The Real Estate Industry Plagued By Highly Public Clashes
What is it about 2019 which seems to be drawing the ire of regulators and competitors to the residential real estate brokerage industry? Never in my long memory of the business have so many highly public fights broken out in our industry. As real agents try to go about their regular business selling homes, the air about them vibrates with bad karma from a number of sources.
- The Class Action Suit. Of all the conflict going on nationwide, this one possesses the most visibility, a visibility not mitigated by the fact that the source of the suit is, in my opinion, nonsense. Here’s what it’s about: A seller in the Midwest was discovered by that hungriest of all attorney specialties, the plaintiff’s bar; they brought a class action suit against all the major national brokerage players for conspiring to cost sellers extra money by making them responsible for buyer side commissions as well as those on the seller’s This means that sellers would only pay their own agent, while buyers would be responsible for paying THEIR own agent. The way it works now, of course, is that sellers almost always pay the whole commission, covering the agents on both sides of the deal. The lawyers aren’t so much interested in the equity of the situation.They seek, as always in suits of this nature, a big settlement. But the success of this suit should carry a warning, “Let the seller beware!” Once you compel buyers to pay their own agents, and they, therefore,begin to think about commission as an added cost, it’s certain to reduce the offers they make, even if they don’t hire an agent. My prediction: this won’t affect the industry as a whole too much, but it will be bad for sellers.
- The Zillow/Compass Lawsuit.This one resembles the crazy Japanese double monster movies of my youth, like Rodan (the fierce pterodactyl) vs. Godzilla (the T-Rex-ish generic dino-monster): two giant companies now duking it out with each other. Zillow claims that employees hired away from them by Compass brought important intellectual property to the billion-dollar startup. Zillow is just the latest in a string of companies to sue Compass for one version of poaching or another. Since Zillow collects and mines probably the most comprehensive set of data in the country, it’s easy to understand how they might be sensitive to a rich and tech-hungry potential competitor hiring their people. That said, people have the right to work where they want and it’s not like they can leave their brains behind at the old company when they switch. Time will tell about this one…
- The Real Estate Board of New York (REBNY)/StreetEasy Complaint. And speaking of Zillow, will 2019 actually be the year when the slow-as-molasses New York Department of State finally issues a fatwa regarding Zillow subsidiary StreetEasy’s use of deceitful advertising to promote brokers who pay to play through its Premier Agent program? Here’s how it works: an agent writes a check to StreetEasy to “purchase” a zip code (not exclusively) and as a result that broker receives pride of place on the StreetEasy listings in that zip code. Only problem: the real exclusive agent, who actually did the work of obtaining the listing and who is the only one with a legal right to market it, gets shunted to a secondary position on the listing page. The Real Estate Board of New York has submitted carefully reasoned letters to the DOS demonstrating how this practice violates New York law. StreetEasy (and Zillow) have aggressively defended themselves, since the Premiere Agent program has for years been the company’s primary revenue source. It seems increasingly likely that this decision is not going to go StreetEasy’s way. And MLS ’s all over the country are watching with great interest to see the outcome and then figure out how to launch complaints to THEIR state regulatory agencies. No wonder Zillow plans on switching its focus to buying and selling homes!
- The cap on rental commissions. The New York City Council, apparently lulled by the belief that the reality TV show “Million Dollar Listing” shows an accurate portrayal of the lives and earnings of real estate agents, wants to limit rental commissions to a maximum of one month’s rent. Thousands of agents have signed petitions and written to their Council representatives assuring them that in fact, few rental agents are earning seven figures a year and that a cap on commissions disables the ability to co-broke or, in many cases, even earn a living. And in the era of the internet, it’s easy enough to find an apartment with no fee on your own through Craig’s List or any one of a dozen websites. The New York community still awaits the outcome on this one.
- The Increased Mansion Tax. This new tax approved by the New York State Senate last month takes aim directly at New York City real estate. We dodged a bullet on the worst of this, a proposed annual tax on homes costing over a million dollars, which did not pass. But the city now faces closing taxes on its most expensive units in excess of 3% higher than they were before. Most of the contracts being written today stipulate that closings MUST take place before July 1, when the new taxes take effect.
The stakes are high in real estate. Home sales, with the ancillary fields which revolve around them, account for billions of dollars in the U.S. economy. Real estate agents, like mortgage providers, title insurers, and home inspectors, depend on the free flow of information and compensation to remain in business. Entrepreneurs like these men and women deserve support in both government and the courts, at the local, state, and national levels.