.

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NAR should promote Realtor Authenticity

Realtor Authenticity
Rules of Authenticity (infographic from MarketingWeek.com “How to be an Authentic Brand”

Several years ago I told you about the National Association of Realtors’ attempt in shifting consumer attitude towards Realtors.  They are pivoting away from selling Realtor integrity, to selling Realtor value.  In 2014, the NAR voted on creating a Code of Excellence to demonstrate competency.  It wasn’t until this past November that the NAR approved a framework of competencies for agents to achieve.  The eagerly anticipated implementation will allow Realtors to assess and grow their skills and knowledge in many aspects of the business of real estate.  But this Commitment to Excellence, as it is named, may help Realtors increase their competency; but in the end, just like being proficient in the Code of Ethics, it will likely fall short in building consumer trust.  The NAR should promote on Realtor authenticity.

Having agents commit to more training is a good idea in building competency among real estate practitioners.  However, research has demonstrated that showing off accolades and awards doesn’t instill value, nor does it increase sales (Valsesia, Nunes, & Ordanini: What Wins Awards Is Not Always What I Buy: How Creative Control Affects Authenticity and Thus Recognition (But Not Liking). Journal of Consumer Research. Apr2016, Vol. 42 Issue 6, p897-914).

Realtors have a trust gap.  And a badge indicating competency and a Commitment to Excellence won’t bridge that gap.  The business of residential real estate is likened to a game of smoke and mirrors.  Instead of encouraging Realtor authenticity, agents are often taught techniques of persuasion to increase sales.  Many agents devise gimmicks and expensive marketing materials to entice you to do business with them.  Even before you meet with a real estate agent, they are likely scheming how to gain your trust.  Whether or not they earn it is an entirely different matter.

Instead of creating another Realtor badge, designation or code, the NAR should consult with James Gilmour and Joseph Pine II (of the Strategic Horizons LLP).  The title of their 2007 groundbreaking book sums it up nicely: “Authenticity: What Consumers Really Want.”  Realtor authenticity is sorely lacking in the industry, and it’s not just the NAR; it stems from the brokers who train real estate agents as well.  In order for Realtors to build trust, they need to be authentic.

A brief 2004 article by Michael Angier (Authenticity Matters: Are you the real McCoy; Sales & Service Excellence Essentials. Vol. 4 Issue 9, p10) highlighted the necessity for authenticity in the sales environment.  He stated that “People like to do business with people they like. And they like people who are like themselves… Buyers today are savvy. They have more choices. And they can tell whether the company and the people in it are congruent. They seek out, resonate with and tend to be loyal to companies that are authentic. Your uniqueness and the things you’re best at doing are part of your differentiating position. It’s who you are—your identity. It’s what people can relate to. If there’s anything false, made up or covered over, your prospects will sense it. And they can’t even tell you why they didn’t buy…”  Realtor authenticity would certainly positively affect client satisfaction.

Realtor authenticity will not only build trust but can also increase sales.  And indeed, a 2006 research article by Allen Schaefer and Charles Pettijohn (The Relevance Of Authenticity In Personal Selling: Is Genuineness An Asset Or Liability? Journal of Marketing Theory & Practice. Vol. 14 Issue 1, p25-35) confirms that authenticity is related to sales performance.  Their results indicated that salespeople who felt more authentic in their roles performed at higher levels and had a higher commitment to “personal selling.”

What do you think?  Below is the framework of the Commitment to Excellence Program as adopted by the NAR is below (from nar.realtor/policy/commitment-to-excellence). It seems to me that Realtors should already be striving to be competent in these areas:

1) Being current and knowledgeable about the laws, regulations and legislation affecting the real estate disciplines the REALTOR® engages in, and about real estate in their community generally.

2) Understanding the Code of Ethics is a living document, and keeping themselves informed about its duties and obligations on an ongoing basis.

3) Providing equal professional services to all consistent with Article 10 of the Code of Ethics.

4) Advocating for property ownership rights in their community, state and nation.

5) Acknowledging and valuing that honesty and integrity are fundamental and essential to REALTORS® being known as consumers’ trusted advisors.

6) Becoming and remaining proficient in the use of technology tools to provide the highest levels of service to clients, customers and the public, and facilitating cooperation by sharing accurate, current information with consumers and with other real estate professionals.

7) Keeping up-to-date on laws and regulations governing data privacy and data security, and taking necessary and appropriate steps to safeguard the privacy and integrity of information entrusted to them.

8) Committing themselves to enhancing their knowledge and skills in the real estate areas of practice they engage in on an ongoing basis.

9) Providing superior customer service.

10) Appreciating that courtesy, timely communication and cooperation are fundamental to facilitating successful real estate transactions, and to building and maintaining an impeccable professional reputation.

11) As a broker-owner or principal of a real estate company, being committed to creating and maintaining an environment that promotes excellent customer service consistent with these standards.

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Real estate fakery

real estate fakery
Do you really have a choice where you hear news? (from steemit.com)

“Fake news” is the cause du-jour that has energized many into a movement to stop the spreading of falsehoods.  Ironically, the crusaders who point their finger at alleged sources of fake news may also be guilty of promoting it; Fake news accusations are sometimes used to promote misinformation and half-truths.  Unfortunately, fake news has become a meme that is becoming trite and meaningless.  The promotion of fake news may be found throughout history, but real estate fakery is well established in the industry.

Fake real estate news isn’t always a manufactured story.  It is more often a story that is misleading.  When reporting real estate, the media typically sensationalizes a headline without reporting all the facts, which can make you draw inaccurate conclusions.  An example of this is when the local media report on rising national average home prices, giving the false impression that the local market is expanding at the same pace.  This is a mischaracterization of the local market because the regional data is often much different from the national trends.

The National Association of Realtors® is sometimes guilty of real estate fakery too by stating conjecture as fact when explaining market deviations.  An example of this is when existing home sales declined about seven percent during February 2014 (March 20, 2014; nar.realtor).  It was explained away because of the poor weather and snow that occurred that month.  However, if snow is causal to poor winter home sales; then why was there a five percent increase in Montgomery County Home Sales during February of 2010 – when Snowmageddon and Snowzilla occurred? From “Real Estate, Climate Change, and Data-Porn” :

The National Association of Realtors® (realtor.org) March 20th news release reported that February home sales remained subdued because of rising home prices and severe winter weather.  The decline in existing home sales was just 0.4% from January, but was 7.1% lower than last February’s figures.  NAR chief economist Lawrence Yun stated that home sales declines were due to “weather disruptions, limited inventory, increasingly restrictive mortgage underwriting, and decreasing housing affordability.”  And although it may sound bad, Yun actually has a rosy outlook saying, “…Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year.”

So, if a snow filled and cold February is to blame for poor home sales, was Snowmagedden and Snowzilla the reason for increased home sales during February 2010?  Of course not.   And although home sales increased 5.1% year-over-year here in Montgomery County MD during February 2010, it was mostly due to increased home buyer demand that some speculate was due in part to the availability of first time home buyer tax credits.

Housing data cause and effect is only conjecture unless it is directly observed.  To make sense of the “data-porn” that is excessively presented in the media, often without proper or erroneous explanation; economic writer Ben Casselman offers three rules to figure out what the media is saying (Three Rules to Make Sure Economic Data Aren’t Bunk; fivethirtyeight.com): Question the data; Know what is measured; and Look outside the data.  Casselman states, “The first two rules have to do with questioning the numbers — what they’re measuring, how they’re measuring it, and how reliable those measurements are. But when a claim passes both those tests, it’s worth looking beyond the data for confirmation.”

Consumers also perpetuate fake real estate news by exaggerating their (good and bad) experiences, usually offering unsolicited advice or posting to the internet (to real estate forums and websites).  Facts are often distorted or misrepresented about specific real estate situations, such as divorce, short sales, and foreclosure.  Unfortunately, people in similar situations who are looking for answers are at their most vulnerable; and can take the “advice” as gospel, seeking a similar outcome with their transaction.

More real estate fakery on the internet comes in the form of fake reviews.  Fake reviews has been an ongoing issue for a number of years.  And although the online real estate portals have claimed to use artificial intelligence and other means to thwart the trend, fake reviews and those who provide them have adapted and have become more sophisticated such that it is increasingly difficult to spot.  Even back in 2011, Cornell researchers claimed that detection of fake reviews is “well beyond the capability of human judges” (Proceedings of the 49th Annual Meeting of the Association for Computational Linguistics, pages 309–319).

From “Are internet Realtor® reviews real or fake?“:

The National Association of Realtors® (NAR) code of ethics prohibits deceptive practices, which includes posting or encouraging fake reviews. However, Lani Rosales of AGBeat (Sketchy new trend – hiring fake online review writers) argues that there has always been an element posting fake Realtor® reviews and testimonials.

Scammers and fraudsters also use fake real estate news to their advantage.  Fake real estate listings have been an issue since the inception of the internet.  Fraudsters publish pictures and information from a prior sale or rental, or may lift the photos and information from a legitimate listing being marketed by an agent.  The con is to have the consumer send money, often before the home can be seen.  Craigslist warns consumers: “Avoid scams, deal locally! DO NOT wire funds (e.g. Western Union), or buy/rent sight unseen.”

Real estate agents are also culpable for spreading fake news, which may be why agents are often characterized as being fake or phony sales people who will bend the truth to make a sale.  Of course there are some in the industry who fit the stereotype, but many are “straight shooters.”  Unfortunately, it is common for agents to use puffery to make a home seem nicer (until you visit it and realize the “rustic charmer” is a neglected home).  Not as often, agents may create a history for the home that is not real to promote a lifestyle or even hide relevant defects.

When it comes to real estate news, advice, and listings – don’t take anything for granted.  Don’t fall prey to real estate fakery – know the source, and verify the information with a local real estate professional or your real estate agent.

Copyright © Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.