…will definitely hurt them.

I was poking around this morning doing some research on enhancing real estate searches for our Web site. We’re about to introduce building specific searches. While testing the listings for 340 On The Park I discovered that we are only allowed to show 9 listings, while there are actually 15 units for sale in the building. Why can’t we show those other 6 listings? Well, we could if we required you to register but we don’t want to do that because registration is a pain in the ass. Furthermore, it’s a real turn off for real estate buyers who are afraid that some pushy real estate agent is going to start harassing them – not to mention that many home buyers provide bogus registration information when faced with that requirement.

But why do we have to get you to register to see these other 6 listings? Because the real estate brokers that are listing those units do not participate in an arcane and convoluted program called broker reciprocity. As explained in that prior post real estate listings from brokers that participate in the program get put in the IDX feed, which is broadly available on all realtor Web sites without registration. If a broker does not participate, their real estate listings are only available in the VOW feed that requires registration to access on a realtor’s Web site.

What is surprising about the 340 On The Park situation is that 6 out of 15 listings are not in the IDX feed. That’s a huge number. Just the other day I did a quick estimate and determined that in the city of Chicago only about 2 – 3% of the real estate listings are missing from the IDX feed, which is consistent with what the MLS folks tell me. That’s the reason that we decided to not require registration on our site.

So why is 340 On The Park so different? It all comes down to the dominant broker in the building who has all 6 of those listings. Apparently, this broker does not participate in the reciprocity program. This is especially peculiar in light of the fact that a real estate broker has to actually go through the trouble of opting out of the broker reciprocity program. In addition, opting out of the program only prevents the listings from showing up on other realtors’ Web sites. The listing brokerage still has the ability to advertise the listing on any Web site they choose – e.g. Realtor.com, where these “missing” listings do appear and without registration. So the listing brokerage selectively withholds access from the Web sites of brokers like us who refuse to require registration for accessing MLS listings (we still have access to the properties through the MLS system but we can’t put them on our Web site without requiring registration).

All of these shenanigans highlight yet another problem you can run into using the top producer. So, if your home is currently listed and you want to find out if your realtor is holding out on you just check for your home on our site. If it doesn’t show up then it’s not getting the broadest distribution possible.

As I asked before, why would any broker not want their listings to receive the broadest exposure possible? Could it be that they are trying to restrict access to their listings so as to increase  the likelihood of their getting both sides of the transaction? Nahhhh. A real estate broker would never put their own self-interest above that of their client.

That’s basically the headline of one of the articles in the weekly email that I got from the National Association of Realtors (NAR) on Friday morning. Well, the headline certainly doesn’t apply to this realtor!

The very short article references a recent LA Times article that features quotes from realtors like “You’d be foolish to give part of your salary away. I’m worth what I get paid” and “[realtors are] really digging in their heels because they aren’t selling as many homes.” Hmmm. First of all, if the realtor works the low end of the real estate market they are worth what they get paid but in Chicago there are an awful lot of realtors collecting pretty fat commission checks from $500K+ real estate transactions. As for realtors not selling as many homes these days…well, that’s not the customer’s problem now, is it? All that means is that there are still too many real estate agents out there.

Given the tone of the NAR article and the fact that it was only 158 words I couldn’t help but wondering if it was nothing more than a blatant attempt at price signaling – i.e. “don’t cut your commissions”. The original LA Times article, at 1547 words, conveyed a much different tone which I summarize as follows:

• Some real estate brokers are willing to discount their commissions but you have to ask – well, not always
• Agents are reluctant to discount their commissions because in this market they have to work a lot harder to close a deal
• Some discount brokers may underprice a house in order to get a quick sale
• In a related article the author points out that a discount broker may overprice a house in order to have a listing to attract buyers
• There are several special situations in which you might be able to get a discount – e.g. when the listing agent acts as a dual agent or when the broker is independent of a national chain (these chains usually take 8% of all commissions)

On the whole it’s a much more balanced picture than that presented in the short NAR article. The only peculiar thing I noticed was that in one article the author cautions about discount brokers overpricing a house and then in another article cautions about them underpricing a house. The truth of the matter is that any realtor, discount or not, can either intentionally or unintentionally overprice or underprice a house. I would not assume that it’s more likely to happen with a discount broker.

One last point: there were two glaring omissions in the LA Times article. First, there was no mention of service level. Many discount brokers offer a discount because they provide a lower level of service. Consumers should always find out how the realtor can afford to offer a discount real estate commission. Second, there was no discussion of the buy side, where buyers can get rebates of the seller paid commission from their agents. Let’s face it, for every seller there is a buyer (eventually we hope), so you can’t ignore this half of the equation and the savings can be just as substantial.

Last week the Illinois Senate passed a bill to substantially rewrite the Real Estate Act of 2000. The bill now goes to the governor for signature. Here are some of the highlights of the bill:

They’re changing the terminology of the industry. Currently, a Salesperson is what most people think of as a regular agent and Broker is the person that the Salesperson works for. Of course, the public thinks of everyone as a broker because, well, they broker deals. So they’re changing the terminology to match popular usage. The new terms will be Broker and Managing Broker. Probably a good idea since realtors aren’t supposed to be selling anything when they are working for a buyer (yeah, you heard me right).

They’re increasing the course work required in order to become either a broker or a managing broker. The broker requirement is going up from 45 classroom hours to 90 hours, while the managing broker requirement is going up from 120 hours to 165 hours. 15 of these hours have to be situational (not exactly sure what they have in mind here but with any luck it will include how to answer your phone, how to return phone calls, and how to use email). In addition, they are increasing the ongoing educational requirements for both licenses.

The increase in coursework is definitely a good idea because, let’s face it, there are a lot of Bozos running around as real estate agents. If nothing else this should clear the ranks out a bit, pushing some of the marginal players over the edge. You would be surprised at how much is missing from the current curriculum that we have had to figure out on our own. For example:

• How to handle a short sale
• How to find and pull up public records
• How to determine zoning
• Where to find the building codes
• How to find out what the development plans are for adjoining properties
• All the documents required for a closing
• Typical inspection issues to look out for
• How to use the MLS effectively

Of course, there’s no guarantee that they will apply the additional course hours to this practical stuff.

In addition to a host of consumer protection initiatives, another new requirement is that a broker will have to be licensed for at least 2 years before becoming a managing broker. The cynical part of me thinks that this is an attempt to restrict competition but I guess it makes sense – for the average person. However, given that the job is not exactly rocket science, I know of at least a couple of people who were able to move quickly into this role, without a lot of time in the trenches, and became more effective than most overnight.

This new law takes effect December 31, 2009 but existing licensees have until April 30, 2012 to comply with the new requirements. So, there’s still plenty of damage that can be done in the meantime.

It’s that time of year again when realtors do their annual pumpkin dropoff. Well…not all realtors – just the ones that follow the traditional real estate marketing model of ingratiating yourself with your clients. It’s an old realtor ploy popularized in the realtors’ bible: How To List & Sell Real Estate In The 21st Century. On page page 53 the author tells the story about how she learned about the success of Tommy Hopkins in Simi Valley a few weeks after she started in real estate: “For Halloween, he rents a truck and loads it up with pumpkins. Then he puts on a ghost costume and drives around his neighborhood giving away pumpkins.” She includes this strategy again under her “Full Year Farming Almanac” on page 93 under October SUPER-promotion.

Uhhhh…I refuse to go around in a ghost costume – even at Halloween. I’d rather discount my commission and give rebates to buyers.

Apparently, you would. At least that’s what a Gallup poll released in November 2008 revealed. Although it’s old news I thought it was interesting since I routinely hear people within the industry lament the “fact” that realtors have one of the lowest trust ratings of any profession – next to used car salesmen.

Well, it looks like this might be another one of those industry myths and lies – but this time it’s one that clearly does not promote the industry. Here is the actual data from the Gallup poll where they interviewed 1010 adults across the nation about their perceptions of the honesty and ethics of 21 professions.

As you can see, realtors actually landed in the middle of the pack, right behind lawyers. The ranking above is based on the % of respondents that gave professions high or very high marks. However, you can also see that if you were to rank these same professions based upon the % that gave professions low or very low marks, realtors’ ranking would actually rise a couple of notches.

Surprised? Yeah, me too.