redfin went to Congress to get the law changed. The rebate in a Real Estate transaction was referred to as a “kick back.” It was illegal for many years because of it’s potential for abuse. We have yet to see what this will do to the consumer.

In the 1980s when Sears owned Coldwell Banker and Discover Card they wanted the rebate in a Real Estate transaction. The idea was that you could get discounts on escrow, loans, patio furniture, Discover Card fees or interest. It was called an unfair inducement by the Real Estate community. It would give Coldwell Banker an unfair advantage by bribing clients to use their Real Estate services.

A larger problem has been at the agent commission level. For many years Real Estate agents have tried to keep deals together by kicking in a portion of the commission. The problem is that the commission gets paid after a transaction closes, not before. Using a portion of the commission in the transaction can jeopardize the buyers promise of having the funds available to close the transaction.

More simply put, lenders didn’t want to see buyers getting “kick backs” because of the temptation for abuse.

Let’s use the straw buyer scenario. I want you to buy a house for me. I’m a Real Estate agent who gets a 3% commission. I have you apply for a 3% down FHA loan and kick back my commission to you while funding the rest of the transaction. Afterwards I assume the loan from you.

Many things have changed from those days. Number one was that 0 down loans became common and FHA loans are no longer assumable. Now 0 down loans are frowned upon.

So things change in the business, but the rebate abuse will come and go.

The most successful Real Estate investor I know had less than an eighth grade education. He later lent money and that’s when he needed to be monitored.

Dealing with this guy’s transactions was hard for escrow to do. That’s escrow’s job. Escrow takes all the pieces and puts them into a legal document that can be recorded. That’s not a Real Estate agent’s job.

We have a saying in Real Estate that has been around for thirty years that I know of. Every one should be a Real Estate agent for two years. Their livelihood should depend on it.

You see people at their absolute core personality. There’s laughing, crying, anger, remorse, glee, and exuberance all in the span of a day. It takes a whole different set of skills to put all of this on paper and get it to escrow.

I think banks, lenders, and escrow agents need to be more regulated. There should be much more monitoring and over sight when a set of people can manufacture paper work to reap thousands, hundreds of thousands, even millions of dollars of profit.

A Real Estate commission has to pass through escrow also. In the big scheme of things that commission is a pretty low liability in a transaction.

We are now seeing lenders and escrow agents who have had properties refinanced, or flipped by straw buyers for millions if not billions of dollars in fraud. We are all paying the price for that.

Comparing that type of economic liability to a Real Estate agent’s commission seems disproportional to me.

I would add, and I shared this with Ray privately before the post came out, that both agents were equally at fault here.

A main rule of representing someone is buffering them from the bullshit that may go on, that is not about the client and their objectives. Agents are often 24/7 and catching them at a bad time or when they are having a bad day is VERY common in this business. Sharing that with clients is like gossiping and not very professional.

I don’t keep secrets from my clients about anything the agent has to say about the house, the sellers, or anything else that is relevant. How they say relevant things is important as well…key words “relevant things”.

But how they treat me or commission issues, should not be a worry point for the clients of either agent.

If the buyer is your client then the agent should be the one calling the listing agent to make arrangements for the buyer to see the house, not the buyer. The agent could ask when there will be an Open House or indicate that the buyer would like to see the house on X day at X time, but they have another appointment. Then see if the agent OFFERS to show it “for” the other agent.

Many, many ways both agents acted “incorrectly” here, or at minimum could have handled it better.

This is a story of how agents (both) can get in the way between a buyer and seller’s objective. That it ended badly for both the buyer and the seller does not speak well for either of the agents who participated in that outcome.

1) My clients were shown a listing by a jerk.
2) My clients made an offer
3) Offer fell through (for emotional/other reasons)
4) People were/are unhappy
5) The “hero” of the story found the clients another house

If the point is that this particular listing agent doesn’t like “alternatives” to a traditional business model (“I’ve seen the likes of you come and go!”), it’s not much of a “tale from the dark side.” I can, with confidence, say that there are a lot of full-service agents who have been treated as badly (myself included) and even though it all seems terrible, if you went to my broker (or me) with a story like this, you’d hear something the following: “Real estate is a highly emotional, irrational and ofttimes ugly business. Sorry feelings were hurt, move on, deal with it.”

Here’s a tale from the other side: In the past, as a listing agent, I have actually offered to write offers for other agents who were unable to be with their clients and have received comments like this: “I’ve seen agents like you come and go.” So, allow me to say this: there are a lot of very good agents in the market place. I’m intrigued and sometimes irritated by “bad” agent behavior but, for the most part, the agents with whom I’ve done business and with whom I associate are true professionals.

I was at the Kent Cornucopia Days this afternoon, then a little Dukes Chowder House at Kent Station, and ended my day with “Bruno.” I absolutely loved the entire day with my friends and would do it all again tomorrow if I was not leaving town to go home.

I’m off to Carson City to watch my 80 year old parents play nickle machines at the Carson City Nugget. I will not think real estate for 10 days starting right NOW!

Good night!

You have moved up considerably in my admiration for your site. Ray is the most eloquent of spokes people we have for alternative Real Estate business models.

I’ll qualify that by saying it was hard to get past the screaming of the message, but once you meet Ray you can feel that he is sincere, and knowledgable.

In my opinion it makes him trustworthy.

Thank you both for giving an uplifting message to the Real Estate Industry.