“2010 or Bust”

This may be the new mantra of the DOJ when it comes to its current anti-trust case against the National Association of REALTORS.  The boys at Freakonomics are at it again with an interesting post about some inside scoop on settlement discussions.

In a recent presentation [link removed] to some MLS folks, I concluded that the DOJ has absolutely no incentive to settle this case unless NAR comes to its knees on the issue of who is a “broker” for purposes of access to MLS listing data.  I also believe that this case is very analogous to the Visa/Mastercard case brought by the DOJ in 1998.  That case took 5 years to reach its conclusion.  Based on that same time line, the NAR case could easily stick around until 2010.

Every day that goes by without resolution of this case helps the new real estate players gain necessary traction in their quest to legitimacy.  If NAR settles the case and gives the DOJ what it wants (open access to all “brokers”), Katy bar the door.  If NAR holds out and we don’t have resolution until 2010, then (regardless of the end ruling in the case), the practical effect may likely be the same with these “new” models then being accepted as part of the real estate brokerage industry. 

This case, like the Visa/Mastercard case, is about innovation or maybe the lack thereof.  Query the impact if the human and monetary resources that are being used to defend this case were instead re-directed to innovate on behalf of traditional brokers to leverage the riches of data that lies within its control.   

-Russ   

30 thoughts on ““2010 or Bust”

  1. For those who may not realize the profoundness of current events, I chose this quote from Russ’ link to the Freakonomics posting.

    3. …the House Financial Services Committee (Housing Subcommittee) will soon hold a hearing to explore the competitive (or anti-competitive) practices of the brokerage industry. “This is significant,

  2. If a new online listing company/broker can’t wait for DOJ v. NAR to be decided, they ought take a page from erealty.com circa 2000 and just display the MLS lisitings they want. The affectred MLSs or NAR will sue and they get 5 years to operate as that case drags or just put the case in abeyance (is that the legal term? ) pending the DOJ case resolution.
    or get a settlement from NAR as erealty did.

    Could that work?

  3. If a new online listing company/broker can’t wait for DOJ v. NAR to be decided, they ought take a page from erealty.com circa 2000 and just display the MLS lisitings they want. The affectred MLSs or NAR will sue and they get 5 years to operate as that case drags or just put the case in abeyance (is that the legal term? ) pending the DOJ case resolution.
    or get a settlement from NAR as erealty did.

    Could that work?

  4. 3 cents,

    What “works” depends on your perspective. Do you sell real estate? You seem to focus more on “display” of listings than on what actually sells homes, which is primarily the interaction of agents with one another. “AN” mls system separate from “the” mls system, I expect would be fairly ineffective.

  5. 3 cents,

    What “works” depends on your perspective. Do you sell real estate? You seem to focus more on “display” of listings than on what actually sells homes, which is primarily the interaction of agents with one another. “AN” mls system separate from “the” mls system, I expect would be fairly ineffective.

  6. Ardell

    1. my perspective is the efficient sale of real estate & fiduciary service to my client
    2. Yes I sell real estate (licensed broker)
    3. I focus on sellers & believe in the widest distribution of the listing w/o control of any entity. The only entity that should control a listing distribution is the principal, the seller. If the seller & I disagree guess who wins—the seller. If I dont like it I can find another seller.
    4. If I search for property for a buyer I expect no obstacles to my search. That’s what DOJ v. NAR is all about, obstacles.
    4. I don’t give a squirrel’s bottom about display of my listing by another as long as the link is to me & the listing facts are complete & accurate. (The listing broker of course controls the display on his/her own website). It should all be about making teh sale for the client. That will result in happy seller, happy buyer & happy me.

    Re: Leads
    If my listing is displayed by another (MLS) the leads belong to me (& maybe the seller). Any income from sale of leads do not belong to the MLS or anyone else. They get dues why do they get this potential income as well rfom sale to partners or affiliates (eg mortgage lenders)

    If you use my or my seller’s listing as bait, the fish you catch belong to us !

  7. 3 cents,

    OK, now I’m confused. If I blog about your listing and why I think it is the best property on the market, then someone may call me. I show your listing to them and explain why I believe it is the best property on market. My picking it as “best on market” is neutral and credible, as I have no ties to the seller. I write it up. How does your “bait” lead to you?

    More importantly, if the buyer is to get separate and sole Buyer Representation, isn’t it better for the buyer if the trail does not lead back to the Seller’s Agent…you?

    I don’t know any mls that makes money from leads. Companies who display mls listings can sell real estate or sell leads to agents. But I am not aware of any mls that sells leads.

  8. Ardell

    I have no objection to you writing as you say. Hopefully it leads to a sale of my client’s property As listing broker I will get my piece of pie. ALl is well

    Leads from that listing should go to me–i.e people interested in that property should be sent to me, so I get full commission. Of course, people may contact you and you may decide you want them as your client—your moral compass will dictate what you do. If they hire you as buyer;s broker & you as their broker contact me– I will honor that & if deal is made you get a piece of the pie. I would like the whole pie but since the sale is made by a buyer you brought, 1/2 the pie to you 1/2 to me.

    .

  9. Ardell

    I have no objection to you writing as you say. Hopefully it leads to a sale of my client’s property As listing broker I will get my piece of pie. ALl is well

    Leads from that listing should go to me–i.e people interested in that property should be sent to me, so I get full commission. Of course, people may contact you and you may decide you want them as your client—your moral compass will dictate what you do. If they hire you as buyer;s broker & you as their broker contact me– I will honor that & if deal is made you get a piece of the pie. I would like the whole pie but since the sale is made by a buyer you brought, 1/2 the pie to you 1/2 to me.

    .

  10. 3 cents,

    If life were as simple as you and I, but it isn’t. The issue for Brokers has been the struggle to represent sellers, while allowing for the buyer to be separately represented.

    If we can get to the point where no agent who works for the seller, expects to also and simultaneously represent the buyer, we will be in line with the Code of Ethics that says “Dual Agency” should be the exception and rare. And we will also be in line line with the laws of each state that wants buyers to have the option of full and separate representation.

    To do that, no broker (not just agent) would want to sell their own listings and all would want the broadest distribution of listings over the internet.

    Unfortunately the primary answer has been to treat the buyers as “customers” and the sellers as “clients” leaving the buyer totally unrepresented. Local custom and the Broker set up is in direct conflict with what the laws of each state are trying to accomplish. And now buyers are willing to give away their right to representation entirely, in exchange for a piece of the buyer agent fee.

    Perhaps Oklahoma was correct in outlawing agency altogether. Let the brokers sell and let the buyer beware. It seems to be what many, at least those focusing on technology, would like to see happen.

  11. 3 cents,

    If life were as simple as you and I, but it isn’t. The issue for Brokers has been the struggle to represent sellers, while allowing for the buyer to be separately represented.

    If we can get to the point where no agent who works for the seller, expects to also and simultaneously represent the buyer, we will be in line with the Code of Ethics that says “Dual Agency” should be the exception and rare. And we will also be in line line with the laws of each state that wants buyers to have the option of full and separate representation.

    To do that, no broker (not just agent) would want to sell their own listings and all would want the broadest distribution of listings over the internet.

    Unfortunately the primary answer has been to treat the buyers as “customers” and the sellers as “clients” leaving the buyer totally unrepresented. Local custom and the Broker set up is in direct conflict with what the laws of each state are trying to accomplish. And now buyers are willing to give away their right to representation entirely, in exchange for a piece of the buyer agent fee.

    Perhaps Oklahoma was correct in outlawing agency altogether. Let the brokers sell and let the buyer beware. It seems to be what many, at least those focusing on technology, would like to see happen.

  12. Ardell,

    What Code of Ethics are you referring to that says:

    “Dual Agency” should be the exception and rare.

    I don’t recall seeing that one.

    Also I haven’t sold real estate in years but doesn’t the consumer either buyer or seller have the right to choose no agency representation?

    One last question why would it be bad if the buyer got his council from an attorney if the listing agent was also the selling agent?

  13. Allen,

    I’m heading up to San Francisco with two of my daughters, but here’s a brief, quote of NAR’s position. NAR has supported and promoted Designated Agency so that a Broker can provide a means for a buyer and seller to have representation “without creating a Dual Agency relationship”,

    “The National Association of Realtors® Code of Ethics requires Realtors® to disclose who they represent—the buyer, the seller, or both—to consumers…NAR supports state laws to clarify the law of agency as applied to real estate brokerage relationships…NAR recommends that state laws clearly define the duties for each type of brokerage relationship, including designated agency. Under designated agency, brokers may appoint an individuallicensee to represent the seller and another licensee to represent the buyer in the same transaction without creating a dual agency relationship.
    NAR does not support the pure non-agency facilitator concept in which a licensee assists the parties to a real estate transaction in reaching an agreement without being an advocate…”

    What I have seen here in the Seattle area, is an agent treating the seller as the client and the buyer as a customer “pure non-agency”, a position that is expressly frowned upon by NAR.

    Our Forms have a two little check boxes, and listing agents are checking Seller/Seller, leaving the buyer without representation. How many read that little checked block and fully comprehend the ramifications of this simple check mark?

    I believe the actual COE reference has been removed from the 2006 version, since more than half of the states have accepted Designated Agency, thus reducing the instances of Dual Agency. When I return I will try to find the reference in a previous version of the COE.

    CA is not a Designated Agency State. I’m surprised. Anyone know why CA continues to “holdout”?

  14. Allen,

    I’m heading up to San Francisco with two of my daughters, but here’s a brief, quote of NAR’s position. NAR has supported and promoted Designated Agency so that a Broker can provide a means for a buyer and seller to have representation “without creating a Dual Agency relationship”,

    “The National Association of Realtors® Code of Ethics requires Realtors® to disclose who they represent—the buyer, the seller, or both—to consumers…NAR supports state laws to clarify the law of agency as applied to real estate brokerage relationships…NAR recommends that state laws clearly define the duties for each type of brokerage relationship, including designated agency. Under designated agency, brokers may appoint an individuallicensee to represent the seller and another licensee to represent the buyer in the same transaction without creating a dual agency relationship.
    NAR does not support the pure non-agency facilitator concept in which a licensee assists the parties to a real estate transaction in reaching an agreement without being an advocate…”

    What I have seen here in the Seattle area, is an agent treating the seller as the client and the buyer as a customer “pure non-agency”, a position that is expressly frowned upon by NAR.

    Our Forms have a two little check boxes, and listing agents are checking Seller/Seller, leaving the buyer without representation. How many read that little checked block and fully comprehend the ramifications of this simple check mark?

    I believe the actual COE reference has been removed from the 2006 version, since more than half of the states have accepted Designated Agency, thus reducing the instances of Dual Agency. When I return I will try to find the reference in a previous version of the COE.

    CA is not a Designated Agency State. I’m surprised. Anyone know why CA continues to “holdout”?

  15. Ardell,

    This is from the realtor code of ethics: Full Code of Ethics

    Standard of Practice 1-5

    REALTORS® may represent the seller/landlord and buyer/tenant in the same transaction only after full disclosure to and with informed consent of both parties. (Adopted 1/93)

    I dont see anything in there that says “should be the exception and rare” as you stated. I see that it clearly says it is an accepted and approved practice.

  16. Ardell,

    This is from the realtor code of ethics: Full Code of Ethics

    Standard of Practice 1-5

    REALTORS® may represent the seller/landlord and buyer/tenant in the same transaction only after full disclosure to and with informed consent of both parties. (Adopted 1/93)

    I dont see anything in there that says “should be the exception and rare” as you stated. I see that it clearly says it is an accepted and approved practice.

  17. Ardell

    I think you mis-read the NAR language. The term “pure non-agency facilitator concept” is one where the broker (and their agent) represents NEITHER buyer nor seller in the deal. It is not the situation you refer to where the listing broker/agent sells their own listing and does not establish an agency relationship with the buyer (hence Seller=client and Buyer=customer). Nothing that I have ever read would indicate that the latter relationship is frowned upon in the COE.

    Russ

  18. Russ,

    The language doesn’t specify whether the broker is representing, or actually NOT representing, one or both parties to the transaction. In an average transaction where one broker is a facilitator for the buyer and a different broker is a facilitator to the seller, the net effect is the same as if one broker was NOT representing either.

    We both know why NAR doesnt back Transaction Brokerage and why TB was created. The day Florida outlawed Dual Agency in favor of Transaction Brokerage, the “intent” was as you suggest. However a major brokerage instructed all of their agents to opt for the filtered down version, for all consumers including single agency transactions, to promote less liability for the company.

    This created an immediate scenario wherin one party was represented and the other was not. “The road to heaven is paved with good intentions”. Transation Brokerage, as backed by some states and as frowned upon by NAR, may in fact “intend” the application to be to both parties. But there is nothing in the language of NAR, or the States that adopted Transaction Brokerage, to prevent the uneven balance between the representation of the two consumers in the transaction.

    It has become an increasing practice to treat a buyer as a “customer” and a seller as a “client” which really just puts us right back at Square ONE. A buyer “thinking” an agent represents them when they do not. A very long road back to square one, the one that benefits the large broker and squashes the progess made in buyer consumer representation.

    Building new business models based on the buyer consumer trading away their representation in exchange for a rebate, will be the nail in the coffin that once again buries buyer representation.

    The crime and shame of it is that these models are pushed by people who are fully capable of representing themselves and who have lots of money to build these models. But the roadkill left in their path, are primarily the first time buyers and persons who do not speak English as their first language. Fat Cat wins, the guy who actually needs the protections afforded by each State loses when they are treated as a “customer” vs. a “client”.

  19. Russ,

    The language doesn’t specify whether the broker is representing, or actually NOT representing, one or both parties to the transaction. In an average transaction where one broker is a facilitator for the buyer and a different broker is a facilitator to the seller, the net effect is the same as if one broker was NOT representing either.

    We both know why NAR doesnt back Transaction Brokerage and why TB was created. The day Florida outlawed Dual Agency in favor of Transaction Brokerage, the “intent” was as you suggest. However a major brokerage instructed all of their agents to opt for the filtered down version, for all consumers including single agency transactions, to promote less liability for the company.

    This created an immediate scenario wherin one party was represented and the other was not. “The road to heaven is paved with good intentions”. Transation Brokerage, as backed by some states and as frowned upon by NAR, may in fact “intend” the application to be to both parties. But there is nothing in the language of NAR, or the States that adopted Transaction Brokerage, to prevent the uneven balance between the representation of the two consumers in the transaction.

    It has become an increasing practice to treat a buyer as a “customer” and a seller as a “client” which really just puts us right back at Square ONE. A buyer “thinking” an agent represents them when they do not. A very long road back to square one, the one that benefits the large broker and squashes the progess made in buyer consumer representation.

    Building new business models based on the buyer consumer trading away their representation in exchange for a rebate, will be the nail in the coffin that once again buries buyer representation.

    The crime and shame of it is that these models are pushed by people who are fully capable of representing themselves and who have lots of money to build these models. But the roadkill left in their path, are primarily the first time buyers and persons who do not speak English as their first language. Fat Cat wins, the guy who actually needs the protections afforded by each State loses when they are treated as a “customer” vs. a “client”.

  20. Allen,

    The quote regarding “exception and rare” stems from discussions I have had since 1998 with the current head of NAEBA. As soon as I have the source, I will print it. Tom’s likely out fighting sharks, his hobby, though I think he does that in August…National Agent takes a break month.

    I will print the source when I get a response from Tom, but if you are looking for a clear mandate from NAR that “Just Says NO” to Dual Agency, that clearly can never happen. If you are in a state that has not yet adopted Designated Agency as promoted by NAR, then there will not and cannot be any statement other than one that supports Dual Agency in your state.

    I am not an EBA nor am I a single agency fanatic. I simply promote “informed” consent when someone trades down or trades off their right to full representation. In my book a little check mark doesn’t cut it.

    The very best I have seen, though later rescinded, was the brief time that Florida required agents to hand a statement to the buyer at first contact that read “I DO NOT represent you UNTIL AND UNLESS you HIRE ME to do so.” Can it get any simpler than that? I loved it! Unfortunately the industry removed it because it was apparently too clear to the buyer that they needed to DO something to get the best representation available. States like ours tried to get around that, but failed to address the “what if” the agent treats the buyer as a customer vs. client scenario.

    I love Washington’s Agency Laws and mls setup. The best in the Country, really. Just a little tweaking to perfect actual application is in order.

  21. Ardell

    Look at the quote again. The term “pure” is used to describe facilitator and the next sentence goes on to use the term “parties” (plural) when talking about the non-agency role. In all of the discussions that I have ever been involved with respect to agency, the term “facilitator” has never been used to apply to a listing agent who sells her own listing without representing the buyer too.

    As to your other point, are you telling me that listing agents don’t provide the requisite agency disclosures required in most states that clearly state who that agent represents in the deal. This would certainly fly in the face of NAR’s great PR campaign about why consumers should use REALTORS – namely that they are ethical – because ethical listing agents certainly would provide the disclosures and not imply to a buyer that they will represent them too.

    If that is happening, and buyers don’t want the representation, what is the harm? Maybe the buyer believes that they can get a portion of the SOC and that is adequate trade off for broker representation. Why is that the “nail in the coffin”? Whose coffin?

    -Russ

  22. Russ,

    There’s an old saying regarding “a child only a mother can love”. Same is true in the industry regarding ” a property only the listing agent can sell”. I’m not suggesting that NAR take a sronger position, since they do represent the best interests of the major real estate companies. Nor am I suggesting that the new business models take on the responsibility to determine if the consumer has fully comprehended the “adequate trade off” in terms of “written and informed consent.”

    Clearly an agent can and does act as a facilitator with their end, without regard to what the other party and their agent determine. It does take “Two to Tango-Transaction Brokerage”, but the two are not the buyer and seller to form this relationship. The two “parties” are the consumer and the agent and their agreement, verbal or written, in that regard.

    What is in the coffin is not so much a “who” as a “what”. The what in the coffin is Buyer Reperesentation in general. I know it has taken the “follow the money” road, in that the whole concept has turned into a way to chain a buyer to an agent for the agent’s profit reasons. That’s is considered by most as “normal”.

    My only point, back to the original thread, is that it is likely time for the DOJ, and Congress as Freakonomics suggests, to dismantle the long honored current system. Freakonomics quote “Congress has for the better part of a century obeyed the National Association of Realtors’ instruction to allow the brokers to run the MLS system.”

    Given the organization has taken the “Follow the Money” route to Buyer Agency, and the “lofty ideals” have taken a back seat to Dual Agency considerations for profit, I think the DOJ should win this one. Or keep trying until they get the appropriate changes needed.

    As to the mountains of paper provided regarding “disclosure” that say all too much and so nothing, being adequate? You’re kidding me, right? Where is the part that thoroughly explains “Listing Agent is treating you as a customer, with no repreentation to you, and full representation to the seller?” Where is the part that says, “Here’s what to expect when the agent is treating you as the “customer” and the seller as the “client”. Seems there would be at least one full page of the 7 or 8 pages devoted to that topic.

    Maybe you could write a post on which option in the pamplet explains fully the “No Agency”/customer “trade offs”, as they are defined in the “disclosures” you mention. Quotes would be nice. Clearly that would be a wonderful and informative post for the buyers in the Seattle Area to read.

  23. Russ,

    There’s an old saying regarding “a child only a mother can love”. Same is true in the industry regarding ” a property only the listing agent can sell”. I’m not suggesting that NAR take a sronger position, since they do represent the best interests of the major real estate companies. Nor am I suggesting that the new business models take on the responsibility to determine if the consumer has fully comprehended the “adequate trade off” in terms of “written and informed consent.”

    Clearly an agent can and does act as a facilitator with their end, without regard to what the other party and their agent determine. It does take “Two to Tango-Transaction Brokerage”, but the two are not the buyer and seller to form this relationship. The two “parties” are the consumer and the agent and their agreement, verbal or written, in that regard.

    What is in the coffin is not so much a “who” as a “what”. The what in the coffin is Buyer Reperesentation in general. I know it has taken the “follow the money” road, in that the whole concept has turned into a way to chain a buyer to an agent for the agent’s profit reasons. That’s is considered by most as “normal”.

    My only point, back to the original thread, is that it is likely time for the DOJ, and Congress as Freakonomics suggests, to dismantle the long honored current system. Freakonomics quote “Congress has for the better part of a century obeyed the National Association of Realtors’ instruction to allow the brokers to run the MLS system.”

    Given the organization has taken the “Follow the Money” route to Buyer Agency, and the “lofty ideals” have taken a back seat to Dual Agency considerations for profit, I think the DOJ should win this one. Or keep trying until they get the appropriate changes needed.

    As to the mountains of paper provided regarding “disclosure” that say all too much and so nothing, being adequate? You’re kidding me, right? Where is the part that thoroughly explains “Listing Agent is treating you as a customer, with no repreentation to you, and full representation to the seller?” Where is the part that says, “Here’s what to expect when the agent is treating you as the “customer” and the seller as the “client”. Seems there would be at least one full page of the 7 or 8 pages devoted to that topic.

    Maybe you could write a post on which option in the pamplet explains fully the “No Agency”/customer “trade offs”, as they are defined in the “disclosures” you mention. Quotes would be nice. Clearly that would be a wonderful and informative post for the buyers in the Seattle Area to read.

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