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... The United States Department of Justice calls this a “puzzle” and in 2005 began working on finding an explanation, but still, they have not found one. ...
According to Top All-Time Donors, 1989-2012 | OpenSecrets, #5 on the list of "Top All-Time Donors, 1989-2012" who bribe, er, contribute to political campaigns is the National Association of Realtors. This website lists the top political influence buyers.
That NAR is #5 on the list may well be a factor in the Justice Department's failure to find the explanation they sought.
According to Top All-Time Donors, 1989-2012 | OpenSecrets, #5 on the list of "Top All-Time Donors, 1989-2012" who bribe, er, contribute to political campaigns is the National Association of Realtors. This website lists the top political influence buyers.
That NAR is #5 on the list may well be a factor in the Justice Department's failure to find the explanation they sought.
Good point, but that won't be my point.
I am going with comparing the USDOJ with the SEC on the Maddoff case.
Read this book review and I believe the word SEC can be replaced by USDOJ.
The USDOJ is just a resume booster.
What we are looking at here is not a Ponzi Scheeme.
It is a Bait and Switch.
Agent's tell buyers "I am your agent, I work for you, and I won't cost you anything" that is the bait
That is not Illegal but does not mean that the agent is free, it means the buyer will pay the agent with OPM, (other people's money).
Once the buyer receives the OPM, which is the 3% the seller gives his agent to give the buyers agent to give the buyer during escrow, the buyer would pay the agreed negotiated commission with the buyer's agent and keep the rest.
That is how the forms are written and designed to work.
The buyer is lead to believe he has an valid "free of charge" agent in his corner, and loses interest in the agency relationship.
Then, comes the switch.
Once the buyer and the agent find the property the buyer wants to buy, the agent working with the buyer begins to work for the seller's agent as if they planned it from day one. Now, thanks to the MLS and the lack of a buyer agency agreement, the agent get's paid as an agent for the seller, as a sub agent for the seller's agent. This is illegal as hell and it is recorded in the forms and the forms are available for anyone to see.
So, the buyer never really hires the agent, although she believes she did and she does not notice the difference, because agents don't really do that much. They show you a few properties and talk on the cell phone and fill forms. They can do that with or with out a valid written agency agreement and the buyer does not notice the difference.
If the buyer had a agency relationship with the agent, the buyer would receive money from the seller.
It is never about paying the agent from your own pocket. Never. It is always about the buyer receiving money, credited. That also never happens.
If the buyer does not have the agency relationship agreement with the agent, the agent "handling" not "representing" the buyer receives the full 3% and works for the seller while the buyer still believes the agent works for him (the buyer). The problem is that to do that, the agent has to cheat on the forms.
Good thing about that is that the fraud is recorded in the forms, every time.
The buyer does not notice a thing. For her, it is just one more signature in another form.
The buyer is erroneously relieved that the commission is free, when what the buyer needs to know is that in any agency agreement he would have paid the agent from the MLS 3% incentive and would have received a credit for the rest of the 3%.
So, the USDOJ is not on the take but they are really not looking for more work.
Once I get all my ducks lined up, I'll go talk to Mr. Holder in person.
One more thing. The scam does not start with the buyer. The scam starts with the agent listing the property. The agent for the seller talks about charging 3% and having to collect an additional 3% in advance, to pay for an agent that will show up in the future. That is what starts the 6% Real Estate Commission Bubble.
Maybe not so much now with such a limited supply on the market, but I recall back in the sub-prime heydays, where agents could afford to frequently "pick and choose" which offers received their limited attention... and which didn't. And if many of them preferred to ''cherry pick'' just the inquiries on the higher-priced properties, you can be damn sure they didn't waste their time on any listings offering less than the standard 6% commission (professional ethics or no)!
So it was just a fact of life then that the busier they were, the more inclined they were to blow off inquiries on the cheaper properties (where they would make less commission... duh)!
Mateo
You made a boo boo
You said could afford to frequently "pick and choose" which offers received their limited attention...
maybe you meant. could afford to frequently "pick and choose" which LISTINGS received their limited attention... (so they can make offers on)
[quote=lvoc;28643016]Competition is always an interesting thing. Just came across a listing today that really illustrated the point. New listing nice tract...$399,900 and 2.5% commission. And an agent number that indicates less than a year in the business.
Would I show it? Sure. In fact I might feature it with an eligible client. I would suggest we have an inexperienced agent and might want to play around a bit and see if we could not get a good buy. I might even point out the low commission and suggest they might want to compensate me a bit if I pull it off for them.
I then draft a low but not absurd offer and insist that I get to present it. ***** and moan...but it is my right unless they have a predated exclusion. Then I get a crack at the owner and point out how difficult it is to sell in that price range and all that. Better than 50/50 I can get them to buy a low offer.
Might even get more than I lost from my client.
RE is actually a fun sport if you approach it right.[/quotIe]
Ivoc
RE is a fun sport. Once, we, my client and I actually got our price because I knew the Agent and he was a wild card, and I mean mental. When the interest rates went against us, we played hard ball saying that we could not afford it any longer. and he adjusted the price down on the spot. We were just bluffing. It really felt like a game and we scored on that one, and everybody was happy because the seller needed out so he could cover another transaction.
Now, Questions
With this client of yours, did you use a standard Buyer Broker agreement?, or did you write one up?
and what did you write on the Agency Disclosure form prior to presenting the offer?
You don't have to answer, but that is what I am trying to discuss.
When I was in the business for a lot of years up till retirement as a broker, here is how I handled it.
As I was a commercial broker, I did the same on all types of transactions and large exchanges, some of them quite large.
Hi old trader
Welcome back, sincerely.
Now, the 60 billion dollar per year "puzzle" has to do with residential real estate. If you look at the agency disclosure form (you don't need to know about it, because it is only required in transactions in residential transactions of 4 or less units), that is where the problem is.
You were never required to work with that and I doubt that you really needed the MLS to find your properties. I could be wrong.
What you did is valid and there is no problem with commercial real estate. Commercial clients are on their own and they can handle it. This 6% bubble is about Mom and Pop selling an buying their homes and paying at the tune of 60 billion dollars per year, which would not be a problem, unless there is something wrong in the way those homes are brokered. I claim, I can prove there is.
Buyer's don't want the buyer's agent to be paid a commission PERIOD. You know, I'm thinking about getting my real estate license. I heard it's easy to get anyway
Dear BTS
Buyer's agents never ask for a commission from the buyer. The first word out of their mouths, when meeting with a buyer is you don't pay. Buyer's don't have to want. That is not the real choice.
As for getting a real estate license, even if you do it the right way, it will pay itself on the first deal.
It will cost you about $1,000 with the coursed and the DRE test. It would be the best money you ever spent, and if you have a college degree, you go straight to broker.
Do it!!
Competition is always an interesting thing. Just came across a listing today that really illustrated the point. New listing nice tract...$399,900 and 2.5% commission. And an agent number that indicates less than a year in the business.
Would I show it? Sure. In fact I might feature it with an eligible client. I would suggest we have an inexperienced agent and might want to play around a bit and see if we could not get a good buy. I might even point out the low commission and suggest they might want to compensate me a bit if I pull it off for them.
I then draft a low but not absurd offer and insist that I get to present it. ***** and moan...but it is my right unless they have a predated exclusion. Then I get a crack at the owner and point out how difficult it is to sell in that price range and all that. Better than 50/50 I can get them to buy a low offer.
Might even get more than I lost from my client.
RE is actually a fun sport if you approach it right.[/quotIe]
Ivoc
RE is a fun sport. Once, we, my client and I actually got our price because I knew the Agent and he was a wild card, and I mean mental. When the interest rates went against us, we played hard ball saying that we could not afford it any longer. and he adjusted the price down on the spot. We were just bluffing. It really felt like a game and we scored on that one, and everybody was happy because the seller needed out so he could cover another transaction.
Now, Questions
With this client of yours, did you use a standard Buyer Broker agreement?, or did you write one up?
and what did you write on the Agency Disclosure form prior to presenting the offer?
You don't have to answer, but that is what I am trying to discuss.
I used a BBA only once...Someone who wanted my sole services for a week so we set up a special BBA.. Involved a significant up front payment.
Otherwise like most western agents I never use the BBA.
Agency is disclosed by the normal Nevada Duties Owed. Always presented to the buyer as the first document in a buy package.
And I describe the relationship as their agent and their agent only. I don't do dual.
Real estate agents deserve to be paid for their work just like everyone else and anyone suggesting that this is wrong is not being genuine and should not be trusted.
Yes, well said.
And there is a clever mechanism for that to happen and it is reflected in the forms and in the MLS.
But that mechanism is used wrong, as in fraudulently wrong.
Remember that it is the Real Estate agents themselves that say to the buyer that they won't be paying anything. How do you trust that? Go hire a dentist and see how you like it if he says he is getting paid not by you but by another dentist.
BB wouldn't bite in his first thread when I pointed out that I knew his argument was based on the idea that real estate sales are fraudulent. He won't bring forth his evidence, just trawls along.
I used a BBA only once...Someone who wanted my sole services for a week so we set up a special BBA.. Involved a significant up front payment. Otherwise like most western agents I never use the BBA.
Agency is disclosed by the normal Nevada Duties Owed. Always presented to the buyer as the first document in a buy package. And I describe the relationship as their agent and their agent only. I don't do dual.
All of the forms were designed by the same people. The MLS forms pass money to the buyer via the agents.
If the agent does not use the BBA form, that money gets stuck in the agent's hands to keep.
On the other hand, as long as the agent makes the buyer understand that the agent is not representing the buyer, the agent can keep the 3% because he would be working as a sub agent for the seller.
For that, he must use the agency disclosure form stating the agent is not working for the buyer. The Agency disclosure form does that. No buyer would accept that deal, because the buyer has money coming to them if he uses the BBA form.
The Forms Kit is designed for the buyer to want to use a BBA so the agent and the buyer end up with a cash incentive for using an agent. With out using the BBA, the rest of the forms don't really work as intended. Agents know all of the forms and which comes next.
Buyers and sellers really don't know that a Listing will generate an offer that comes with escrow instructions from a buyer that has a valid agency agreement, etc etc etc.
In California, to have a valid agency between the buyer and the agent, it has to be in writing, and for the MLS to work in passing the money around, the agent has to use the form that comes with the kit.
In the BBA, it mentions additional compensation the agent will receive.
Why did they put that clause there?
Because the writers of the forms know about the MLS so they designed the forms that way.
We are getting to abstract and we are going to loose everybody.
As soon as I get my make believe buyer and we start from the first meeting, all of this will become clear.
I have to show it, not explain it.
Have a good rest of the week folks and thank you very much for your interest.
Bubble Boy
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How did you validated the agency?
