After all of these years, there is still a war rumbling in neighborhoods across America as traditional brokers are still obsessing over the merits of the rebate brokerage model despite most remaining full service and despite rebaters being embraced by consumers.
Rebate brokerages are still challenged by real estate insiders as highlighted by a recent event in Boston wherein rebate brokers Redfin and CondoDomain (both in the top 10 brokerages in volume and unit sales) were allegedly blackballed by a traditional broker and preemptively offered a lower commission because the broker allegedly has a “personal problem” with the rebate model.
According to CondoDomain, a Boston broker contacted Redfin and CondoDomain to notify them that on his listing, if either company desires to show the property, only 1% commission would be offered rather than the 2.5% offered via the MLS “because that listing broker doesn’t believe in our business model and he “personally has a problem” with the fact that we [CondoDomain] give some of our commission back to our client.”
In an email to CondoDomain, the Boston broker allegedly said, “Now, I haven’t actually done any deals with Condo Domain. So I cannot speak to the issue of whether your agents provide a level of service to your buyer clients which (sic) should entitle you to the full buyer broker commission. But you do give portions of the commission received back to your buyers, and I personally have a problem with that.”
Further, the broker allegedly wrote, “I have recently notified Redfin by written correspondence that any future compensation to their company or their brokers & agents on transactions with properties listed by my company will be at the sole discretion of Metropolitan Boston Real Estate and its seller clients, notwithstanding the MLS published cooperating broker compensation to buyer agents. Likewise, any company operating with a similar model to that of Redfin should not necessarily expect to be paid the commission being offered in MLS to cooperating buyer agents on any Metropolitan Boston Real Estate listings… Our company will advise our clients not to offer Buyer Broker level compensation to any brokerage offering to refund portions of real estate commissions received back to buyers – which is to say, we will seek our seller clients’ permission to make compensation to such brokers at our discretion.”
At the time of publication, we have not been able to independently verify, but CondoDomain claims the person who contacted them is a licensed Massachusetts real estate licensing course instructor (name withheld).
The rules under which this would be okay
CondoDomain asked their local board and MLS for a ruling on the behavior to which they advised CondoDomain seek counsel, noting the rules (as with most boards) is that the listing broker must honor the amount of commission offered through the MLS unless the brokers mutually agree otherwise or the listing broker is “excused through an arbitration hearing or other legal process.”
CondoDomain opines that this action is also a breach of the National Association of Realtors’ Code of Ethics, namely Article 15 which states “Realtors shall not knowingly or recklessly make false or misleading statements about competitors, their businesses, or their business practices.” CondoDomain’s assertion is that they are a full service brokerage and Metropolitan Boston Real Estate’s actions and alleged statements to their clientele imply otherwise.
Joe Manausa, MBA
March 2, 2011 at 12:39 pm
Lani, nicely done. This is so true of all dying industries/business models. The old boy network flexes its muscles for as long as they can. They can get away with “only 1% commission would be offered rather than the 2.5% offered via the MLS” until momentum shifts in the other direction. This too shall pass.
Jim Duncan
March 2, 2011 at 1:03 pm
I feel like a broken record, but wouldn’t divorcing the commissions solve this problem?
Bruce Lemieux
March 2, 2011 at 3:38 pm
This behavior baffles me. If you are representing a seller, why would you take any action that would reduce the exposure of your client’s homes to other brokers? When did it become the listing broker’s responsibility to interfere with the buyer’s relationship with his broker?
I understand why an ‘old school’ brokerage would be threatened by new models, but selectively reducing buyer commission is not the smartest way to go. It’s not good for their sellers, and its not good for their brand. This strategy simply isn’t good business.
Also, in my experience, buyer agents who rebate their commission are not the best negotiators. As a rule, they do not manage inspections and contingencies with the same detail as ‘regular’ buyer agents. They seem motivated to “just get to closing”. Ultimately, my sellers do better with rebate-brokers. Why would I discourage these agents from my listings?
T. Longo
March 2, 2011 at 3:46 pm
Hey Lani – glad you picked up the story. Enough is enough with the negativity in the market among our peers. This industry is all about the client (buyer or seller or renter for that matter) and anyone who doesn’t get that needs to just move on.
Dan Connolly
March 2, 2011 at 4:34 pm
A lot of brokers around here advertise in the private remarks that the Buyer’s Broker’s commission will be 1% if the listing agent shows the property to the buyer. It doesn’t address the individual discount brokers but it solves the problem.
Jane Wallace
March 3, 2011 at 5:15 pm
Dan, What a Great Idea, I am going to use that from now on
Judy Graff
March 2, 2011 at 8:03 pm
Nice story, Lani. Here in Southern CA, the only brokerage that’s growing is Redfin.
Fred Romano
April 10, 2011 at 10:19 am
If I received such a letter from a broker I would contact the local association and file an ethics complaint. It’s completely wrong that they offer a commission through the MLS but exclude certain companies from collecting the total amount. Its discrimination at it’s best.
I don’t understand why brokers get so upset that some brokers offer a rebate back to the buyer… Why should they care? They can do the same thing if they desire.
Lani Rosales
April 10, 2011 at 1:29 pm
I agree, Fred. So ridiculous.
mike hardiman
April 17, 2011 at 9:49 pm
Disagree with the sourcing on this article – "Further, the broker allegedly wrote" and etc. is lame. Either the reporter was provided with a copy of the email – or she wasn't – and if not, then this "alleged" email should not have been reproduced nearly in its entirety. I don't have a problem with discounting, just the way this is presented.
Lani Rosales
April 18, 2011 at 9:50 am
Mike, as indicated in the story above (and linked to), the source is the document published in full on the CondoDomain website: https://agentgenius.com/real-estate-technology-new-media/tech-tip-simple-way-to-bulk-download-pictures-from-facebook/
Thank you for reading.
Robert Waring
August 4, 2011 at 9:48 am
Hey Lani,
Just ran across AG, thanks for the story, sorry this comment comes so late. I wonder how well "seek our seller clients’ permission to make compensation to such brokers at our discretion" will go over with those clients if properly explained? If our criteria for a selling agent/broker remains "to bring a ready, willing, and able buyer" why should we care what business model is representing the buyer? My only concern is that with some discount/rebate models, the agent bringing the buyer doesn't perform those duties commonly expected of an agent on the buyer's side, leaving some of their "duties" to the listing agent. Unfortunately, this can lead to a conflict in the listing agent's proper representation of their seller client and creates an onerous disclosure situation for the listing firm. In Virginia, one reaction to this was a 2 tier commission structure that paid less commission to the selling agent and more to the listing agent when the listing agent had to provide additional service to cover what the selling agent didn't do; the expectations were outlined in the listing itself. It went beyond Dan's idea about 1% if the listing agent had to show the property; to receive full commission the selling agent had to show the home, write the contract, and be present for all inspections as well as settlement. Eventually the state stepped in with "limited service" disclosures and the problem took care of itself. In the situation you have outlined in this story, my opinion is that this broker is shooting himself in the foot; our job is to get our client's home sold and this broker is hedging that against a dislike for another company's model. That is just not good business practice; I'm curious as to whether or not it is a Realtor firm?
Rob Waring