How is a "no-service" brokerage legal?

Asked by Paul Slaybaugh, Scottsdale, AZ Sat Jul 21, 2007

First, let me clarify. Not talking about a limited service agency, but rather the companies which specify, "Do not call listing agent. Contact seller for all showings and to all present offers. Fax copy of accepted contract to ..." How is this not a violation of the duty to provide the industry standard of care? I surmise that MLS boards just don't want the headache of fighting it. Thoughts?

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16
Deborah Madey, Agent, Brick, NJ
Sat Jul 21, 2007
BEST ANSWER
Simply entering data into an MLS and directing all inquiries to a seller is not being an agent of another and surely fails all tests of fiduciary. Data entry does not make for Realtor representation. This policy leads to confusion for the public, and I expect, unfortunately, that the public will be hurt more than helped by this practice.

MLSs do not want to be viewed as anti-competitive or engage in legal battles on that subject, so I believe we will see more of this practice...until the pitfalls and problems of such play out in the public eye. Once there is a history of problems, complaints, lawsuits and consumer losses, look for consumer protection groups, MLSs, and state commissions to seek change.

I fully support consumer choice. I believe in the consumer’s right to choose to represent themselves, and for consumers to negotiate a level of service and fees appropriate for themselves. I believe in a broker’s right to sell their services at any rate they chose. I do not believe that data entry equates representation.
2 votes
Kathleen Kel…, , Nashville, TN
Sat Jul 21, 2007
We have discount brokers here that were listing properties for a flat fee, usually $500, with no services. No one was happy about it because it was like dealing with a FSBO, but they were on our MLS. There was some anti-trust talk, but we lobbied and rather than banning them we got legislation that says that all brokers owe a basic level of service to their clients regardless of fee and that if any of those services were not going to be provided, the client has to sign in writing for each service not provided. That way if the listing "agent" sends us to the seller, we can request to see documentation that the seller acknowledged in writing that they are owed services that they are not getting.
2 votes
Paul Slaybau…, Agent, Scottsdale, AZ
Sat Jul 21, 2007
Both of your answers, Mario and Deborah, mirror my sentiments. I am not anti-competition, and I am not complaining about the disparity in fee structure. "You pays your quarter, you takes your chances." My take is this: The Department of Justice loves competition. Absolutely adores it, and believes it is always in the consumer's best interest. While this may be true in regards to cost, it certainly does not promote excellence. Local boards know this, and do not want to stick their necks out to enforce the code of ethics for fear of unholy federal reprisal. It's a shame that a major market (at least that I am aware of) has not had the guts to take this on. After all, I am not legally permitted to charge a fee simply for authoring a contract in the state of Arizona. I have the authority to write contracts, negotiate and conduct all of the various taks which are part of a Real Estate transaction, but I cannot charge a fee for simply writing a contract. How then can I fail to perform all duties of a Real Estate agent, with the exception of loading a listing into the MLS, and earn a fee?
Web Reference:  http://RayandPaul.com
2 votes
J Lo, Home Buyer, California Glory, Brentwood, CA
Mon Jul 23, 2007
Sorry for not clarifying Paul: I understand your frustration - as all of us do within the industry. My personal feelings are that the no-service brokerage's and most of the limited service brokerages are a danger to our industry as a whole.

Not because of competion. I welcome competition - because in the end we provide a true service with proven success. It all comes out in the wash.

What I am more concerned about is the backlash these organizations will have on the future of home sales and the fuzzy trail that could be left behind. You know as well as I do (I'm a novice - compared to your credentials) the paperwork and actual leg work necessary to close the deal on a home sale can be dicey at times.

What happens when these no service or limited service organizations - leave the finite details to an untrained owner? The fallout may be felt much later when the "buyer" becomes the "seller" years later - only to find out that some aspect of the original sale was left incomplete and worse case yet - there becomes a title issue?

This may seem far fetched to some - and I may be asking for an onslaught of comment - but I felt I needed to put this into laymans terms. All this real estate speak can get cumbersome - lets bring real dialog to the public and let them see the differences.

Agents are taking a big hit from some consumers; we work long and hard - sometimes to no avail. The stories are out there - we aren't travel agents as Leslie Stahl alluded to. We deal with real issues that affect the consumers largest asset - how can that compare to a trip to Mexico?

I'm off on a tangent now - so let me close with this - regardless of who regulates the standard for our duty to client - we as professional (single agent or trademarked REALTOR) must rise above and maintain the highest ethical stance on our behavior and service delivery.

I believe most of the internet based organizations are "legal" just not acceptable.
1 vote
Jim Walker, Agent, Carmichael, CA
Sat Jul 21, 2007
I sure hope my MLS doesn't decide to be the test case for the Justice department. My monthly dues are high enough for an excellent service. No service listings are annoying, but they are no more annoying than overpriced listings, or agents who refuse to put lock boxes on vacant houses, or agents who refuse to put pending signs on their sold listings because they want to trick potential buyers into calling! With the huge oversupply of homes in my area, these pseudo-listings are competitive chiefly for signing up unrealistic sellers, they are not particularly competitive as houses.
Web Reference:  http://www.metrolistmls.com
1 vote
Brian Warden, , Albuquerque, NM
Sat Jul 21, 2007
I don't see how it's legal either, but our board recently changed all our boilerplate documents to specify that brokers owed all of the listed duties EXCEPT for limited service listings! They made them an exception to all the standards of care! I don't know why, but it's very aggravating. Here, most of these "no service" listings belong to "web" companies who do not even have any in-state address. And they make the sellers use FSBO signs in front of the houses, too, which just encourages buyers to go back to the house later, sans agent, and try to cut a "commission-free" deal with the sellers. I do NOT understand why our Board of Realtors is allowing these FSBO properties to be listed in our MLS!
Web Reference:  http://www.laurawarden.com
1 vote
Mario Pinedo,…, Agent, Cupertino, CA
Sat Jul 21, 2007
That leaves the seller so unprotected it's unfortunate. You get what you pay for doesn't even come close to what they are truly getting, which is liability and probably bad financial outcome. The world of DIY in real estate is not good. What's the point of these companies being licensed in the first place? Reminds me of the Nolo legal books being offered. Attornies are not offering them. Why should brokers offer "no-service?"
1 vote
Aileen-Manha…, , New York, NY
Mon Jul 23, 2007
Thank you, Paul. Perhaps you can enlighten me and list the specific articles of the REALTOR Code of Ethics is that a "no services" brokerage is breaking? As I read it - and I can be wrong - I'm using the January 2007 Code of Ethics.

Article 1-7 allows for waivors in writing regarding their duty to forward offers and counter-offers;
Article 1-12 provides a duty to the sellers to disclose the brokerage's policy regarding cooperation and compensation;
Article 3-1 is on the same subject of 1-12;
Did you mention any complaints of latent or readily apparent defects as addressed in Article 2 and 2-1?
There's even argument that can be made that the brokerage is acting in a consultative relationship, if the "no service" brokerage is only listing the property on the MLS. See Article 11-3.

So... I fail to see where compensation is irrelevant. I was asking that question for myself, hoping to get some clarification from other professionals in different states.

I assumed this was a forum for discussion and enlightenment. I, for one, enjoy what I read here by real estate professionals and will be the first to say that I'm not perfect.

Lastly, this quote is from the MLS.COM site: "MLS.com is an advertising service for real estate agents located within the fifty (50) states of the United States of America."

It states "real estate agents" not REALTORS. Being a REALTOR is voluntary, but I think you forget REALTORS do not set the industry standard of care for all real estate agents or brokers. It's my impression - at least it's true in NY - that the licensing state sets the industry standards for agents practicing in their jurisdiction.

Thank you and good night.
0 votes
Paul Slaybau…, Agent, Scottsdale, AZ
Sun Jul 22, 2007
Aileen,
Compensation is irrelevent. The question is whether such a brokerage adheres to the minimum standards of care that both NAR and local codes of ethics specify. If you are a Realtor and member of a local board, how can you skirt these standards? I understand (if not agree with) the rationale behind the business model, but it is in conflict with our bylaws, in my opinion. You mention that the seller is making the choice to receive lesser services, but can the seller authorize the waiver of ethical conduct? It's not only the seller's interest at stake, but rather maintaining the integrity of the organization that the agent VOLUNTARILY belongs to. I don't pretend to have all of the answers, but I do have a lot of questions.

That's it, no more posts from me on the topic, scout's honor. Unless I get grief ;)
Web Reference:  http://RayandPaul.com
0 votes
Aileen-Manha…, , New York, NY
Sun Jul 22, 2007
I would compare a "no-service" brokerage with a "limited representation" attorney. The client - in this case the seller - is contracting with the brokerage for a very limited use. If the seller knowingly and voluntarily chooses not to take advantage of all of the services of the brokerage, then that's their business as it's their money.

A "limited representation" attorney in Washington is allowed to be hired for a specific purpose - i.e. to draft court papers or to argue one hearing. BUT the retainer agreement must specify what they were hired for and provide the court with a special Notice of Appearance. It's supposed to cover the attorney's a$$ and provide some service to low-income individuals who otherwise would not be able to hire an attorney full-time.

My question is - if it's a FSBO listing - how is the buyer's realtor compensated? Do your brokerages charge the buyer for a commission percentage?

By the way, as I understand it, the MLS is just a conduit for advertising and providing real estate and mortgage information. It's not their jobs to enforce brokerage standards.

As long as I'm getting paid by the buyer and my duty of loyalty is to the buyer, I don't see what the hula-ba-lub is.
Web Reference:  http://www.mls.com
0 votes
Paul Slaybau…, Agent, Scottsdale, AZ
Sun Jul 22, 2007
Please expand, Jeanette. Am I somehow restricting competition by advocating that the minimum standards of our industry are enforced? Nowhere in my posts will you find a complaint with commission structure, only the "service" provided.
Web Reference:  http://RayandPaul.com
0 votes
J Lo, Home Buyer, California Glory, Brentwood, CA
Sun Jul 22, 2007
Paul:
Go talk to the DOJ - they may want to hear your opinions on the matter real soon.
0 votes
Paul Slaybau…, Agent, Scottsdale, AZ
Sat Jul 21, 2007
Great points all, and very interesting to hear how some areas are clamping down. I do not worry that these agencies are taking my business because the sellers who employ them are not people whose business I much want anyway. If my value is in question, I won't stand on my head to prove someone wrong. Their agent will do that for me. I just flat out hate how our MLS has been compromised by granting access to people who have no interest in being actual agents. Choose to be a part of the industry or go do medical data entry. Just don't assume the role of Realtor for the sole purpose of accessing our database. All of the benefits, none of the responsibilities. Catchy.
Web Reference:  http://RayandPaul.com
0 votes
Paul Slaybau…, Agent, Scottsdale, AZ
Sat Jul 21, 2007
Keith, you are exactly right. The difficulty resides in enforcement. My broker has taken the matter up with the local governing bodies. It's a hot potato. While it appears to be a clear violation of the code of ethics, no one is willing to enforce it for fear of crossing swords with the Justice Department who might perceive it as an anti-trust violation (attempting to stymie competition). Some board will be the test case somewhere, and I will follow the events with great interest. On a side note: I actually did pick up the phone and call one of these "agents" on a listing once because it cited a non ARMLS lockbox. I simply asked for the code. He referred me to the Realtor Remarks which specified not to call the agent, and hung up. Crazy.
Web Reference:  http://RayandPaul.com
0 votes
Deborah Madey, Agent, Brick, NJ
Sat Jul 21, 2007
The introduction of minimum service standards by state associations at the state regulatory level has been viewed as anti-competitive by some. I haven't heard NAR's viewpoints on this. If anyone knows, please point me in that direction.

State regulataory law, of course, is different than association or membership rules, such as the Code of Ethics.
0 votes
Keith Sorem, Agent, Glendale, CA
Sat Jul 21, 2007
Paul
I assume that if this brokerage is a member of an association in order to access to the MLS, there is a broker of record. Assuming that membership in the local assocation also translates into a member of the State association of Realtors and NAR. Therefore, the broker member is accountable to obey and adhere to the Code of Ethics. It would seem, if he is a member, some minimum level of duty is required.
Keith
Web Reference:  http://www.realtor.org
0 votes
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