Month: June 2006 (page 1 of 1)

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

In a comment below, Jon offers this:

What are you talking about? Lawsuits against emongoo, zillow and refin? None of them are doing anything wrong…sorry to say. I looked at emongoo, zillow and redfins sites and I don’t see anywhere where they say they give legal advice.

First, I only cited legal advice with respect to emongoo.com – and we’ll come back to that. We should exclude zillow.com from this discussion, because, for now at least, they are doing nothing but running a look-up service with no legal consequences that I know of.

But redfin.com has considerable legal exposure, as does buysiderealty.com and anyone emulating the general redfin.com business model. The first and most obvious problem is the legal doctrine known as procuring cause. These sites are a procuring cause lawsuit – or perhaps a procuring cause class action suit – waiting to happen. They go out of their way to flout the rights of cooperating brokers, openly advising buyers to see homes at open houses or by contacting the listing broker directly. The NAR Code of Ethics forbids brokers from letting a procuring cause dispute impede a transaction, but there is nothing to prevent the aggrieved broker from pursuing damages after the fact. I’m not saying this will happen, but their noses are wide open.

(As a side note, the way I read buysiderealty.com’s web site, their real business is loan origination. My guess is that the real estate brokerage side of the business will be one or more separate operating entities, with the broker being hung out to dry in the event of a lawsuit.)

The entire discount sector of the real estate industry – on-line and brick ‘n’ mortar – faces huge risks on the subject of agency law. It is difficult to argue that you did everything possible to advance your client’s interests when you did everything possible to avoid knowing what your client’s interests actually are. From the outside, you might want to shout caveat emptor! But the law of agency in real estate is by now much closer to caveat venditor.

There is actually added risk for the discounters, as Read more

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

I have been devoting a lot of my time to some ascendant ideas in Real Estate loosely based on the Web 2.0 model of internet commerce. The ideas are ascendant, but they’re not necessarily good. I weigh in on the skeptical side for now, but I’m watching all this with interest. I’ve been wrong before.

Of all the fascinating things I’ve seen, the most impressive was the painstaking deconstruction of the redfin.com numbers. We can scale those results any way we want and they still stink. Any brick ‘n’ mortar accountant could do the math. As with Web 1.0, it doesn’t matter how many different ways you shout down the numerical analysis, ten trillion times a tiny loss is a huge loss.

So: One procuring cause lawsuit–and there are apt to be dozens… One negligence lawsuit–and the business model is proudly based on negligence… Emongoo.com is actually in worse shape, since they’re taking quite a bit less money but openly promising legal advice. The aggregators and sites like zillow.com are probably safe–though possibly not profitable. But sites attempting anything like agency have the same legal exposure as B&M brokers, but with a lot less money to cover the losses.

It’s an interesting problem…

Here’s another one:

The real estate industry has always been about seller representation. This was true historically, but it’s still a huge source of lawsuits among the old-timers. The idea of dual-agency–itself a huge fount of lawsuits–is an attempt to cling to double-commissions in the age of buyer agency.

But here is where we’re headed, at least for now: In the world of redfin.com, emongoo.com, HelpUSell, etc., buyers will have full representation, but many sellers will be essentially unrepresented.

The immediate knee-jerk answer to this would be to make buyers pay for their own representation, but, of course, now more than ever buyers arrive at the closing table with no cash at all. Good income, good credit, but little or no cash.

So why should sellers pay for the buyer’s agent? For the same reason they always have, agency law be damned: For the introduction.

So how does this shake out?

On the one hand, sellers might think Read more