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Homesnap has cool technology, but same corrupt commission model


By Patrick   Follow   Wed, 13 Mar 2013, 1:33pm PDT   1,021 views   50 comments
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http://pandodaily.com/2013/03/13/zillow-challenger-homesnap-declared-most-disruptive-startup-at-techcocktails-sxsw-showcase/

Since the housing bubble burst half a decade ago, residential real estate has been an unsexy industry. As a result, the category has seen limited innovation. Existing giants like Zillow, Trulia, and Redfin have thrived in the home search category, if only by default. But all are nearly a decade old and were built in a pre-mobile world. For the first time in years, there are signs that the tide is turning and that both investors and consumers are once again receptive to new technologies in this space.

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leo707   Tue, 19 Mar 2013, 8:41am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 11

PockyClipsNow says

Its not illegal for someone to list a house for sale in MLS - thus it cannot be corrupt. Corruption implies laws are broken.

Incorrect, corruption does not imply broken laws it implies--nay directly is in reference to--immorality, dishonesty, no integrity, evil, depravity, nepotism, etc... in someone's conduct. Coincidentally all those things are not illegal.

cor·rup·tion
noun
1. the act of corrupting or state of being corrupt.
2. moral perversion; depravity.
3. perversion of integrity.
4. corrupt or dishonest proceedings.
5. bribery.

cor·rupt
adjective
1. guilty of dishonest practices, as bribery; lacking integrity; crooked: a corrupt judge.
2. debased in character; depraved; perverted; wicked; evil: a corrupt society.
3. made inferior by errors or alterations, as a text.
4. infected; tainted.
5. decayed; putrid.

This will come as a shock to some, but what is legal and what is moral/ethical are not always in sync.

leo707   Tue, 19 Mar 2013, 8:48am PDT   Share   Quote   Permalink   Like   Dislike     Comment 12

Stormtrooper says

Patrick........being a regular follower of your blog and articles you reference about the housing market, etc.

Really? You really follow and read this forum?

Then it is difficult for me to understand why you would make a comment like...

Stormtrooper says

It is my impression that for some reason, you feel our services should be provided for free.

Please post a quote of Patrick, or anyone on this forum for that matter who seriously suggests that used house sales people should provide their services for free.

Yes, there is a log of complaining about the commission system, but work for free? No. I don't recall anyone saying that.

Stormtrooper   Tue, 19 Mar 2013, 9:00am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 13

"used house sales people"...........so tell me Leo, what is it you do for a living? What grand philanthropic profession do you belong to? You snide little man/woman/transgender-ed person............

RentingForHalfTheCost   Tue, 19 Mar 2013, 9:15am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 14

Stormtrooper says

A GOOD broker is worth their weight in gold.

Only if they both get buried. A house is a simple commodity. It should be easily sold or bought. Realtors, brokers, etc. benefit from making it appear way more complicated than it is.

Buyer: "Dude, you selling your house?"
Seller: "Why, yes I am. You must have seen the sign I put out front"
Buyer: "How much?".
Seller: "30 years of your income would be fine."
Buyer: "Deal"

;)

Dan8267   Tue, 19 Mar 2013, 9:17am PDT   Share   Quote   Permalink   Like (3)   Dislike     Comment 15

Stormtrooper says

A GOOD broker is worth their weight in gold.

So then you should go for the fattest broker you can find, right?

errc   Tue, 19 Mar 2013, 9:17am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 16

I don't think realtors should work for free, but if their profits aligned with their value add to the transaction, then they should be happy to receive minimum wage.

PockyClipsNow   Tue, 19 Mar 2013, 9:23am PDT   Share   Quote   Permalink   Like   Dislike     Comment 17

If you imagine a world where everyone FSBO's thier home- it would be a total nightmare. More fraud than you could imagine.

Patrick has no clue because he didnt even work a month as a realtor - its evil and all that. haha.

Stormtrooper   Tue, 19 Mar 2013, 9:39am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 18

Funny, you try to have a rational conversation and all you get are ignorant responses. Don't like brokers........don't use em. It's a free country.

leo707   Tue, 19 Mar 2013, 9:46am PDT   Share   Quote   Permalink   Like (3)   Dislike     Comment 19

Stormtrooper says

Patrick.....you are lumping buyer and seller representation together.

Why not? Sure they go about it in different ways, but they both have the same core motivation--to make a commission on the sale.

Stormtrooper says

As a listing agent, I have a fiduciary obligation to my seller.

Ah, yes the oft mentioned fiduciary "obligation" that a real estate agent has for their client. If you truly feel a fiduciary obligation to your clients then you must oppose the commission system and seek to change the real estate payment model (not suggesting you work for free silly!).

This has been gone over many times on this site, but let me explain...the real estate commission system invites corruption and encourages/rewards agents who fail to put their clients needs as their top priority--it is a perfect example of the principal–agent problem.

A "fiduciary obligation" to how owners means that a selling agent needs to get them the best price possible for their home right?

To make it simple let’s assume that an agent, working at full capacity, can close on 24 properties a year, with the average price being $100k. Taking half of the 6% commission would make an agent’s yearly take home for all that hard work $72k (for this exercise we are also going to assume that the agents is also the broker).

For only $3k per house the agent is getting a great price for their clients. However, let’s say that the agent can put in a little more elbow grease into the deal to get his client an even better price (after all that is his/her fiduciary obligation, right?). In doing so he/she manages to get more for his/her valued clients and ups the average price to $105K per/building. Also, he/she when spending that extra time prepping the buildings for sale, letting “bad” deals go, etc. reduces the sales he/she can close each year from 24 to 20.

With the increased effort and integrity the agent’s new take home is $63,000/year.

So, providing more value, living up to and agent’s fiduciary obligation, and working harder in a clients best interests costs the agent $9,000 a year, this is not an insignificant portion of his/her income and quite a "gift" to his/her clients.

Hmmmm.... I wonder what an agent would really do in this situation.... hmmmm...

This is one example in how the commission system lends itself to corruption and how an agent is motivated to work against the financial interest of their client.

While I am sure that you are perfectly ethical in your business dealings, and are more than willing to put the financial well being of your clients above your own income you must realize that not all humans are the stalwart of moral virtue that you are. Most people have human failings, and a system that lends itself to corruption is going to lead many down a path that they may not otherwise tread. For these reasons--even though you are able to easily sort out the ethical dilemma--you should oppose the commission system in-order to avoid having to work within an inherently corrupt system.

Thank you for now working to reform the system.

leo707   Tue, 19 Mar 2013, 9:49am PDT   Share   Quote   Permalink   Like   Dislike     Comment 20

Stormtrooper says

"used house sales people"...You snide little...

You don't sell used buildings? Do you really feel that it is an insult to say someone sells used homes? Do you prefer the term "pre-owned?"

I apologize if I hurt your feelings.

leo707   Tue, 19 Mar 2013, 9:53am PDT   Share   Quote   Permalink   Like   Dislike     Comment 21

PockyClipsNow says

If you imagine a world where everyone FSBO's thier home- it would be a total nightmare. More fraud than you could imagine.

AAAAHHHHHH...Hahahaha.......hahahahaha.....aaaaaahhhhh........

*snif*

*chuckle*

OK, let me try and compose my self...

AAAAHHHH...hahahaha.....*snort*.....

Whew, OK.

Granted I am not suggesting that we should go entirely FSBO, but you are suggesting that the monumental fraud that exists in the current system would somehow be worse? Oh, do tell, I am all ears.

Stormtrooper   Tue, 19 Mar 2013, 9:55am PDT   Share   Quote   Permalink   Like   Dislike     Comment 22

WTF Patrick? Petty? Screwed? Don't blame others? The buyer & buyer owner? Sort what out? You're rambling.....
You still haven't answered my question.
OBTW- Nothings free........I used that as a figure of speech. The cost of the commission for BOTH sides of the transaction are built into the price of the home. Along with taxes, government fees, and other charges associated with the transaction are the "costs of doing business". Nothings FREE!

leo707   Tue, 19 Mar 2013, 9:57am PDT   Share   Quote   Permalink   Like   Dislike     Comment 23

Stormtrooper says

Funny, you try to have a rational conversation and all you get are ignorant responses.

Funny...

Stormtrooper says

you are either ignorant of our profession or simply don't understand how business gets done.

Stormtrooper says

extremely disrespectful. But....maybe that's your calling card eh?

Stormtrooper says

you don't have a clue about what your talking about. You sound bitter & ignorant.

Stormtrooper says

You snide little man/woman/transgender-ed person............

Yes, those do all sound like things someone who is trying to have a rational conversation would say.

leo707   Tue, 19 Mar 2013, 10:00am PDT   Share   Quote   Permalink   Like   Dislike     Comment 24

Stormtrooper says

OBTW- Nothings free........I used that as a figure of speech. The cost of the commission for BOTH sides of the transaction are built into the price of the home. Along with taxes, government fees, and other charges associated with the transaction are the "costs of doing business". Nothings FREE!

Yes, we understand that. The commission is build into the price of the home. The home that the buyer shells out money for.

That is why statements like...
Stormtrooper says

By the way, the fact that the buyer gets representation for "free"......is a great thing. What other service can you think of that you can get good council and NOT pay out of pocket?

...sound a little silly. The buyer is "paying out of pocket" an extra %6 so that both the buyer and seller can have "representation."

Stormtrooper   Tue, 19 Mar 2013, 10:01am PDT   Share   Quote   Permalink   Like   Dislike     Comment 25

Patrick.....my last comment was in error. That was not your comment.

leo707   Tue, 19 Mar 2013, 10:02am PDT   Share   Quote   Permalink   Like   Dislike     Comment 26

Stormtrooper says

Patrick.....my last comment was in error. That was not your comment.

You can press the "Edit" text above your comment to fix the text.

turtledove   Tue, 19 Mar 2013, 10:05am PDT   Share   Quote   Permalink   Like   Dislike     Comment 27

Stormtrooper says

The cost of the commission for BOTH sides of the transaction are built into the price of the home. Along with taxes, government fees, and other charges associated with the transaction are the "costs of doing business".

Don't forget the amount of the underwater mortgage. Mustn't leave that out of the price calculation.

Stormtrooper   Tue, 19 Mar 2013, 10:11am PDT   Share   Quote   Permalink   Like   Dislike     Comment 28

Oh Leo......you are sooooooo smart. YOU are the reason I don't sell used homes anymore. Now I deal with business's that understand how things work and can rationalize the value of time and money. You're just a bitter and jealous person. I'll bet you're a lefty, someone who despises success. I should have known, you live in CA. The redistribution capital of America. Why does it bother you so that a broker makes a living?
Walmart not paying well?

Stormtrooper   Tue, 19 Mar 2013, 10:14am PDT   Share   Quote   Permalink   Like   Dislike     Comment 29

Sorry turtedove.......the value of your property has nothing to do with the amount of debt you have.

Stormtrooper   Tue, 19 Mar 2013, 10:15am PDT   Share   Quote   Permalink   Like   Dislike     Comment 30

Unless your buying an investment property of course. Had to get that out there before the vultures tear me up.

leo707   Tue, 19 Mar 2013, 10:20am PDT   Share   Quote   Permalink   Like   Dislike     Comment 31

Stormtrooper says

Oh Leo......you are sooooooo smart.

Thank you!

Stormtrooper says

YOU are the reason I don't sell used homes anymore.

I am glad that I could take some small part of you leaving the corruption and moral depravity of your past life behind.

You are welcome.

leo707   Tue, 19 Mar 2013, 10:23am PDT   Share   Quote   Permalink   Like   Dislike     Comment 32

Stormtrooper says

I'll bet you're a lefty, someone who despises success.

Funny that this is how you would characterize someone who opposes a system that lends itself to being corrupt.

Stormtrooper   Tue, 19 Mar 2013, 10:27am PDT   Share   Quote   Permalink   Like   Dislike     Comment 33

Nothing corrupt about people mutually entering into a contract to pay a fee for services rendered. But heh, let's just agree to disagree. I wish you the best!

Patrick   Tue, 19 Mar 2013, 10:32am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 34

Stormtrooper says

Nothing corrupt about people mutually entering into a contract to pay a fee for services rendered.

That would be fine, but getting paid by the seller to sell a house at the highest possible price and also claiming to represent the buyer's best interest is definitely corrupt.

leo707   Tue, 19 Mar 2013, 10:37am PDT   Share   Quote   Permalink   Like   Dislike     Comment 35

Stormtrooper says

Nothing corrupt about people mutually entering into a contract to pay a fee for services rendered. But heh, let's just agree to disagree.

Sure we can agree that contracts are not inherently corrupt, but just because a contract exists--and is legal--does not mean that the agreement bound by the contract is a moral or ethical one.

Putting aside the fact that there are many ways that contracts can be manipulated and corrupted that is not really what we are discussing. We are discussing that the current way that real estate agents get payed--through commission--lends itself to corruption and encourages/rewards an agent to act against the best interests of their clients.

Stormtrooper says

I wish you the best!

Thanks! I with the best to you in whatever new career you have chosen.

Stormtrooper   Tue, 19 Mar 2013, 10:55am PDT   Share   Quote   Permalink   Like   Dislike     Comment 36

Patrick......"claiming" to represent a buyer when you truly are representing the sellers interests ONLY........then I would agree. However, MOST state's real estate laws require full disclosure of your (agent's) relationship with the consumer, upfront. Kinda destroys the "corrupt" aspect of your argument. However....most consumers make assumptions, still no laws against stupidity.

And Leo......I said I don't sell homes, I didn't say I don't sell real estate. And for the record, the vast majority of agents I know personally, professionally or otherwise are some of the finest people you will find. They, nor do I practice any of the "corrupt" behavior you claim to be so rampant in my profession. They are the most charitable & giving people I know. It's sad that you are so cynical.

leo707   Tue, 19 Mar 2013, 11:01am PDT   Share   Quote   Permalink   Like   Dislike     Comment 37

Stormtrooper says

They, nor do I practice any of the "corrupt" behavior you claim to be so rampant in my profession. They are the most charitable & giving people I know.

How can you possibly know this?

...about the others not you.

leo707   Tue, 19 Mar 2013, 11:07am PDT   Share   Quote   Permalink   Like   Dislike     Comment 38

Stormtrooper says

Patrick......"claiming" to represent a buyer when you truly are representing the sellers interests ONLY........then I would agree. However, MOST state's real estate laws require full disclosure of your (agent's) relationship with the consumer, upfront. Kinda destroys the "corrupt" aspect of your argument.

You seem to be ignoring the principal–agent problem in the agent client relationship. That is where the corruption in the arrangement lies.

Plain-and-simple...

Payment for the agents is not tied to getting a good price for their client. In fact in many situations an agents level of payment is contrary to a clients best interest. Can you not see how this would lead to corruption. Under these circumstances even good people are tempted and can drift into grey areas.

Stormtrooper   Tue, 19 Mar 2013, 11:07am PDT   Share   Quote   Permalink   Like   Dislike     Comment 39

Because I know them personally, and do business with them.

Stormtrooper   Tue, 19 Mar 2013, 11:11am PDT   Share   Quote   Permalink   Like   Dislike     Comment 40

Leo......what you describe is not reality. Maybe in some cases, but that is NOT the norm.

leo707   Tue, 19 Mar 2013, 11:12am PDT   Share   Quote   Permalink   Like   Dislike     Comment 41

Stormtrooper says

Leo......what you describe is not reality. Maybe in some cases, but that is NOT the norm.

Can you be more specific?

Stormtrooper   Tue, 19 Mar 2013, 11:18am PDT   Share   Quote   Permalink   Like   Dislike     Comment 42

You are making too many assumptions when you generalize. Your question is too vague.

evilmonkeyboy   Tue, 19 Mar 2013, 11:22am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 43

Stormtrooper says

It is my impression that for some reason, you feel our services should be provided for free.

I personal feel that it should be free to the buy and seller. Find a better business mode, innovate or someone else will. Google and Facebook provides it services free to public why shouldn't you.

PockyClipsNow   Tue, 19 Mar 2013, 11:31am PDT   Share   Quote   Permalink   Like   Dislike     Comment 44

agents sure dont 'last long' on this site, haha.
exceptions are greg and roberto of course

turtledove   Tue, 19 Mar 2013, 12:11pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 45

Stormtrooper says

Sorry turtedove.......the value of your property has nothing to do with the amount of debt you have.

Sure... Asking prices have absolutely nothing to do with the amount the seller originally paid to purchase the property. The asking price has nothing to do with the amount of equity loans he/she took out against the property either. The properties are really just worth that much! Thank you for clearing that up. Surprising coming from a person who sells property for a living.

turtledove   Tue, 19 Mar 2013, 1:07pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 46

robertoaribas says

hmm, that must be why there are never any short sales, since clearly homes are always worth what is owed... thanks for the information!

Well, since short sales make up such a large portion of the MLS portfolio these days, I can certainly see why you might think they have a material effect on median asking prices.

taxee   Wed, 20 Mar 2013, 12:52am PDT   Share   Quote   Permalink   Like   Dislike     Comment 47

Property is worth whatever a bankster will lend to an idiot. That is, unless the bankster is buying it himself.

leo707   Wed, 20 Mar 2013, 3:00am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 48

PockyClipsNow says

agents sure dont 'last long' on this site, haha.

exceptions are greg and roberto of course

Isn't E-man also a real estate agent?

Anyway most agents who come to this site come to toe the NAR party line and think that their participation is a great way to drum up business and get exposure. Unfortunately for them almost everyone who participates in this forum is familiar with the bullshit-ness of such ideas as "fiduciary obligation", buyers agents are "free", etc.

The agents that stick around are more likely to respond to criticism of real estate agents with things like reasoned arguments (not that they never get heated), data, or--hell--even sometimes agreement; rather than responding with personal attacks, straw man arguments, red herrings, anecdotes and "trust me."

While I don't always agree with robertoaribas, E-man and gregpfielding I do respect what they have to say.

leo707   Wed, 20 Mar 2013, 3:45am PDT   Share   Quote   Permalink   Like   Dislike     Comment 49

chanakya4773 says

A real estate agent is like any other service provider ( doctors, lawyers..etc). There are good ones and bad ones ( corrupt).

Yes, this is true. It is also true the some professions for one reason or another attract more bad apples than others.

chanakya4773 says

No system can automatically create an environment where the consumer automatically gets everything. even doctors have conflict of interests. same with auto mechanics..and so on.

Right, any system has the potential for abuse, fraud and corruption. The propensity for a system to encourage corruption is a continuum; some systems lend themselves and reward corruption more than others. Imagine if your doctor or mechanic's entire paycheck was a percentage of the total cost of procedures they billed to you. What do you think would happen to the number and cost of your medical and mechanical procedures? Would you worry more about the % fee system than the current systems used?

chanakya4773 says

If somebody is truly concerned about real estate agent corruption, they should create real estate agent reviews.

Yep, I like reviews and it is a good idea to have access to reviews they are not a fix for an inherently corrupt system. Reviews can be interesting anecdotes, but just about any review systems is also easily manipulated and should be taken with a grain of salt.

leo707   Wed, 20 Mar 2013, 4:07am PDT   Share   Quote   Permalink   Like   Dislike     Comment 50

Stormtrooper says

Leo......what you describe is not reality. Maybe in some cases, but that is NOT the norm.

What I described is what happens in every real estate sale with agents representing clients.

To break it down:

Agent's (buying or selling) financial interest = get offers accepted as quickly as possible while balanced with the property selling for the most amount of money as possible.

Seller's financial interest = sell their property for as much as possible.

Buyer's financial interest (the person who is actually paying all the agents commissions) = buy the property for as little as possible.

In no world is does a full-time serious buyers agent's motivations and rewards ever align with the interests of their client.

The argument could be made that sometimes a sellers agents interests are aligned with their client, but there are many situations where they are not only unaligned with the seller, but where a selling agents motivations are more inline with the buyer than the seller of the property. Remember, no matter the price no agent gets paid until the property sells.

Every transaction has these conflicts of interest.

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