REAL Trending Episode 52: Worry Not Over Class-action Lawsuit

REAL Trending Episode 52

Worry Not Over Class-action Lawsuit

Also: Uber Drivers Make Great Property Scouts, and Changes at Compass?

Steve Murray

From REAL Trends, the trusted source for real estate industry news, this is REAL Trending episode 52. We’re breaking down the trends and events of the week and showing how they impact brokers and agents. I’m Steve Murray, president of REAL Trends. Today we’re discussing the class-action lawsuits and the amended complaint, how some real estate flippers and investors are hiring Uber drivers to find properties that may be available, and last, some changes at the top of Compass. So let’s jump right in.

Worry Not Over Class-action Lawsuit

Most people in the industry have heard that some leading plaintiff law firms around the country [are] joining forces, and have come up with a few purchasers of homes to file a class-action lawsuit, basically claiming that realtors’ system of unlimited cooperation and compensation violates antitrust law and that there’s a conspiracy to hide information from the public. We’ve commented on this once before.

First of all, I would tell every broker and agent listening to this to not pay any attention whatsoever to this litigation. It is targeted at NAR and mainly for large national real estate companies, all of whom are equipped with abundant capital, great legal talent both inside and outside their organizations. I also comment from, in my past being an industry expert witness both on the realtor side of the equation and on one occasion representing the Federal Trade Commission in a case against an MLS. So having had some experience with this, I can tell people first, don’t worry about it, don’t spend any time thinking about it. It has nothing to do with how well you’re going to run your business and remember that we always tell people focus on recruiting and developing talent and preserving your cash in these somewhat difficult, challenging times. This lawsuit is targeted at specifically, the practice where a listing agent charges a seller commission and then shares part of that commission with the agent who brings a buyer.

Their basic statement or position is, that the amount that’s paid to the buyer’s agent is hidden from either sellers or buyers or both and that that constituted a conspiracy. After all, buyers should be able to negotiate their own arrangements with their own agent and their own commission payments and that somehow this will save buyers and/or sellers money. Further, that people are pricing their homes higher because they have to cover the costs of the commission. I think everyone in this industry knows a few fundamentals. First, the amount of the commission that the seller pays is not hidden from the seller whatsoever. Number two, it is not hidden from the seller that part of that commission is going to be paid to a buyer’s agent who brings a buyer. Third, that a market value of a home, say if it’s $400,000, well that’s the market value of the home, whether it’s listed FSBO [for sale by owner] or listed by an agent. Whether or not a buyer thinks they can get a better deal if no agents evolved.

Sure, does that happen? Sure. But not all the time. Sellers are looking to keep as much money, obviously, as they can. Lastly, there’s no one that forces sellers or buyers to use real estate professionals. In the United States of America, last I checked, there is no law that requires buyers or sellers to use an agent. Freely, therefore, as we pointed out in our Harris Insight studies last year, 90% of Americans who bought or sold a home in 2018 used an agent freely and then negotiated their own deals with their respective representatives. We know there are many cases, Redfin’s a good one where they offer part of the buyer side agent commission back to the purchaser. They’re not the first to do it and they’re not the only ones doing that. We know routinely, that agents working with buyers will offer to kick in money for repairs or appliances or other items to keep a deal together. It’s a very free and freewheeling market.

I’ll go back to my first statement. No broker agent I’m aware of in the industry should be worried about this whatsoever and we’re not going to cover it anymore in REAL Trends because frankly, our peers are doing a really good job of stirring the pot, saying that it’s the end of times as we know them. We think, hardly. There’s a long way to go to get to that.

Uber Drivers Make Great Property Scouts

Secondly, interesting story about investors using Uber drivers to scout out properties to get broader reach and scale because it’s such a hot market for investment properties and/or fix-and-flippers. It brings to mind direct mail, email, online marketing is just a new advanced way to get other people who are driving around neighborhoods all over metropolitan areas to scout out properties. It is said in the story that some real estate agents are paying a flat fee to Uber drivers if they spot something that turns into a transaction.

I think it’s highly innovative and interesting to have people that are driving around in the normal course of the work they’re doing and have them scout neighborhoods and/or properties for investors. It goes to show that our industry remains among the most innovative in the world at finding new ways to reach sellers and buyers. Isn’t it fascinating, the use of Uber drivers? I suppose it’s akin to the first time somebody put advertisements on shopping carts in grocery stores or on park benches or even on their own cars. Very interesting. We’ll do a follow up on this later as we learn more about how well it’s working for people.

Changes at Compass?

Lastly, announcement was made recently that two top Compass executives had departed the company. And again, some of our peers made a very, very large deal out of this. You know, if every time key executives at any national real estate company departed, whether voluntarily or involuntarily, when that became big, big news, well, it happens so frequently we just don’t think so. Compass is the same Compass it was before these two executives departed. Among the national companies, one may have noticed in the last 18 months, for example, new CEOs at Berkshire Hathaway, new president at Keller Williams, new brand presidents at Realogy, new senior executives at RE/MAX International and new executive changes at Zillow with Rich Barton stepping in to take over being CEO again at Zillow and Spencer Rascoff staying on the board, but stepping out of that role.

Changes in senior executives, marketing, finance, technology, operations, and personnel are a routine fact of life in any business, no more so than in our industry. Compass continues to have the heart of a lion in terms of recruiting and purchasing agents and teams and brokerage companies. We don’t think these changes signal any change of course, for Compass. It could well be that they just needed new and different kinds of talent in those positions.

Learn more about industry trends, marketing and technology strategies, as well as listen to past REAL Trending episodes on our website, www.realtrends.com/blog/. This has been Steve Murray. Until next time.

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