Hint: It is being discussed and decided this week, but not in San Francisco.
John Cook picks up this quote from Glenn Kelman of Redfin on what he will testify about when placed in front of U.S. House of Representatives’ Subcommittee on Housing and Community Opportunity:
“I am going to say how much friction there is in the business,” said Kelman, adding that as one of the first online brokers Redfin has been “kicked and spat on” by the Multiple Listing Services in California and Washington.
Ouch! I’m sure that once he testifies, relationships with the local MLS organizations will quickly be healed. 🙂
If this topic interests you, then definitely check out John’s column because he provides some great links.
You say Ouch, I say ROTFLMAO! mls rules of conduct everywhere = he who shows house starts the process for the chain of events that lead to the payment of the mls offering. Redfin collects mls offerings and doesn’t show property…breach of membership ethics.
They can make it into a discount broker issue easily, but it isn’t. It’s about the basic rules of membership that are broken by the Redfin model. New business models are great, but not ones that become a member of the mls and the “kick and spit at” the rules of membership. From my vantage point it is Redfin doing the kicking and spitting at the mls, not vice versa.
They are required by mls rules to make a much better effort to insure that the buyer has not seen the property with another agent, and that includes the listing agent. A little tweaking of the business model would stop all of the “kicking and spitting”.
Redfin needs just a little tweak…not a big change, to comply with the terms of membership in the mls. So why aren’t they doing that? Because they don’t understand or because they are thumbing their nose at the mls they have just joined? In the beginning we figured they just didn’t have enough money to hire a showing agent. But now that they’ve raised a ton of dough, why are they still “using the agents in play” to show the listings that they sell? Not fair play.
But the DOJ can easily pretend, along with them, that is all about beating up on the discount model. There are plenty of other discount models that aren’t getting kicked and spit at…they discount, but they don’t refuse to abide by the rules of membership.
P.S. If Redfin now shows property…someone tell me. Last I heard they did not. They used another agent to show property and then took that agent’s piece of the pie and gave it to the buyer. Big no-no. I feel a big lugee (I think that’s the term) building up myself on that one.
You say Ouch, I say ROTFLMAO! mls rules of conduct everywhere = he who shows house starts the process for the chain of events that lead to the payment of the mls offering. Redfin collects mls offerings and doesn’t show property…breach of membership ethics.
They can make it into a discount broker issue easily, but it isn’t. It’s about the basic rules of membership that are broken by the Redfin model. New business models are great, but not ones that become a member of the mls and the “kick and spit at” the rules of membership. From my vantage point it is Redfin doing the kicking and spitting at the mls, not vice versa.
They are required by mls rules to make a much better effort to insure that the buyer has not seen the property with another agent, and that includes the listing agent. A little tweaking of the business model would stop all of the “kicking and spitting”.
Redfin needs just a little tweak…not a big change, to comply with the terms of membership in the mls. So why aren’t they doing that? Because they don’t understand or because they are thumbing their nose at the mls they have just joined? In the beginning we figured they just didn’t have enough money to hire a showing agent. But now that they’ve raised a ton of dough, why are they still “using the agents in play” to show the listings that they sell? Not fair play.
But the DOJ can easily pretend, along with them, that is all about beating up on the discount model. There are plenty of other discount models that aren’t getting kicked and spit at…they discount, but they don’t refuse to abide by the rules of membership.
P.S. If Redfin now shows property…someone tell me. Last I heard they did not. They used another agent to show property and then took that agent’s piece of the pie and gave it to the buyer. Big no-no. I feel a big lugee (I think that’s the term) building up myself on that one.
Ardell,
I am intrigued. Exactly what MLS rule is Redfin breaking? Seems to me its alot like those “unethical” buyer agents who allowed their clients to “use” the on-site plat agents to show them around the new homesites and then when it was time to write up a deal, they swooped on in to collect the SOC. But wait, that happens today and there is no rule breaking. Instead, the builders have site registrations and variable rate commissions to protect their agents’ efforts.
Russ
Ardell,
I am intrigued. Exactly what MLS rule is Redfin breaking? Seems to me its alot like those “unethical” buyer agents who allowed their clients to “use” the on-site plat agents to show them around the new homesites and then when it was time to write up a deal, they swooped on in to collect the SOC. But wait, that happens today and there is no rule breaking. Instead, the builders have site registrations and variable rate commissions to protect their agents’ efforts.
Russ
Russ,
To some extent it’s more of a “four corners of the Will” type concept, tied to the internal “procuring cause” chain of events.
Let’s say you come to me and tell me you are going to buy a house and want “a deal”. I say, no problem. Go out and find the house on your own. AFTER you know which house you want to buy, come back here and I will “write it up” for you, and give you the bulk of the commission. I do in fact know an attorney in CA (who I like very much 🙂 who does this, and thinks it is just peachy. So I am not surprised that you do not see this flaw in the Redfin model.
Let’s try to look at it from your point of view. Say you hired someone on a straight contingency basis and worked on a case for two years. Let’s say a guy opens up shop next to you with a sign saying “hire me on the morning of your court case for $1,500” and bring me the guy next door’s file, so I can appear in court. So, at the very end, at time of trial, the contingency client runs next door with your/his file and hires the new guy for a flat fee. You get nothing because you were not there at the end, when the award was granted (assume THAT, because that’s how the mls and real estate DO work). At what point might you kick and spit at your “peer/competitor next door?
The system requires by its very design, that the person with their hand out at the end, be the same person who led the consumer to the “award” point. Thus membership requires that all follow the basic ethics of the system in play.
For anyone to “start at the end” as a business model, turning a blind eye to HOW the consumer MADE IT to the end, whether that be Redfin or my attorney friend in CA, is an abuse of the privelege of membership in the mls system, historically speaking. This may be one of the changes afoot in the industry. We shall see.
Some feel the Buyer Agency Agreement, being the be all end all of getting paid, is the answer to all of this. I do not support that remedy.
As to your “new construction” analogy, quite different as the buyer is ALWAYS entitled to separate and distinct representation, and cannot be “forced” into Dual Agency. The new home “salesperson” represents the seller. Laws in play do not force the buyer to use the agent for the seller, and permit a “switch” to separate and full representation. Dual Agency cannot happen without the written and informed consent of both consumers in the transaction.
As I said, a tiny “tweak” is needed in the Redfin model. Not a total revamping. Agents and the mls thinking needs to change as well, with regard to the listing agent having any right to “procuring cause” awards, as that thinking is a throwback to sub-agency days and makes no sense whatsoever anymore. But many don’t see it that way.
Ardell
You law analogy does not work because in any contingency fee case I would ever take, my fee agreement would require the client to pay my hour rate (or some component of that) if they decided to ditch me before trial. If I did not do that, and the guy next door took the client, I would spit at my reflection in the mirror because I would have been the dumb guy.
You say the new construction analogy does not work because “the buyer is ALWAYS entitled to separate and distinct representation, and cannot be “forced
Russ,
1) I figured you’d be coming in that direction, so I wrote a new post on that topic. See my newest post that I was writing as you were writing this comment. I don’t use contracts to protect myself against…because the “side effects” in downside risk from the client’s perspective, outweigh the benefits to me personally. If that makes me a “dumbass”…so be it.
2) In the “new construction” scenario, anyone at the new construction site, must, by definition, be an agent for the seller. In the “Redfin” model, since the buyer is going “out into the world” to find property, Redfin simply needs a one line question “How and with whom did you see the property you want us to ‘write up’?” As long as they have that one line, and the answer is the Listing AGENT, not the Listing COMPANY, they will have covered their bases. I don’t think that line is on the questionnaire, but maybe it is. I await being enlightened on that point and hope they do ask that question. If the potential Redfin client puts any name on that line other than THE one and only listing agent, or has no such question for the buyer to answer, then the sceanrios are not comparable.
The buyer is always entitled, under agency law, to NOT be forced to deal with the agent for the seller, that being the in house builder’s sales rep or the individual listing agent.
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You say Ouch, I say ROTFLMAO! mls rules of conduct everywhere = he who shows house starts the process for the chain of events that lead to the payment of the mls offering. Redfin collects mls offerings and doesn’t show property…breach of membership ethics.
They can make it into a discount broker issue easily, but it isn’t. It’s about the basic rules of membership that are broken by the Redfin model.
Then, again, maybe not. The following is an excerpt from WARs Legal Hotline (it’s longer w/more disclaimers):
“The procuring cause doctrine, as instituted by the NAR and the WAR is as follows.
The determination of whether the activity of a broker is the procuring cause of a sale is generally a question of fact. Broker’s efforts must set in motion a series of events which, without a break in continuity, eventually culminate in the sale. Prior case law shows that it takes more than just showing a property to a prospective buyer or providing the buyer with information about the property. Even if a licensee wants to be and tries to be instrumental in the sale of the property, he will not be considered the procuring cause unless there is a clear connection between the licensee’s action and the ultimate sale.”
For example “agent #1 shows the property to the buyer. Then agent #2 shows the buyer the property again, drafts the offer for the buyer and offers assistance throughout the purchase process. Although agent #1 may have initially set the process in motion, agent #1’s activities were not continuous and were interrupted by the activities of agent #2. Agent #2’s activities eventually result in the culmination of the sale. Therefore, agent #2 is the procuring cause.”
The only difference I see between the above example and Redfin, is in the above example, agent #2 (aka Redfin) shows the property again. Even if this event (2nd showing) doesn’t take place, I suspect agent #2 will still be procuring cause. Of course, I make no representation to know or interpret the law. : )
P.S. If Redfin now shows property…someone tell me. Last I heard they did not. They used another agent to show property and then took that agent’s piece of the pie and gave it to the buyer.
Per the WAR attorney, it never was the 1st agent’s pie to begin with.
BTW where exactly this is grand MLS membership ethics you’re referring to and what exact rules are Redfin is breaking? And, if they were afoul, I’m sure the NWMLS would have stepped in.
Ben,
Love your phrase “the grand MLS ethics”
Ben, you are an agent with John L. Scott.
Go ask your broker what you should do if a buyer calls you and says “I’m looking for an agent to write up a property I saw three times with an agent who I’ve been working with for a year and I want to pay you 1% and keep 2%…OK? Ask your broker what “the grand MLS ethics” is of kicking a peer to the curb, and the potential consequence of that action.
I am very, VERY sure your Broker knows the answer. John L. Scott is one of THE MOST ethical Brokerages in town. If your Office Manager or Broker doesn’t know, give John L. Scott a call. HE DEFINITELY knows “the grand MLS ethics” in fact…I think he invented them 🙂
Ardell – it was rhetorical.
BTW, John L. Scott died a long time ago.
Ben,
The ethics of the mls system may soon be forgotten, but clearly not “a rhetorical question” as if there is no answer.
No answer? You would write that one up? Someone’s turning in their grave then.
I wonder how long until we start seeing “registrations” for individual listings similar to new construction. How well will Redfin do if SOC is cut in third for agents that do not visit the home with their buyer client.
Robert,
I can tell you that around the Country agents are, and have been, putting “SOC to be reduced to X if agent who writes offer did not show the property.”
That has nothing to do with Redfin by the way, though it would affect them. This “new thing” started both before Redfin and in areas where they don’t have Redfin.
Agents trying to simply “writing things up” and cashback to the buyer, that they didn’t show, started long before Redfin came into being. I wonder of NWMLS allows this type of wording? Anyone know?
Robert,
I can tell you that around the Country agents are, and have been, putting “SOC to be reduced to X if agent who writes offer did not show the property.”
That has nothing to do with Redfin by the way, though it would affect them. This “new thing” started both before Redfin and in areas where they don’t have Redfin.
Agents trying to simply “writing things up” and cashback to the buyer, that they didn’t show, started long before Redfin came into being. I wonder of NWMLS allows this type of wording? Anyone know?