Rain City Guide

History of Real Estate – Part 2

ARDELL on 01 28, 2006

Robbie asks: “On a related thought, how did people buy & sell homes in the “dark ages”? That seems more mind boggling to me than anything I or the folks at Zillow are going to be doing in the next year.”

Ardell responds: Below is the system used just prior to the mls, which was the “precursor” of the mls.

Just prior to the first mls, a real estate office was comprised of a core of agents. A typical office might have 6 to 12 agents, each of which was assigned a “farm area” within the “territory” of the office. John’s “farm” was Greenlake, Joe’s “farm” was Ballard, Pete’s “farm” was Queen Anne and so on. Agent training to this day uses the term “farm area”, though for the most part, “protected farming” went out in the early 1990’s. I had a “protected farm area” until about 1993 or 1994.

Every day the agents would come to the office via a different route through their individual farm area. When they arrived at the office they would write down the addresses of any houses with new for sale signs on “The Board”. At that time there were two chalkboards in the office. One to write down the signs they passed each day that were listings of other brokers, and another to write down the listings they had personally signed up for the company (in-house sales). To this day, most offices have “a board” for in house transactions. It is generally a whiteboard and not a chalkboard, but I have seen both used in recent times. “The Board” is usually hidden in the back where clients and agents from other offices cannot see it.

Any agent who only brought buyers to other agent’s listings, was eventually fired and replaced with an agent who would both list property and sell property. All agents with only buyers, that waited for someone else to do the the “hard work” and obtain the listings, was considered a “parasite”. To this day, you will see this type of discussion in agent message boards and forums, criticizing agents who only work with buyers and “feed off” the efforts of the listing agents. Obtaining listings has always been perceived as being more work than walking a buyer into the front door who likes the house. There was no such thing as an agent who only worked with buyers. Since companies could not survive without listings, agents who didn’t list were fired.

Originally there was only one chalkboard in the office and agents only sold the listings of their own company. At some point a few brokers got together and created a loose system of “cooperation” between certain Brokers (but not all) to sell across company lines. The broker of one company agreed to pay the broker of another company, should one of the agents at the other broker’s company bring the buyer. This is not the first mls. It is the precursor to the first mls.

This established the rule, which is still in place today, that agents are paid by their brokers ONLY, by law. Sales involving two companies involves a broker payment from one broker to the other broker, and then each broker pays their own respective agents. Every closing, to this day, shows only the company, and not the agent, on the closing sheet. Each state requires that the broker receipt the monies and pay the agents as well as supervise the activity of the agents. This is about to change slightly if “Broker Only Licensure” is passed here in Washington.

Only the company who lists the home can advertise it (proprietary rights) and only those offices with cooperation agreements could sell each other’s listings. To this day if John at ABC Realty lists a property for sale, only John has the right under the listing contract with the seller, to advertise that property. Any broker or broker’s subagent “in the system of agreement” can bring a buyer. But only the listing company can advertise it. That is where the internet, as an advertising tool, may be breaching the proprietary rights of the listing contract which are still in place today. The seller doesn’t contract with the mls, the seller contracts with the listing broker. The broker then contracts with the mls and all “members” agree to the terms of interaction, and are “ousted” from membership or fined severely, if they do not comply with the terms of membership.

But I’m ahead of myself there. This loose system of cooperation between brokers is not the mls. It is the precursor to the mls.

The mls was created to protect the seller, not for the agents at all. For how that came about, see History of Real Estate – Part 3

About the Author: Ardell DellaLoggia

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An Associate Broker with Sound Realty. ARDELL was named one of the 25 most Influential Real Estate Bloggers in the U.S. for 2007 by Inman News, and has over 19 years exeperience in Real Estate up and down both Coasts. She represents buyers and sellers of real estate on both sides of the 520 Bridge from Kirkland, Bellevue and Redmond on the Eastside to Green Lake and surrounds on the Seattle side. You can reach her at 206-910-1000 or by hitting the email the author link above.