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Bribing Consumers As A Business Practice – NARS New Bill Is Nothing New.

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cash-for-use-is-a-bribe-dis.jpgPaying consumers to use your service has always been a no no in the state of Texas.  Referral fees are limited, gifts are limited, but rebating has always been on the edge of both.  Personally for me, it angers me that I cannot pay more in referral fees, but it has always kept the playing field level here in Austin.  When I first began in the business, a local mega producer had local apartment communities on salary- the on-site was paid a monthly automatic fee for a guarantee that he would receive any and all referrals.  Now for a new guy, there was no way I could compete with that, it was unfair. 

 Paying consumers to use your service is no different as I see it, it is just a direct referral fee.  Most of the time, the builder, or a lender wants to know nothing about what you’re rebating, why? Because it creates a gray area in some cases, is additional contributions that some loans bar, and various other issues.

With the sub-prime fiasco that had the market in a virtual panic a few months ago, it only drives my point home.  If you want to do good by the consumer and be pro consumer, then roll back the final sales price for the buyer.  Allowing a buyer cash back rewards for using your service is financed, they’re paying X interest rate on the cash.  Why not do the right thing and create further equity for the consumer- thus, pro consumer.  And you level the playing field between all…

So, my suggestion- it should be rolled off of the sales price.  Then consumers can shop without being bribed into a lesser service.  Then it really is a consumer driven solution, levels the playing field, and forces all to compete on negotiated commissions. 

This is a quote from Buyside Realty’s website:

Although our customers like us a lot because WE PAY THEM to use our services…

That is just disgusting and just as bad as NAR passing laws barring rebates (NAR shouldn’t have to force you to be ethical).  NAR did not say you couldn’t discount your fees, they simply said you can’t bribe a buyer– it isn’t in a buyers interest to finance cash back. 

In my humble opinion the law absolutely levels the playing field for the discounters to compete fairly. 

Read the (slanted) breakdown of the bill here

(b)  A real estate licensee shall not give or pay cash rebates, cash gifts or cash prizes in conjunction with any real estate transaction. …. 

That one sentence is the bottom line, and I happen to agree with it.  Sorry folks.

Benn Rosales is the Founder and CEO of The American Genius (AG), national news network for tech and entrepreneurs, proudly celebrating 10 years in publishing, recently ranked as the #5 startup in Austin. Before founding AG, he founded one of the first digital media strategy firms in the nation and also acquired several other firms. His resume prior includes roles at Apple and Kroger Foods, specializing in marketing, communications, and technology integration. He is a recipient of the Statesman Texas Social Media Award and is an Inman Innovator Award winner. He has consulted for numerous startups (both early- and late-stage), has built partnerships and bridges between tech recruiters and the best tech talent in the industry, and is well known for organizing the digital community through popular monthly networking events. Benn does not venture into the spotlight often, rather believes his biggest accomplishments are the talent he recruits, develops, and gives all credit to those he's empowered.

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8 Comments

8 Comments

  1. Nick Davis

    May 26, 2007 at 12:54 pm

    There is a very clear distinction between paying referral fees to professionals in a real estate transaction and issuing rebates to buyers as a mean of price competition. RESPA is very clear on this, so your first paragraph doesn’t even make sense.

    Secondly, per the USDOJ, “Rebate” means a payment of monies or anything of value by, or on behalf of, a Licensee to a client or customer (or to a third party authorized by the client or customer to receive the payment) that is in connection with the provision of Real Estate Brokerage Services.

    Although home sellers are permitted to offer inducements directly to the buyer, this does not mitigate the anticompetitive effects of the Rebate Ban. Such a discount is attached to a particular house (and not the broker’s services). Thus, it is not a factor when a buyer chooses the broker who should represent the buyer in finding and purchasing a home. Brokers should not be prohibited from competing to become the buyer’s agent by lowering their prices through rebates and inducements.

    Rebates and inducements benefit home buyers and sellers. Under the traditional structure of a real estate contract, the seller and seller’s broker determine the amount of the commission, and how it is allocated between the seller’s and buyer’s broker. If the seller’s broker also finds the buyer, then that broker keeps the full commission. If, instead, different brokers represent the seller and buyer, the seller’s broker pays the commission of the buyer’s broker, and the size of that payment is not controlled by the buyer. Being able to offer rebates and inducements allows brokers to compete for the buyer’s business by reducing the compensation they receive for representing a buyer.

  2. Nick Davis

    May 26, 2007 at 12:58 pm

    Regarding taking it off the sales price, a rebate from the buyer’s broker helps to offset moving expenses.

  3. Nick Davis

    May 26, 2007 at 1:13 pm

    How can you assert what is in the buyer’s best interest? Maybe offsetting moving expenses is more advantageous. Many buyers move across the country (thousands of dollars) which the rebate can pay for. Other buyers will run out to purchase new furniture or appliances that would otherwise be put on a credit card (more debt).

    Given your logic of a “level playing field“, then ALL concessions should be done away with — not just an arbitrary restriction on cash rebates.

    I find it odd that the State Of Tennessee (comprised mostly of Republicans) use the Gov’t to restrict something they don’t like, yet republicans hate Gov’t intervention! Talk about a paradox!

  4. B. R.

    May 26, 2007 at 2:34 pm

    My point was simple in my first paragraph- DB’s are not the only little guys in the business as they proclaim. Finally a fair rule was put into place that allowed me to compete- pretty simple.

    I respect your opinion, so you can please respect mine.

    I do not agree with all of your assertions that under the law as it is written that DB’s can’t help buyers. You can simply give away all of your buyer side commission by rolling it all off the sales price. At least then you are not PAYING THEM TO USE YOUR SERVICES, as they put it.

    No offense, but I also do not agree that it is the buyers money, I am firmly on the sellers side in this argument. If you aren’t going to provide the services I am paying you to provide, which is bring me buyers “physically show them my home and fully represent them” then it was never your money to rebate in the first place. It is the sellers money and a seller oughta have a right to reduce your commission to zero when a buyer rolls up to the home alone without you.

    At least by rolling it off the sales price, every one wins, everything is disclosed, and DBs can still take a huge bite out of market share. The complaint that you cannot compete because you cant give away cash to buyers is a load of crap. Simply put, the law is not preventing you from competing nor is it unfair.

    To finish- If a buyer can make great financial decisions with their money; then the move across country was planned, they saved money for it. They’ve also gone ahead and paid for their washer and dryer in cash or have the cash ready once they’ve closed- because they’ve planned for it. If they haven’t, maybe they need someone helping them make a sound financial decision; acting in their best interest. Which is what Realtors do and why we are paid.

  5. Janice Delmore

    May 26, 2007 at 6:12 pm

    BR, I just stumbled onto your site (searched genius realtor to find my next agent and you came up, too bad you’re not in Tampa!!!)!

    So I gather from Nick that it’s okay for someone to let ME finance a rebate (and get a tax bill on it too) and fail to provide service and simply let me walk into a bad financial decision/situation?!? That’s not right! I want a Realtor to advise me even though this will be my second home to purchase. I WANT a Realtor’s expertise! I want someone who can do more than tell me how to get to a house I found online (I have Google Maps already), I want someone to advise me on ALL of my options- I would never ask for a discount on expertise!

  6. Nick Davis

    May 27, 2007 at 10:24 am

    Disclaimer: Seek your own professional tax advise.

  7. Nick Davis

    June 2, 2007 at 5:56 pm

    If you are not going to post my comments in their entirety, then remove all of them.

    Regards,
    Nick Davis

  8. Barry Preusz

    October 18, 2008 at 4:19 pm

    Marketing gimmicks have been around for ages and have a negative impact. The big question is who gets hurt in the long run. Obviously cash rebates can have a negative impact upon the lender and on the real estate market. The lender is impacted by being the actual provider of the rebate. The real estate market is impacted by inflating the price of the property. Consumers are impacted by the new inflated cost for real estate. Too often marketing gimmicks like rebates do not contribute to our industry.

    Barry Preusz

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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