What is your broker doing when he’s not milking you for overpriced business cards and overpriced letterhead with overpriced envelopes? He’s milking your buyers for overpriced loans, overpriced title services, overprices inspections, home warranties and hazard insurance policies. For some brokerages, there is never enough money to be squeezed out of a transaction. This is white shoe corruption — technically lawfully but oozing sleaze. Someday there will be a successful class action suit and it will all go away just like that.
Until then, heed the advice of attorney Joshua Marks, who wins this week’s Odysseus Medal with Buyer Beware: You Don’t Have to Use the Mortgage and Title Companies Affiliated with your Real Estate Broker. Make Sure You Shop Around!:
A recent class-action lawsuit filed in the state of Minnesota is bringing to light a long-standing issue that affects buyers of residential real estate throughout the country—alleged steering of home buyers to affiliated title, settlement and mortgage companies by large realty brokers. This widely utilized practice often leads to consumers incurring a considerable amount of extra fees and costs when compared with fees and services offered by non-affiliated competitors.
Many real estate brokerages rely on the income generated by clients using mortgage and title companies that are affiliated with them. Brokerages often attempt to maximize their “capture rates” – the percentage of all home-sale transactions that use the affiliates’ services. A consumer typically ends up paying more fees than if he/she selected a non-affiliated competitor. The brokerages justify the additional expense to consumers by claiming that even if the affiliates’ fees or mortgage rates are not the lowest available, the quality and dependability of the affiliates’ services more than compensate for any price differences.
Over the past several years, many cases involving financial relationships between brokerages and their affiliates have withstood legal challenges. So long as the financial arrangement was properly structured to comply with federal anti-steering and anti-kickback rules, the Courts have been reluctant to intervene in these arrangements.
In the Minnesota lawsuit, two buyers filed claims against Coldwell Banker Burnet Realty Inc., one of the largest realty firms in the state. The Plaintiffs in the litigation charged that Coldwell Banker breached its fiduciary duties under state law when it steered the buyers to its own title and settlement affiliate, Burnet Title, despite knowing that the affiliate’s fees were significantly higher than those available from non-affiliated firms. In the case of a broker-client relationship, fiduciary duty means that a real estate broker is bound to put a client’s best interests ahead of the broker’s, and must not profit from the fiduciary relationship unless the client consents. A fiduciary is also supposed to disclose material facts that may affect the client’s best interests.
Russell Shaw’s illustration of the Realtor.com pencil sharpener was hugely popular across the RE.net, and one of the posts it inspired, How to Stop getting hosed by REALTOR.com… by Eric Blackwell, is the winner of this week’s Black Pearl Award:
Take the money that you would spend on going to REALTOR.com and use it to develop your OWN web presence. Even if all you did was to take that $3,500 mentioned in the comment of the Bloodhound blog and plunked it down on Pay per Click advertising, at $2.00 per click it would still bring 1,750 RELEVANT clicks to your site. Your odds of closing more business than what you are getting from R.com are MUCH better!
Talk to other agents and get them to get out of R.com as well! Explain to them that it is not benefiting them (this will not be a tough sell!).
Here is what we did…
We put our efforts into getting ahead of the interlopers. And they ARE in my opinion the KING interloper. We started going after the channels that THEY dominated like:
a) Getting to the top of the search engines with ALL of the photos and much more of what the customers actually want.
Seriously Errol and Alan…you cannot expect us to buy that the customer ACTUALLY wants to look at that presentation you call a site.
b) Teaching our agents the art of new advertising channels like Pay per Click (another favorite of interlopers) see above. Our agents are getting great results and making sure that we are staying ahead of the competition. We do not go there, because we do not want to bid against them.
The results? Check out your extortion eradication metrics in your town:
Metric #1: Percentage of multiple photo listings on R.com! You want this as low as possible.
Metric #2: Search Engine Rankings on Google and Yahoo for REALTOR.com for city real estate, city homes, city homes for sale type of keywords, etc.
There you have it. A simple recipe for focusing your marketing expenses in a useful direction, thoughts?
By a wide margin, the winner of this week’s People’s Choice Award is Jim Cronin with Kick the Pay Per Click Habit: 7 Reasons Why Real Estate Blogging Is Better For Your Business:
A Pay-Per-Click campaign is an easy way into the search engines. Anyone with a budget can swing it.
Blogging takes discipline, skill, focus, dedication, and savvy. The huge reach your blog has in the search engines is a testament to your current and future clients that you understand and have what it takes to be a master online marketer. If you have successfully marketed yourself, the impression is that you can do the same for their home.
Lead Quality was one of the topics that came up again and again in our forum discussion, and I feel that it was weaved into the above nicely, but it would be a shame to have left out this quote by Tracey Thomas:
- A pay per click lead is like finding a wallet in the parking lot; just a name and contact info.
- A blogging lead is like a referral. The customer feels like they already know you. Its almost as good (maybe even better) than third party validation; I control the information feed.
- If someone reads my blog and calls me, they know more about me than if I was referred to them by a past client.
- A recent relocation client found my via my blog/vlog. When we finally met, she had a familiarity with me that was similar to knowing me for a long time. I almost felt like I was at a bit of a disadvantage at first. I had to ask a lot of questions to get the same sense of comfort with her as she had obtained “virtually” with me.
And finally, my favorite One-Liner in the discussion:
“Blogging gives you a voice, while pay-per-click just gives you a link.” – Mary De Luca
If you didn’t look at this week’s nominees for The Odysseus Medal, you should. As always, if you happen upon perfection, nominate it.
Deadline for next week’s competition is Sunday at 12 Noon PDT/MST. You can nominate your own work or any post you admire here.
Congratulations to the winners — and to everyone who participated.
Technorati Tags: blogging, real estate, real estate marketing
Joshua Dorkin says:
Greg – I’m glad you selected Joshua’s post on mortgage and title companies. He’s been a great asset to our blog and I appreciate your recognition of his quality article.
October 15, 2007 — 1:36 pm