real estate agent Archives - Real Estate News and Commentary

November 23, 2019November 23, 2019

Real Estate Transparency

Ten years ago, I reported on the growing demand of transparency in real estate. As you can imagine, mistrust of real estate agents was at an all-time high after the housing market crash. At that time, home buyers and sellers felt betrayed by an industry that was perceived as keeping their cards close to their chest. However, times were changing and consumers demanded real estate transparency, especially from their agents. Home buyers and sellers not only want their agents to act in good faith, but also want more information and communication during the transaction.

Since then, the National Association of Realtors (nar.realtor) has been trying to mend their reputation. The 2015 DANGER Report was intended to identify issues affecting the industry as well as provide a roadmap to the future. One of the major issues identified was agent competency and ethics. However, it was obvious that ethical Realtor behavior didn’t guarantee competency. And vice-versa. The upshot of the Report was that many of the identified concerns were already known. Ironically, the identified issues and answers only prompted more questions. It was not known if and how the industry would provide real estate transparency.

Fast forward to 2019, when the real estate industry is at a crossroads. Earlier this year a class-action law suit was filed that challenges how agent commissions are paid. Also, earlier this year, the Consumer Federation of America (consumerfed.org) published the first in a series of reports focused on “the lack of real estate agent transparency on representation, compensation, and service.” The Consumer Federation of America (CFA) is described as an association of non-profit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education.

The class-action suit filed in March, if successful, has the potential to force a major change to the industry. Besides having the potential to change how agents are paid, it may force increased real estate transparency in agent compensation. Nevertheless, similar past challenges to the NAR and the real estate industry resulted in minimal (if any) change to how business is conducted.

Serendipitously (or not), Stephen Brobeck’s most recent CFA series report, “Hidden Real Estate Commissions: Consumer Costs and Improved Transparency”was published this month (consumerfed.org). The report confirms consumers’ “lack of understanding” of commissions. It also points out how “concealment of commissions” does harm to consumers. The report indicated that 70 percent of the agents surveyed charge six-percent commission. Commissions are mostly uniform, more so for buyer agent commissions. The report also indicates that there was a general rationale that buyer agents would not show property if the buyer agent compensation was below the average for the area. Of the agents surveyed, 73 percent indicated they won’t negotiate their commission. It also calls attention to administrative fees of several hundred dollars, which is typically charged in addition to commission.

The report concludes that the real estate industry must change its attitude about agent compensation, or risk eroding consumer trust. Home buyers and sellers are savvy, and are increasingly sensitive to the role that commissions play in housing costs. Home seller costs could be reduced if consumers compare commission rates and ask if they are negotiable. Home buyers can also be helped if they are aware how their agent is paid, as well as knowing the offered buyer agent compensation on homes listed in the MLS.

Original article is published at https://dankrell.com/blog/2019/11/23/real-estate-transparency/

By Dan Krell
Copyright© 2019

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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.

April 15, 2019July 22, 2019

Over-aggressive agent harassment

Something has happened in the last few years where unsolicited phone calls and text messages have hit critical mass. It’s bad enough that unscrupulous individuals take advantage of technologies, such as phone number spoofing, to scam consumers. But it’s not a good sign for an industry when “professionals” abuse technology without regard to the law. You’re not alone if you’re feeling harassed by over-aggressive real estate agents who place multiple unsolicited calls and texts daily. There is a way to stop the over-aggressive agent calling and texting harassment.

When over-aggressive real estate agents abuse technology

Like other industries, technology has been integral in evolving the business of real estate in the last twenty years. As a result of proper application, consumers are empowered. However, some technologies are abused by real estate agents. The combination of aggressive sales tactics and technology can sometimes go over the line and become harassment. Recent lawsuits highlight alleged abuse of technology by real estate agents.

A recent class action lawsuit filed in California is taking on real estate agents who “cold call.” Realtor Magazine (Cold Calling in Real Estate Under Fire in New Lawsuit; magazine.realtor; April 8, 2019) reported that the suit originated from a request for the defendant brokerage to stop directing their agents to make unsolicited calls. The suit alleges that calling without consent violates the Telephone Consumer Protection Act and unsolicited auto-dialer calls violate the Federal Trade Commission’s National Do Not Call Registry.

The plaintiff alleges that he received unsolicited calls from multiple agents affiliated with the same brokerage to his cell phone, which is listed with the National Do Not Call Registry. The calls solicited to re-list his home after it did not sell. Although it’s sometimes easy to find a phone number (typically a land line) associated with a property, the plaintiff said his cell phone was not associated with the property listing in any way.

Two other lawsuits filed earlier this month in Florida focus on unsolicited texting. In one, the plaintiff alleges they received thousands of unsolicited text messages, violating the Telephone Consumer Protection Act, advertising homes for sale. The other alleges the use unsolicited texting to find potential home sellers.

Haru Coryne, for the Real Deal, reported that the suits are really about the abuse of auto-dialer technology that transmits “thousands” of text messages from a spoofed local number (Unsubscribe! Resi brokerages sued over text message spam; therealdeal.com; April 4, 2019). The founder of a popular real estate technology platform acknowledged to Coryne that real estate agents who use these technologies without knowing the law can get into trouble. He further stated, “A typical real estate agent will have five, six, seven programs, probably never took the time to see what the law is. [But] Just because they offer it doesn’t mean you can abuse it. It’s like eating candy and wondering why you’re getting fat. You can’t take technology and abuse it and wonder why you’re getting sued.”

There are many platforms selling these services to real estate agents. New technologies mine data (including emails and phone numbers) and “communicate” with consumers (including internet auto-dialers). There are several popular services that sell contact information (including cell phone and email) for expired listings and Sale by Owner. The data can be used in conjunction with text/email broadcasting, phone number spoofing, and auto-dialers. Many consumers feel harassed by the over-aggressive agent because they are bombarded with auto-dialers, texts, and emails, after opting-out or asking the agent to stop.

Stopping the over-aggressive agent

If you want to stop unsolicited calls and texts from the over-aggressive agent, simply opt-out. If they continue, contact the agent. Contacting the agent should put an end to the unsolicited communication. However, you may have to call the agent’s broker. If, in the slight chance, you continue to be bombarded with unsolicited communication after opting out and contacting the agent’s broker, you may have to consult an attorney.

This can be a watershed moment for the industry to educate consumers about professional Realtors and reign in the “bad actors.” The National Association of Realtors (nar.realtor) and local Realtor associations advocate for the responsible use of technologies and cold calling. With regard to telemarketing, the NAR states, “There’s no fine line or gray area: There are laws you must not break. But you still have a lot of flexibility on the right side of the law.”

By Dan Krell
Copyright © 2019.

Original located at https://dankrell.com/blog/2019/04/15/over-aggressive-agent-harassment/

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April 2, 2019June 3, 2019

Negotiating agent commissions

It’s no secret that residential real estate agent commissions are decreasing. Market forces has created new broker models that has put downward pressure on commissions. Many agents embrace consumers negotiating agent commissions.

If market forces are working in negotiating agent commissions, and commissions are decreasing, you might wonder about a recent class-action law suite.

If successful, an anti-trust class-action law suit filed March 6^th could potentially change the landscape of the residential real estate industry. The law suit alleges that the National Association of Realtors and a number of major real estate brokerage brands engaged in “anticompetitive practices.”

According to the law firm Hagens Berman (hbsslaw.com), “the lawsuit alleges NAR and the Big Four have enacted a set of anticompetitive policies intended to prevent competition among real estate brokers, as well as stopping buyers and sellers form negotiating commissions, including: Only allowing listing brokers to list a property on an MLS if the listing broker makes a unilateral, non-negotiable offer of compensation on the MLS to buyer brokers. Prohibiting buyers and sellers from negotiating buyer broker commission. Prohibiting brokers from disclosing commissions offered on MLS. Allowing brokers to take both buyer and seller commissions, if the buyer is not represented by a broker. This anticompetitive activity has been devised at the national level and enforced at the local levels.”

I am not an attorney, but I have been listing and selling homes for over seventeen years. These thoughts are my own. I am not speaking for anyone except myself. I am offering insight from my professional experience.

On the face of it the lawsuit assertions are false. First, the allegations make it sound as if home sellers have no choice in how they sell their home except to use a full-service exclusive real estate broker. As I wrote just last month, home sellers have many options in selling a home. Besides selling “By Owner,” there are multiple broker options as well, including (but not limited to) MLS placement services, limited services and à la carte.

These assertions also make it sound as if a home seller can only get an “exclusive right to sell” listing agreement with a real estate broker. But again, the home seller has options in the type of listing agreement and broker agency type. Because my space is limited and the issue of brokerage representation is technical, I won’t expound on the types of listing agreements and home seller representation. However, each type of listing agreement has specific benefits and disadvantages.

Furthermore, commissions have always been negotiable. And market forces have been in favor of consumers negotiating agent commissions. The lawsuit’s assertions about real estate commissions are misconceived and cliché. The matter of real estate commissions can be complex and depends on a number of factors, which can include (but is not limited to) market conditions, type of representation, types of services provided, among other things. Additionally, home sellers are not the only party to a transaction that negotiates commission. Home buyers who are represented by a broker negotiate the buyer agent commission as well.

The internet has created an empowered savvy consumer. Like other industries, public access to information (internet) has been a major factor in reducing real estate broker fees and commissions. Both listing broker and buyer agent commissions have decreased. The internet has allowed home buyers to find home listings on their own regardless of advertised buyer agent compensation, including non-MLS listings such as home builder and FSBO listings.

Although the NAR has yet to issue a formal statement, NAR vice president Mantill Williams was quoted as saying on Fox Business’ Bulls and Bears program, “We think this lawsuit is baseless and it has no merit. The state and federal courts have considered challenges to the MLS and they’ve concluded the Multiple Listing Service actually benefits consumers.”

Original published at https://dankrell.com/blog/2019/04/02/negotiating-agent-commissions/

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October 25, 2018April 26, 2019

Real estate tin men

Beware the Real Estate Tin Men! “Tin men” was a term used to describe con-artists after the 1987 Barrie Levinson movie by the same name became a nationwide hit. The movie was about aluminum siding salesmen who did whatever they could to sell home improvements in 1963 Baltimore. The story revealed how everyday “schnooks” created the façade of a successful sales person, as well as revealing their unscrupulous sales tactics. The main characters are flawed and likable, so much so that you’re rooting for them as they are cross-examined at their MHIC license hearing.

Modern versions of tin men still exist. They exist in all professions. They are constantly refining their tactics to get your business. They will often tell you what you want to hear.

When it comes to buying and selling a home, beware of the real estate tin men! These are agents who will say and do almost anything for your business.

Many real estate agents still use tin men tactics. Real estate sales is difficult and many agents will do whatever they can to get a leg up on their competition and a chance at a sales commission. There is a subculture in the industry that is focused on pushing the ethical envelope to make money. This philosophy is spread by “gurus” and coaches who teach sales tactics, persuasion, and income strategies.

Unlike the world of 1963, when a salesman could easily lie to make the sale, today’s easy flow of information makes it unlikely that a real estate agent would flat-out lie. The internet has created a savvy and knowledgeable consumer by allowing easy authentication of information. However, the internet has not changed the real estate agent’s reputation for bending the truth, otherwise known as “puffery.”

Rapport is often built on appearances. Like the 1960’s tin men, many real estate agents also employ smoke and mirrors to help them appear successful. Although some still drive cars and dress beyond their means to “fake it,” many agents rely on technology for their trickery. The art of deception is widely used by agents who dare to manipulate data. Many real estate agents, who supervise other agents, take credit for MLS sales they had nothing to do with so as to appear they have many more sales (than they actually do). Likewise, many agents pay for fake internet reviews. Although many platforms screen for false reviews, agents continue to find ways to get fake 5-star reviews on websites, including incentivizing unsolicited otherwise 5-star reviews from clients.

Many real estate agents rely on gimmicks as a means of getting business. A popular agent promotion is “I will buy your home if it doesn’t sell.” The reality is that although the agent may offer to buy your home if they can’t sell it, the conditions actually don’t make it a viable option. Another oversold gimmick is “cutting-edge” marketing. The promise of cutting-edge marketing used to mean advanced and new. However, today cutting-edge real estate marketing is overshadowed by the truth that homes are primarily viewed on real estate internet portals, such as Zillow (all MLS listings are posted to these portals).

Most Realtors are ethical and do the right thing. A recent article by Jim Dalrymple II even touts broker (and agent) humility as the “new method” and business model (Humility, not arrogance, is the new real estate leadership trend; inman.com; October 17, 2017). And although real estate agents have increasingly been leaning towards transparency and authenticity, you should still beware of tin men.

Original located at https://dankrell.com/blog/2018/10/25/real-estate-tin-men/

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October 11, 2018April 26, 2019

Quick sale investor promise?

Is a quick sale to a real estate investor worth it?

House flipping is a misunderstood industry. Sure, these investors promise a quick sale, but legitimate home flipping is valuable to the real estate industry and the community. Home flippers revitalize run-down homes, and market appealing homes to home buyers. In a low inventory housing market, home flips have become a significant percentage of home sales in a low inventory market.

House flipping data

ATTOM Data Solutions (attomdata.com), the data solutions behind Realtytrac, recently released its Home Flipping Report for Q1 2018. The report indicated that there were 48,457 U.S. homes that were flipped, which represented 6.9 percent of all home sales. Although the number of homes flipped decreased 3 percent from last year, the percentage of flipped homes in the home sale inventory increased! The number of flipped homes decreased to a two-year low, but the home flipping rate is the highest since 2012. The average gross profit of $69,500 is at the highest point since ATTOM started collecting the data in 2000.

Given the stats and profits, it was just a matter of time for the mom and pop home flipping business to become corporatized. Using the power of the internet and corporate financing, companies such as Opendoor, Offerpad, and recently Zillow have become players in house flipping business. Whether corporate flippers are profitable or have a sustainable business model is for another column. But, there is no doubt that home sellers are seduced by one-click instant offers and promises of a quick closing.

How real estate investors operate

House flippers are known to buy foreclosures and other financially distressed properties. However, these real estate investors also go after other properties too, as long as it’s financially feasible (it’s a business after all). Other types of targeted homes include estate sales, divorce sales, long-time rentals, and outdated or obsolete homes. So, if you haven’t already received a letter offering you a quick offer and fast closing, it’s just a matter of time.

For some home sellers, a quick sale to an investor is fitting. The seller is disposing of a home that would otherwise continue to be a financial burden and deteriorate further. However, many realize they can sell for more on the open market (MLS).

Is a quick sale to an investor all it’s cracked up to be?

If you’re thinking of selling your home (or even currently selling), you might be fascinated by the idea of a quick sale. But for most, the dream of selling for a large sum and closing quickly is just a fantasy. You should realize that home flipping is risky business, and the investors build their costs into their offer. So, be prepared for a really low offer. A typical investor offer is about 70 percent of the home’s value minus rehab, carrying, and marketing costs.

Before you sell to an investor, do your due diligence. Compare multiple investor offers. Verify that the investor is legitimate. Be wary of investors who include extended contingencies. Be aware that “wholesalers” will tie up your home while looking to sell their purchase contract to other investors. Although most investors promise “cash” deals, the reality is that most investors actually borrow money. It is not uncommon for investors to back out or default on a deal because their financing doesn’t come through. Most important, have your attorney review any contract before you sign.

Also, talk to a Realtor. You could possibly sell your home for more than the investor’s “instant” offer. Marketing your home on the MLS at a price appropriate for its condition could net you more.

Original is located at https://dankrell.com/blog/2018/10/11/quick-sale-promises/

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