Folks who know my work on Notorious R.O.B. know that I go out of my way to avoid controversy in the same way that "congresscritters" go out of their way to avoid lobbyists. In that spirit then, I’d like to tackle a topic that is sure to generate only agreement and head-nodding in all readers: forced registration on a Web site.
The impetus is a challenging and perceptive blog post by Redfin Chief Executive Officer Glenn Kelman in which he posits that hiding the address of a listing hurts the client. It appears that some multiple listing services allow a listing agent to withhold the address of a listing "without registration," and Kelman thinks this is bad juju:
"All the games that agents play with inventory were supposed to end now that that the DOJ settlement with the Realtors is being enforced. The settlement requires listing agents to publish to the Web all the information about a listing that could be disclosed to a client in person. The loophole in the settlement is that the listing agent can require other brokers’ Web sites to register users before showing the listing, and to validate their e-mail address.
"In Long Island, where dual agency is common, a whopping two-thirds of all listings on the market now require Internet visitors to register before seeing the address. The form New York agents use to list properties online includes a field indicating whether the address can be displayed without registration; for 66 percent of listings, the agent requires registration, overriding the default.
"And overriding the default is definitely not in the best interests of the listing agent’s client, the seller. On our Web site last week, New York listings that freely publish their address got 42 percent more views than listings that require registration. If the seller discovers a registration requirement, he can ask the listing agent to remove the registration requirement, but most never find out: the Multiple Listing Service of Long Island doesn’t require seller notification or permission."
Read the whole post. It’s worth your time.
Kelman begins his post with an outcry against dual agency; on that point, I’m with him 100 percent. But I’m confused by some of the other points raised in the post.
IDX vs. VOW
The U.S. Department of Justice settlement with the National Association of Realtors that he references only dealt with VOW (Virtual Office Web sites) policy, not IDX (Internet Data Exchange) policy — VOW and IDX are systems for brokers to share data online. VOWs can contain richer property data but require that users register to access that data, and IDX sites do not require user registration but allow MLS participants to opt out from sharing some or all data with other MLS participants.
A great resource for this is Brian Larson’s VOW Clearinghouse, which constitutes legal opinion by attorneys who specialize in the field. And Larson says:
"An IDX site is not a VOW. IDX is an MLS policy under which a brokerage firm participating in MLS grants permission to other brokers participating in MLS to advertise its listings on their Web sites, in return for their permission to advertise their listings on its Web site. IDX sites are governed by MLS IDX rules, which are entirely unaffected by the settlement. Note that a brokerage firm can operate both an IDX site and a VOW at the same location on the Web. (For example, the brokerage can show the consumer some information on its IDX site but then require her to register to see the information available only through its VOW.)"
Given that the address of the listing is available to "registered users" — i.e., consumers who are eligible for VOW access — I’m inclined to believe that what Kelman is talking about is the IDX feed. There, the MLS may indeed do whatever it likes without running afoul of the DOJ settlement with NAR.
Kelman calls this a "loophole" in the settlement, which I think is an unfair characterization. The entire suit from the start was about alleged unequal VOW access between old-school brokerages and new Web-based models, and how such allegedly unfair treatment violated antitrust laws. …CONTINUED
The original DOJ lawsuit and the ensuing settlement were not about "information wants to be free" or "consumers deserve all of the data without restriction," but about equality of treatment between a broker who has a physical office and a broker who does not.
In other words, the difference between IDX and VOW is not a "loophole" but the whole point of the settlement: a feature, not a bug.
Kelman has a larger point: Doesn’t hiding the address of the listing harm the client? If so, isn’t the listing agent doing a disservice to the client by electing not to send the information to the IDX feed?
Client’s best interests
First, a boring mechanical point: It would bolster Kelman’s argument significantly if he could point to something other than property "views" online. Forty-two percent more views seems impressive, unless most of those views are from worthless tire-kickers. The more apt metric to me appears to be actual financial harm.
In other words, if a listing with a public address routinely sells for 5 percent more than a comparable listing with a registration-required address, and there’s enough of a sample size to prove that, then we’ve got something. If there is no difference, however, one is led to ask what harm has been caused because your listing that sold for the same price as mine got 42 percent more page views.
If the argument is that more views equals more leads equals more competition equals higher price and less time on market, well fine. But all of those metrics are available, right? Let’s see the bottom-line numbers, not the top of the funnel that may or may not mean anything.
But let’s assume for the sake of debate that not putting the listing address on the Web does result in some financial harm to the seller. Because this issue brings up a far deeper point: To what extent does a real estate agent owe a fiduciary duty to someone who hasn’t paid him?
Now, I know that the current answer is that a real estate agent is a fiduciary of the client, and therefore must do everything in his power to look out for the client’s best interests rather than his own. In the pursuit of ethics, Realtors have adopted an unusually high standard of behavior for themselves, patterned after lawyers.
But let’s be real here for a moment. Lawyers get paid by their clients for the effort, not for the result, except in contingency-fee cases. And no lawyer is compelled to take contingency cases. When they do take contingency, the fee is as high as 40 percent of the amount awarded or recovered.
Vast swaths of legal practice are entirely outside of contingency arrangements; try finding an attorney who’d do a prenuptial agreement on contingency, for example.
With real estate agents, the exact opposite is true: A listing agent gets paid upon success, not for the effort. Consumers have proven time and time again that they prefer to pay a contingency fee based on percentage of the transaction rather than an hourly rate or a project fee.
The agent, despite taking all of the financial risk, isn’t getting 40 percent of the final sale price, but 5 percent (shared with a buy-side agent and the brokers; that old 6 percent commission thing is a historical curiosity in 2009). …CONTINUED
A lawyer who defends his client in a lawsuit and loses is still entitled to get paid. He’s working for an actual client, someone who is paying him for his work and for his loyalty. If he worked his tail off for his client, then that client pays him for the work performed, not for the ultimate result.
An agent, however, could work around the clock, forego vacations, spend thousands of dollars on marketing the property, be negotiating at 2 a.m., and the deal could fall apart and he ends up with "squadoosh." And the seller could get ticked off and fire him, move the listing to someone else, and that’s the end of the story. Get a few "clients" like that, and the agent could go bankrupt in a hurry.
Yes, that seller is still a client. But let’s face it: He’s not a client the way other professionals understand the term. In fact, there’s a term that perfectly describes the real estate seller: consignor.
Information is free, until someone’s gotta pay
So I’m finding it a bit hard to get outraged about the actions of agents who want to use the listings they have to generate some business. If anything, it isn’t the 66 percent of the listings in the Long Island market that hide the address that amaze me but the 33 percent of the listings that don’t.
Maybe this is why I refuse to go into the brokerage business despite having been around it now for a good six years: I simply can’t understand a business where I owe lawyer-like fiduciary duties to someone who doesn’t pay me until I succeed and expect me to take on all of the risk for a piddly 2.5 percent of the deal.
The client is not a charity case, the public has no right to information, and the Realtor is not a free research resource. Information wants to be free, say the visionaries, until they have to pay to produce, distribute and store all that information. Then the magic word becomes "monetization."
So let’s not go overboard with the tar and feathers. The listing agents and the sellers who use them have, at this point, an unspoken understanding: The listing will be used to generate business for the listing agent. In return, the seller won’t have to pay for the marketing, the effort and the risk.
If the agent wants to put all the info out there to drive more users to his Web site, that’s his marketing decision. If he doesn’t and would rather drive registrations so he can spam them later — that, too, is his marketing decision. If one way is better than the other and the seller benefits more from one approach than another, then the competitive free market will sort it out.
Client in name only
Ultimately, I’m having trouble with calling down the wrath of Zeus on the listing agent here because the client is a "CINO," or "client in name only." The natural result, of course, is that the real estate agent is forced to become a "FINO" — "fiduciary in name only." That leads, of course, to some of the shady behavior on the part of human beings who aren’t demigods, but rather regular human beings subject to normal economic incentives.
So here’s a suggestion for the various real estate boards and Realtor associations: Redefine the consumer in a real estate transaction and make a clear distinction between a client and a consignor. It isn’t a complicated rule: Pay me for my time, energy and expertise, and you’re my client; pay me for the result and you’re a consignor.
Restore the true client-agent relationship. That is the seed from which real professionalism can grow.
Robert Hahn is managing partner of 7DS Associates, a marketing, technology and strategy consultancy focusing on the real estate industry. He is also founder of The Notorious R.O.B. blog.
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