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NAR seeks dismissal of flawed anti-trust lawsuit (Moehrl v. NAR, et. al)

(REAL ESTATE NEWS) The fallout from the widespread, flawed anti-trust lawsuit against the real estate industry, is beginning, and NAR says they intend to fight back.

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court justice

At the annual Association Executive Institute (AEI) event, there was an underlying vibration of curiosity leading up to the legal update over lunch. While a handful of people were cheerfully humming along to a Beatles song being played in the massive ballroom, the majority were whispering about the class action lawsuit recently lobbed at the industry like an irrationally thrown surprise molotov cocktail.

Filed by Minnesota home seller, Christopher Moehrl, the suit claims there is a “conspiracy” to price fix broker compensation in the 2.5-3% range, naming the National Association of Realtors (NAR), Realogy, HomeServices of America, RE/MAX, and Keller Williams (with more to be named, inevitably). The complaint intimates that by requiring brokers to offer buyer broker compensation when listing a property on the MLS, fees are “fixed” and inflated, violating anti-trust laws. In short, they believe buyer’s agents shouldn’t be paid because buyers can find their home online now.

NAR has been sued before. All major brokers have been sued for similar “conspiracies,” and agents know the drill. The industry has been sued before. It’s one of the most litigious lines of work in America. And everyone in the industry agrees the claims are outlandish and untrue. And frankly, worthy of an exaggerated eyeroll.

So why the palpable angst?

Because the suit is led by big scary attorneys that are famous for winning billions in class action lawsuits. Look at the final two pages of the suit – this isn’t just some random lawyer on a whim, it’s an overcrowded dais of dynamism.

Not to mention real estate consultant Rob Hahn’s observation that if the lawsuit is somehow successful, “REALTOR Associations evaporate, the MLS likely dies off, and the entire infrastructure of residential real estate in the United States has to be remade.”

Of course a room of over a thousand Association Executives (AEs) would wonder what NAR has to say next. NAR’s response leading up to this luncheon had been to publicly denounce the suit as “baseless,” noting that “The U.S. Courts have routinely found that multiple listing services are pro-competitive and benefit consumers by creating great efficiencies in the home-buying and selling process,” and that “NAR looks forward to obtaining a similar precedent regarding this filing.”

The lunch began with NAR General Counsel and Chief Member Experience Officer, Katie Johnson, updating eager eaters on insurance topics, and afterwards pondered that there was something else she was going to talk about… Oh, what was it? Oh yeah, the lawsuit! Her zinger was awarded with thunderous laughter and applause. The presentation behind her said in bold letters, “We’ve been sued… now what?”

Johnson described home seller Moehrl as a “standard transaction” that is in no way unique. She proclaimed that the industry would prevail. That this isn’t the first time they’ve been sued.

She asked the anxious audience to “step back 100 years,” noting that “it is important to understand and be able to articulate why our system today works.”

A century ago, before associations and licensing laws, it was “very chaotic” and not at all consumer oriented, with little to no consumer protections. A home seller would have a dozen brokers put signs in their yard, and not only did the seller have to give their personal financial information to multiple brokers, but had to also give physical access to all of those brokers. Mass confusion ensued – who actually has all of the details? Who represents the home?

And buyers had to know a broker with a sign in a yard in order to find a home to buy. Johnson called this time as one “shrouded in secrecy and was not transparent – it was not good for consumers.”

Thus, brokers began getting together and exchanging information. The idea was that a broker will list the home, and if another brings a buyer, they’ll be compensated. Agreeing to share inventory was what Johnson called a “wild sea change.” Consumers could give their private information and home access to one trusted broker, and that represented buyers were legitimate.

Buyers could come to one place (the association exchange) for the data, which opened the market to consumers. Many iterations of how the data has been shared include notecards, then books/binders, computers, and ultimately the internet.

“In the end,” said Johnson, “cooperation (sharing your listings and compensation), agreeing to pay the representative of a buyer who is going to ultimately sell your inventory is the basis of the MLS and is what is on attack.”

The class action suit claims that because the seller has to pay the buyer’s agent, commissions are inflated. The truth is that although it is NAR’s rule to require compensation, it could be as little as one cent, and Associations support all compensation models (flat-fee, discount, rebates, traditional 3% per side, and even higher on luxury listings).

And their “conspiracy” claims that buyer’s agents are unnecessary since listings can now be found online (but the suit fails to mention buyer’s agents’ fiduciary responsibility to protect their client and guide them through a convoluted process). And ultimately, they name “co-conspirators” as brokers who have conspired to violate anti-trust laws via their membership to an MLS.

Another flaw in the Moehrl case is that they argue that home buyers can find their home online without representation, ignoring that the converse argument would also therefore hold true – a homeowner can sell their own home without representation (and without paying commissions). The plaintiff saw the value of the MLS and cooperative marketing when buying and selling their home, and used representation rather than opting to list on their own on Zillow or a For Sale By Owner site, which they had every right to do.

And finally, there is a massive conflict of interest with these attorneys – it is essentially legal for attorneys to practice real estate (local laws vary), so why wouldn’t they collectively push against an industry they could theoretically take over with the bang of a lone judge’s gavel?

NAR has filed a motion to extend the time to respond, and will push for a dismissal. Johnson said, “we have really good legal standing,” noting that “anti-trust [laws are] complex, and not often won on a motion to dismiss,” and while they know it’s not often granted, she notes that it may take time, but, “we’re going to defend it and win.”

The session ended with shuffling plates and standard conference noise, but there were more people humming to the Beatles after the session than before. The fight was on, and the AEs appeared to stand taller, newly empowered by Johnson’s battle cry.

Real Estate Brokerage

Applying for a home? Robots and automation may decide your fate

(BROKERAGE) The next background check you have run may not be in the hands of another human being. Is this automation helpful or harmful?

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Man signing application may only be seen by automation

Leasing approval for your next apartment may not reside in the hands of a human being.

Automation has become an integral part of the decision process for landlords when it comes to deciding who to accept as tenants. Screening tools such as ScorePLUS from CoreLogic use a “statistical lease screening model” that calculates a score and determines a potential tenant’s overall risk. CrimCHECK, another product from CoreLogic, can be used by landlords to search a database of more than 80 million booking and incarceration records across 2,000 facilities. This type of software helps landlords and large apartment complexes streamline their processes and reduce manual reviews of leasing applications.

Housing advocates, however, view such automation as more of a problem than a solution. According to advocates when screening tools bypass human “judgment calls”, those decisions fail to take into account critical details and attempt to solve complex choices with a simple pass/fail algorithm. Eric Dunn, director of litigation at the National Housing Law Project, says that nuance is lost when landlords solely rely on automated screening tools and don’t always capture extenuating circumstances around a possible tenant’s record.

Large automated systems often have inaccuracies as well. Monica Webly, the deputy director of litigation at the Legal Action Center, has said that such checks are “notoriously” inaccurate. For example, a record might end up including information from someone with a similar name, leading to a denial in a renting application for a tenant.

“I’ve looked at more criminal records reports than I could count, and I would say that well over half the ones I’ve looked at had some kind of inaccuracy,” Dunns said.

Companies like CoreLogic have faced lawsuits over such inaccuracies. In 2015, a South Carolina man sued the company after he was flagged by a CoreLogic tool as a registered sex offender due to someone with a similar name. While the man was eventually able to resolve the issue, the process took weeks and cost him the apartment he was applying for as a result.

As automation increasingly becomes a part of our everyday lives, scenarios like the above will become more common. Although software like CoreLogic can help landlords process information faster and reduce human error, it comes with its own set of downsides. How to strike the right balance for things such as leasing applications, is the million-dollar question.

At least not all automation has such drawbacks.

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Real Estate Brokerage

7 red flags that could scare off potential home buyers

(BROKERAGE) While houses are selling quickly right now, there are some things that will almost definitely turn a home buyer off.

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Open home and kitchen that home buyers will be considering.

The process of buying a home is incredibly overwhelming – as is the process of selling a house. There are so many aspects that potential home buyers are investigating when they enter a spot that’s for sale.

Without realizing it, many sellers can be hurting their chances of selling by overlooking simple things. The Ascent recently determined seven things that scare away potential buyers. Let’s dive in.

We all know the market is hot right now and houses are selling like crazy, but there are certain things that just cannot be ignored.

  1. Listing an unrealistic price: Be realistic about what your house is worth and don’t be misleading. People can easily search the worth of the houses around yours and do some digging to find out if what you’re listing is representative of what the house is worth.
  2. Skipping the deep clean: This is never a good idea – especially this year. The cleanliness of your house is akin in the buyer’s mind to the overall upkeep and maintenance of the house. They assume that if you don’t clean, you don’t care.
  3. Personalization: Since you’re moving, try and pack up some of your family photos and leave up less “personal” items (or color choices) to better help the potential buyer envision themselves living there.
  4. Expecting payment for features that are high maintenance: Things like pools and hot tubs don’t always return their value. Many home buyers aren’t interested in keeping up with that maintenance and it’s unreasonable to charge them for the assumption that they’ll keep up with it.
  5. Believing “It’s okay if this doesn’t work”: If your shower head is broken, the A/C is messed up, or a ceiling is cracked, you should do all you can to replace or repair it before listing your house. If you can’t, don’t expect anyone to pay the full listing price.
  6. Being nose-blind: Like those Febreeze commercials tell us, it’s common that we go nose-blind to our surroundings simply because we’re so used to them (i.e. a smoker doesn’t notice their house or clothes smell like smoke). Go back and check off deep cleaning, and then ask someone you really trust to come in and tell you how the house smells to an outsider. Trust me, this will be one of the first things a buyer notices.
  7. Leaving pets home during showings: Due to the unpredictability with strangers – or the potential allergies the strangers may have – it’s best to make arrangements for your pets to be elsewhere during showings.

At the end of the day, you have to look at your house from an outsider’s perspective. Getting feedback and opinions from friends and family can help this process.

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Real Estate Brokerage

The best ways to handle stressed and stressful clients

(BROKERAGE NEWS) Moving can make even your calmest clients nightmare wackadoos. Here’s how to manage the stressed out moments to the best of your ability.

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A team of 3 researchers have published an interesting study on how customer service can be improved by recognizing a customer’s stress level before a connection with your business is made.

For example, a customer can often be anxious over using a particular service, i.e., a funeral home or a lawyer in connection with a divorce. By learning more about how your clients feel when they call your business, you can better manage the customer experience. This offers your business a more effective customer base of referrals and repeat business.

The researchers identified the following steps to manage stressed-out customers:

1. Find out how your customers are feeling when they need your service.

One reason so many breast cancer facilities are free-standing, away from the main hospital complex, is because women voiced their ideas to the healthcare team designing the facilities. Women wanted coordinated care under one roof, but felt like the hospital was not a calming environment. Use your empathy to walk in your customer’s shoes to change the experience.

2. Hire not only for skill, but attitude and personality.

Employees who love their job can’t be trained. The passion and enthusiasm, even for a high-stress career like a cancer nurse or funeral director, cannot be taught. Look to bring on team members who have empathy for your customers and understand that business is all about customer service. It’s far easier to teach someone the skills needed for a job than it is to teach them to be motivated to work.

3. Study your approach to the customer’s journey.

How does your business interact with the client? From the first link online or phone call, to the payment options, what is the customer’s experience? Do they come out more stressed, or less stressed than before? Address the high-stress interactions by providing information about your services. For example, when calling to view a listing, what can your customer expect?

4. Give the customer more control over the service.

Dealing with a mechanic who tells you that your engine is shot is highly stressful. Instead, learn to be more specific and talk to the customer in a language that can be understood by someone without technical knowledge. Make sure your customer has one point-of-contact throughout their experience. Have a plan B in place for when that individual is sick or goes on vacation. Empower your customers through today’s technology, maybe an app that tracks the sale. There’s no excuse today for poor customer service and information.

I would highly recommend that every real estate professional read the research from Harvard Business Review. Leonard L. Berry, Scott W. Davis, and Jody Wilmet packed so much information into their report that there’s no way I could cover it all here.

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