In all my spare time, I’ve been working over the past few days on a real estate porn movie. The film features pictures from hundreds of homes, with loads of juicy details. We took the photos over the course of years, so it’s entirely possible that some of those homes are listed for sale right now. In making the movie available to the public, will we be “advertising” those listings without the listing broker’s permission? I don’t think we will be, but I also don’t give a damn. We have a right to our work product, and we have a right to do as we choose with our work product, and I will joyfully fight for my rights down to my last dime.
Let’s be obvious, at least for a moment. An appraisal is something you contract to have done and pay a substantial fee to obtain. Any state attorney general, even Arizona State Attorney General Terry Goddard, should be able to comprehend such a simple fact. In the same way, advertising is something you pay for. Quibblers will insist that paying web site hosting fees is alike unto paying publication line rates or broadcast fees. To this “argument,” the only reasonable retort is a Bronx cheer. When a word means almost anything, it means almost nothing.
The obvious fact is that MLS rules against advertising other broker’s listings without permission are devised to prevent Broker Paul from placing paid ads representing Broker Peter’s listings as his own. In fact, the motivating premise behind the rule is that Broker Paul, even while giving a false impression about his prowess as a lister, would nevertheless be promoting the homes in a positive light.
So why would Broker Peter object to free advertising of his listings? In other words, why does this MLS rule exist in the first place?
Too obvious, isn’t it? It’s because of the double dip. If Broker Paul advertises Broker Peter’s listings as his own, then Broker Peter might lose out on some opportunities to collect commissions from both sides of his transactions.
Real estate brokers implemented Buyer Agency not because they wanted to make sure that buyers got a fair shake — they didn’t then and still don’t — but because the doctrine of “several liability” was bleeding them white. When every agent of every brokerage was a sub-agent of the listing broker, the listing broker was “severally liable” for every act of negligence or misrepresentation committed by any sub-agent, even if that agent were employed by another brokerage. Buyer Agency gave buyers a nominal kind of representation, but the actual objective was to shield the listing broker from liability for all but his own agents’ errors.
Swept in with the new doctrine of Buyer Agency was a revolutionary change in… almost nothing. Why are days on market to be kept secret? To protect the listing broker. Why is the buyer’s broker’s compensation to be kept secret? To protect the listing broker. Why do MLS rules prohibit one member from advertising another’s listings? To protect the listing broker.
Every mission-critical piece of the MLS system remains just as it was under Sub-Agency, except that the buyer’s broker’s compensation is by now listed under the Buyer’s Broker’s field, rather than the Sub-Agent’s field. In the realms of the Multiple Listing Service, Sub-Agency is not dethroned, it is a monarch in temporary exile — sure to return, one day soon, in triumph.
I’m not saying anyone actually intends to bring back Sub-Agency. But people are thoughtless — they fail to think — and, in consequence, they have never yet thought about what else must be changed, to achieve true Buyer Agency.
Is Days on Market a matter of importance to buyers? The amount of the buyer’s broker’s compensation? Would buyers welcome a frank and public discussion of, for example, soil subsidence issues affecting an entire subdivision? Is there anyone who would want to claim that knowledge of these facts would be bad for buyers, that they should not want to know these things? And yet, if I share facts like these with my buyer clients, I am in violation of MLS rules.
Is there anyone reading this who wishes to claim that these rules are of benefit to buyers? And, if they are not, if withholding material facts like these actively harms buyers, why is this not an agency violation in itself?
I think these rules exist for no reason other than to protect the listing broker, who is in turn protecting the seller. The seller has every right to expect earnest representation from the listing broker and every one of his agents. But the buyer’s broker is not a sub-agent of the listing broker. MLS rules should not oblige him to behave as though he were.
Coming back to the start for a moment: I do not believe real estate porn — photographs and discussion of homes — is a form of advertising. But, even if you insist that it is, I cannot see any benefit to buyers to forbidding the creation and dissemination of real estate porn. Sellers may not like it, and the director of Shrek 3 is probably not going to take much joy in today’s movie reviews, but the interests of consumers are best served by the unfettered flow of information.
All that notwithstanding, in fact we’re solving the wrong problem. The real problem, of which this current dispute is just a symptom, is that the listing broker contracts for and technically disburses the buyer’s broker’s compensation. All the secrets of the mystical MLS flow from this one fact, itself a vestigial remnant of Sub-Agency. If the buyer’s broker’s compensation were divorced from the listing broker’s commission, there would be no more need for secrecy in the MLS system.
In other words, if we are actually following the MLS rules when we represent buyers, we are de facto sub-agents of the listing broker, betraying our fiduciary duty to our buyer clients with every material fact we withhold. We can wait until we run up against an attorney crafty enough to sell that argument to a jury, or we can clean up our industry now, by implementing true Buyer Agency. How? By divorcing the commissions. Boundless benefits to the consumer will flow from that one simple change.
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Technorati Tags: compensation for buyer representation, real estate, real estate marketing
Mark A. says:
Enjoyed reading this post which hits the nail squarely on the head. I will also say that divorcing the buyer’s broker’s compensation from the listing agent’s compensation is something that needs to be implemented YESTERDAY (how we’re going to sell this to lenders is another serious discussion that needs to be started as well, ASAP). But I would also ask: Once we’ve implemented all these great ideas, what do we need the MLS for anymore?
May 18, 2007 — 6:27 am
Will Farnsworth says:
Nice post! This is just another example of how the antiquated methods of RE brokerage are heavily weighed in favor of the seller. As much information as possible on the property (DoM, etc) is absolutely essential for a buyer to make a fair offer, but the protectionist methods of MLS inhibit a practice that would truly benefit every homeowner. I mean, we all have to be buyers at some point, right?
>We can wait until we run up against an attorney crafty enough to sell that argument to a jury
how soon can you start law school?
May 18, 2007 — 7:53 am
Spencer Barron says:
It doesn’t seem right to pry the MLS from the dying hands of the REALTOR brand any more than it would be to insist that the director of your real estate porn turn over all the shots to the public that don’t make the final cut. As far as disclosure of what a buyer’s agent is getting paid, I half agree. But should we also in the same vein be able to demand to know what the profit margin is on each item we buy? I’d like to know just how much Walmart is making on me. That would be great for the buyers but not good for the system. The system would collapse. Ignorance is bliss.
If there are those that would like to create a new system, they certainly could create anything they wanted. That’s the American way…right? I’d love to see a new MLS system and would actively support one I liked. I would insist of any system that I contribute to that I have a say on what the final product looks like.
May 18, 2007 — 8:45 am
Kevin Boer says:
Most of the way our industry is set up is indeed designed specifically for the benefit of the listing side of the equation.
And yet, if I share facts like these [days on market] with my buyer clients, I am in violation of MLS rules.
Here in Silicon Valley, it’s even more convoluted than that. I can send around postcards to my farm detailing DOM for every home currently on the market and the ones which just sold. I can write about it in my client newsletter. I can distribute it on flyers at my open houses. But I can’t display it on my web site. I’m not sure the reason for this rule is to screw the buyer as much as to keep the phones ringing…ie screw the Internet-based discount shops.
Redfin does a clever dodge around this by displaying not days on market, but days on Redfin’s site … which of course is pretty much the same thing. Ridiculous rules invite clever dodges.
And btw, Realtor.com, the official consumer portal of the National Association of Realtors, is the king of clever dodges. Well before our local MLS permitted displaying sold listings, Realtor.com began doing so in our area. They got away with it because their source of information on solds was not the MLS…ergo, they were not displaying sold listings but sold homes, a distinction that I am clearly too stupid to get.
If the trick is in the semantics, and if sold homes are indeed not the same as sold listings, then surely “Days on Redfin” is not the same as “Days on Market“!
May 18, 2007 — 9:01 am
Albuquerque real estate says:
Great post. There is no doubt that the industry heavily favors the sellers.
May 18, 2007 — 9:41 am
Albuquerque real estate says:
Great post. There is no doubt that the industry heavily favors sellers.
May 18, 2007 — 9:51 am
Brian Brady says:
“I do not believe real estate porn — photographs and discussion of homes — is a form of advertising”
I’d support an argument which claims that discussion (real estate porn, WHEN ENGAGED BY LICENSEES, can be construed as a form of advertising because it ultimate intent is to find buyers for those properties.
And…I might be wrong…or right. A similar argument happened on Wall Street when Eliot Spitzer claimed that research reports (their equivalent of porn) were indeed advertising when offered by the underwriting firm and were not an impartial discussion.
This whole analogy may prove your point. Nobody wanted research reports to go away, they just wanted them to be offered by experts divorced from a financial interest in “pushing the product”.
Real estate porn is good, when offered by an impartial professional. Divorcing the buy-side commission sets the stage for a more healthy, consumer-oriented discussion. Buyers’ agents can and should freely discuss the merits or shortcomings of any property. That discussion could include commentary from the listing agent with a disclosure that he/she has a financial interest in “pimping the product”.
May 18, 2007 — 10:23 am
Loren Nason says:
It sounds like every MLS association and its rules are antiquated and ridiculous.
The only way I can see this being resolved is a massive revolt from Agents/Brokers or the consumer voicing their opinion on who/what site they visit.
I would love for the consumer to resolve this with their pocket books but i don’t see how it can be resolved without agents/brokers starting the resolution.
BTW – you now rank #2 for a google search of “real estate porn movie”
May 18, 2007 — 1:22 pm
TNTwally says:
Without commenting on the conclusions regarding unlinking listing agent & buyer agent commissions … much of the content of this post has me baffled, Greg.
I really don’t understand your rigid position for your right to use your work product, while implying that another listing agent should not have the right to control how their entire listing is used. How about your right to control your listings?
The MLS rules require disclosures, even by the listing agent, that you say are forbidden for a buyer’s agent to make. Anything “… that materially affects …” is supposed to be disclosed. All the “rules” of which I am aware require a buyer’s agent to represent the buyer, and we have not encountered significant exceptions in terms of frequency or degree.
And I certainly hope you agree that getting rid of “several liability” was a really good thing.
Days on market is disclosed where it is most important to do so … on a MLS CMA report for all properties that might be of interest to the buyer.
Finally, buyer agent compensation is published in the MLS, so is not much of a secret. But listing agent compensation is another matter. Only the HUD-1 shows that, which has very limited exposure.
May 20, 2007 — 2:08 pm
Arlingtgon Virginia Condos -- Jay says:
I’ll use your excerpt when somebody comes gunning for me due to my blunt series on the latest overpriced condos in my niche market–very porny.
I’ll tell them, “But Greg said….”
“Sellers may not like it, and the director of Shrek 3 is probably not going to take much joy in today’s movie reviews, but the interests of consumers are best served by the unfettered flow of information.”
May 24, 2007 — 8:48 pm