One of the many charges leveled against real estate agents over the years has been that they show their buyers only homes listed with their brokerage. For example, since I’m with Coldwell Banker, I’ll show you only Coldwell Banker listings.
There are at least two, and probably three, problems with this accusation.
The obvious problem with thinking that your Brokerage X agent is going to show you only Brokerage X listings is that listings aren’t a secret, and haven’t been since the late 1990s when listing sites began to appear online.
This isn’t the “good old days”, when only agents had access to listing information. Knowledge is power. You know what’s on the market. If your agent isn’t showing you every home that fits your parameters, you’ll know it and you won’t be too polite to ask why. You’ll insist that your agent show you everything that might work, and if he or she is reluctant, you’ll find an agent who isn’t.
There’s another obvious problem, although it may be obvious only to agents: any agent who shows only her brokerage’s listings not only risks losing her clients, she’s taking money out her pocket, not lining her pockets. How? The shortage of inventory is a big problem for agents as well as buyers in many if not most parts of the United States, and particularly in Silicon Valley, where inventory has been inadequate for most of the nineteen years I’ve been selling homes.
Need proof? Here in the Valley, multiple offers, a sure sign of too-little inventory, have been the rule, not the exception, since 1998. Buying a home in the dot-com era was just as competitive as it is now. Even in the affordable neighborhoods where prices were hammered by the Great Recession, multiple offers on bank-owned homes and short sales were common. And blue-chip cities like Palo Alto, Los Altos and Cupertino were back to multiple offers by early 2010.
That’s been a formidable challenge not just for buyers, but for their agents. You may have heard that buyer’s agents don’t get paid unless their buyers buy. So with agents scrambling to find homes for their buyers to buy, would it really make sense for them to limit their showings to the relative handful of homes listed by their brokerage that happen to be in their clients’ price range and meet their needs?
That’s true not just for agents with mom-and-pop and boutique brokerages that may have listings infrequently, or never, in the neighborhoods where their buyers are looking. These brokerages would be out of business in a Silicon Valley minute if they didn’t show and sell other brokerages’ listings.
But even the big brokerages typically don’t have enough market share to let their agents focus only on those brokerage’s listings. Brokerage X may have many listings in a city or neighborhood, but it doesn’t have all the listings.
But wouldn’t agents feel intense loyalty to their brokerage or, failing that, be under intense pressure from management to focus on their brokerage’s listings? Folks, when you’re self-employed, as virtually all agents are, your first loyalty is to your clients (that’s the law), then to yourself, with your brokerage a close or distant third depending. I bleed Coldwell Banker blue, but if dear old Coldwell had a policy that interfered with my ability to earn a legitimate living, I’d be out the door in a flash.
I mentioned that there could be a third problem with this theory of agent skullduggery, and to illustrate it I’ll tell you about the training class I attended in 1998 when I was a new agent, affiliated with a brokerage I’ll call not-Coldwell Banker. The trainer complained that one large brokerage, which I’ll call Coldwell Banker because that’s what she called it, “incentivized” its agents to sell Coldwell Banker listings. Coldwell agents, she alleged, got a little something extra in their commission check if they sold a Coldwell listing–“and I don’t know how they get away with it”. Shortly after this I switched to Coldwell Banker–it’s a coincidence, I swear!–and in nineteen years I’ve never gotten a bonus for selling a Coldwell listing.
So if this really is, or ever was, Coldwell’s policy, I’d like my bonuses paid in full, immediately, with interest, in small unmarked bills.
Is this the policy at other brokerages? I don’t know, but I doubt it. A formal or informal practice of selling just your own listings would make sense only for the top two or three brokerages in any one area, and with a high profile comes high visibility–to consumers, consumer advocates, attorneys and regulators–and, potentially, a big target on your back.
Now, I’m no legal expert, but I have watched virtually every episode of Law & Order. As that trainer intimated, a clear pattern of Big Brokerage’s agents showing and selling just Big Brokerage’s listings–and it would be mighty hard to hide–would raise colossal questions of conflict of interest and violation of fiduciary duty, questions that go to the legal core of the agent-client relationship and could make Big Brokerage the target of either a class-action suit or a vigorous investigation by the California Bureau of Real Estate–and if you doubt that the BRE would be interested, the fines generated by vigorous investigations is how the lean mean BRE keeps its lights on.
So the bottom line is:
- at the agent level, agents need to sell other brokerages’ listings to make a living, and
- at the brokerage level, there’s too much legitimate money in real estate, at least here in Silicon Valley, for the top players to be interested in playing games
It’s one of those situations in real estate where everyone’s interests are aligned. Adam Smith would be proud.
copyright © John Fyten 2017