An award-winning real estate law attorney recently offered a definition of “Agency” in the Word of the Day series he writes for real estate agents:
http://bit.ly/AgencyRETalk (share via social media)
Given his audience, no surprise his description asserted that there are times the homebuyer or seller may be required to pay the agent damages. That one-sided perspective begged some questions:
1. What about the opposite, for example, the agent’s failure to properly develop and implement a marketing campaign results in missing seasonal pricing premiums?
2. Or worse, the agent talks the seller into underpricing their home to generate a bidding war and none materializes?
3. And perhaps most importantly for the future of the real estate ecosystem, have there been any legal challenges yet to the growing practice of “Off-market as a Strategy?”
http://bit.ly/OffMarketWAR (share via social media)
Six years ago last week, the California Association of Realtors (CAR) warned members that the growing popularity of pocket listings and related practices — Coming Soon, Pre-MLS, private inventory, office exclusives, and in-house dashboards, put the industry at risk of another class-action lawsuit for breach of fiduciary duties:
http://bit.ly/PocketWarningCRA (share via social media)
When asked, “Who wins, who loses, and who gets sued when agents play hide and go seek with inventory?” the agency law expert and Facebook group of leading agents responded with silence. That’s why it’s important to redirect those questions to the public, policymakers, and given the magnitude of in-house bidding wars, the affordable housing community, too.
There is no question that agents, particularly mega-brokers, are hiding listings. What are the costs and opportunity costs to individual homebuyers and sellers, and indirect costs to society? What are the implications for small businesses, not just buyer agents who cannot access pocket listings; but small, independent local real estate brokerages, once the foundation of the industry?In recent years, mega-brokers have ramped up a multi-billion dollar arms race to dominate the real estate market, and their fiduciary duties to investors are taking precedence over fiduciary duties to their clients. Here’s what Mike Delprete, an industry analyst, writes about Compass, a start-up that has raised $ 1.1 billion and grown by buying market share:
For Compass to become a consumer destination, it needs eyeballs. The most effective strategy — and likely the only possible strategy given the market dominance of Zillow — is to build consumer traffic with the draw of exclusive listings (emphasis added). It’s a similar strategy to Netflix and Amazon’s exclusive video content. If the Compass web portal advertises houses for sale that aren’t available anywhere else, it draws consumers to the platform.
The secret to building audience with exclusive content is scale: Compass needs significant market share for this strategy to work. Pocket listings, which are withheld from the MLS for a period of time, have been around for years, but never employed at this scale. Compass needs to advertise so much exclusive content, including coming soon listings, that consumers can’t afford to miss it.
The evidence that Compass is strongly promoting exclusive content is plainly visible on its web site. In fact, exclusive content is the primary call-to-action on Compass’ web site, starting with top billing on its site navigation.
Compass is encouraging agents and consumers to list properties as Coming Soon as an effective pre-sales tool. This agent team page touts specific benefits, such as fewer days on market and more visitors at the first open home, while this agent teamhighlights the benefits of increased exposure and pre-listing feedback.
From “bad word” to click bait
When Real Estate Cafe blogged about this problem five years ago, our headline read “Pocket Listings: Smoking gun outs conflict of interest in real estate,” and began with a rant by a leading broker / owner who put pocket listings at the top of her list of 25 Ways Real Estate is Broken:
When I grew up in the industry, pocket listing was a bad word; now Zillow has a category for pocket listings called ‘Coming Soon.’”
http://bit.ly/SmokingRE (share via social media)
Ironically, her regional brokerage now maintains a closed Facebook group for Coming Soon listings. Is it to compete with Compass and other mega-brokers for market dominance, and simply to double-end commissions to maximize profits? Either way, insider trading has been normalized as the starting place for leads on both sides of the real estate transaction, undermining the MLS and the ability of consumers to access inventory in a single database. Somehow agents teams inside Compass and other brokerages also turn a blind eye to obvious conflicts of interest and how they harm their clients. As the Consumer Federation of America wrote in six months ago, it’s an Agency Mess — and a time bomb.
Class action lawsuits are unfolding, and regulators at the FTC / DOJ are watching anti-competitive practices following their investigation of the real estate industry and call for public comment last year. What’s yours?
http://bit.ly/reMarathon_1Q2019 (share via social media)
