Lucia Brooks : Is telling someone you will sell their home for $499 "unethical" or "illegal"?

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Is telling someone you will sell their home for $499 "unethical" or "illegal"?

By: Lucia Brooks
Monday, May 21, 2007 8:12 PM

I know we have been having a lot of discussions regarding the limited and discounted real estate practices going on in the industry today. My purpose is not to attack anyone with this post, only to get serious feedback from other concerned professionals in the real estate industry.

First let me state that I have no problem with limited or discount service providers. However, I do think there could be a problem in the way they are advertising their services, and I would like to get other points of view to ensure that I am not seeing this in the wrong light.

For discussion purposes let us look at http://www.499homesold.com as an example. I want to state that I have nothing against this company and I don't really even know who they are and I am not saying anything bad about them. I would just like for us to observe their claims and discuss the merits of them as they are stated on their website. I saw the same advertisement on their car so that is what brought me to their sight.

Now correct me if I am wrong, but I believe this website tells consumers that they will "Sell" their home for them for $499 if they purchase their next home using their services. It indicates that consumers should say no to a 6% commission. So the average consumer may think, wow that is great, I can sell my home for only $499.00 and they give them a call.

In their defense, this site does indicate in a table what a consumer would "save" by using their services. And it also makes it clear their offer only applies to people who are buying another home using their services. That is better than some other sites I have seen.

However, there is no disclaimer indicating "Seller will still be responsible for paying an additional 3% or $6,000 to any cooperating buyers agent who secures a buyer for your present home based on a $200,000 sales price", no table explaining the additional increased cost of such sale for each price range either.

There is no true indication of a sellers net.

(There is some verbiage at the bottom of the page, but I cannot seem to grasp what they are trying to say, so please enlighten me if someone else can.)

So in essence, a seller using this service would really be required to pay $6,499.00 to "Sell" their home, not the $499 advertised boldly in the header (and the $6,499 does not include any closing costs or other fees the seller might be required to pay to actually complete this transaction and "sell" their home).

Again, please correct me if I am wrong.

Now, in the report from the FTC and DOJ we read the other day it was recommended that consumers be made more aware of what it is they are getting so they can make informed decisions. I agree.

I think if consumers saw a "cost" table along with the "savings" table as well as the $499 fee, they might think twice about calling or perhaps end up calling someone else instead. That would make for a level playing field for everyone. But to me, it does not appear that this is what is happening here.

This appears to me to be an unclear advertisement and there could be two potential problems with this:

1. If this licensee were a REALTOR® they could be violating the code of "ethics":

According to the 2007 Code of Ethics and Standards of Practice:

Article 12

REALTORS® shall be careful at all times to present a true picture in their

advertising and representations to the public. REALTORS® shall also

ensure that their professional status (e.g., broker, appraiser, property

manager, etc.) or status as REALTORS® is clearly identifiable in any such

advertising. (Amended 1/93)

Now I know that not everyone is in the National Association of REALTORS®, so they may be okay as far as that goes, but if they are members of NAR, they might be violating the Code of Ethics with what is currently on their website. (And if they are members of NAR, they do not appear to be displaying any REALTOR® logo or other professional status on the site which would be another issue.)

As a side note, they could also be in violation of the Code by indicating in their savings table that there is a "standard" 6% commission. This implies that all other real estate practioners would be charging them a 6% commission. This could prevent the consumer from interviewing other possible candidates which again tilts the playing field in their favor. However, that is not the main focus of the discussion here.

In this instance, I will assume this licensee is not a members of the NAR.

2. Even though they are not members of the NAR they must still be licensed in the State of Georgia as either a real estate salesperson or broker.

This then could become a license law issue.

According to Georgia Code O.C.G.A. 43-40-25-(b)-(2)

(b) Licensees shall not engage in any of the following unfair trade practices:

(2) Intentionally advertising material which is misleading or inaccurate or which in any way misrepresents any property, terms, values, policies, or services of the business conducted;

So, even if this licensee is not a member of the NAR and therefore not in violation of the Code of Ethics, they could potentially still be in violation of Georgia license law by using misleading or innaccurate advertising. That could make them subject to investigation by the Georgia Real Estate Commission. That is if someone were to file a complaint in writing to the Georgia Real Estate Commission which would then compel the Commission to investigate for any such violations.

Again, please correct me if I am wrong in my analysis.

If I am not wrong, then I believe we might state that advertising being used by some limited and discount brokerages could be hurting consumers by misleading them regarding the true costs of the services being provided to them. These advertising practices could also be having a direct negative impact on other real estate practioners causing them to potentially lose revenue and could even unfairly be forcing them out of business.

It also seems to me that there are too many real estate practioners for the NAR, DOJ, FTC or state governments to keep track of individually. I believe it is wrong of us to think they should be doing so. If that is indeed the case, what then could or should consumers or other real estate practioners do to prevent this from happening?

I do believe we have the right to legally defend ourselves, and that we bear the responsibility to do so. I would appreciate any and all feedback from others before I formulate any plan of action I might take to address this issue in the name of fair trade and true consumer protectionism.

Thank you in advance for your consideration.

Comments

Member Since '07	Brian Wurster said: In Ohio, the seller is not required to pay a co-op. Just playing devils advocate here, but the advertisement not including, may not necessarily be misleading. Lets assume that in GA. a co-op is required on a listing. The table for savings on a $200,000 deal is a $5501.00 savings. My math shows a 6% commission at $12,000.00. the difference between the 12k and the 5501 is 3% (6000.00) plus the $499.00. so it is there..on this site, it is just not plain to see. May 21, 2007 7:36 PM
Member Since '03	Mark Cohen, Broker said: Unfortunately most of the advertising on TV, radio, newspapers, magazines, online, etc. for every industry is misleading and purposely designed to be that way. There is much of the time a fine line between misleading, unethical, and illegal. Professional (expert) advertising designers know that the public is very susceptible to their product and corporations and politicians take advantage of that gullibility. Put yourself in the position of not being in the real estate business and wanting to save a lot of money or make a lot of money. Would you believe their advertising? They probably had an expert check over their site to see if it was illegal or not. The ethics part of it may seem cut and dried to us in the business but to the public its vague. How do you prove that something is misleading or misrepresents to everyone and not just to a person who is ignorant? My answer to this type of competition is to keep my standards high and not compete head to head with them. There will always be enough customers who recognize quality over quantity and require the personal attention to detail that I provide. Its my responsibility to attract that type of customer and not go after the kind that would be attracted to the company you decribe above. May 21, 2007 7:39 PM
Member Since '03	Lucia Brooks said: Brian, Thank you for your reply. You did the math very well. However, you made my point exactly, it is not plain to see. That is the crux of the matter. By law at least or by agreed upon ethical conduct at most, it is required for it to be plain to see, period. Anything less is unfair trade practice. I did the math as well, I know what I am looking for, that doesn't mean that all consumers will know what to look for. This is becoming a debate about fair business practice and consumer protection. You can dance around it all you want but you even agreed that "it's just not plain to see". Mark, I am not so concerned about other industries and their actions. They may not need a license to practice in whatever business they are in, they may not be compelled by law to make clear what it is they offer. Did you have your site looked over by an expert to see if there are any problems with it? I don't think we can assume that everyone has done that. I am seeing that there is some blatant misrepresentation of information getting out to the public. I think it is getting worse and there is no way for any governing bodies to keep up with the proliferation of websites and real estate practioners so they would just rather fold under the pressure and forget that we are supposed to be bound by law and/or a code of conduct. We are licensed, that should still mean something shouldn't it? Thank you both for your replies. May 21, 2007 8:06 PM
Member Since '03	Lucia Brooks said: Brian, By the way, how many homes have you sold as the buyers agent when the listing agent offered 0% commission? May 21, 2007 8:12 PM
Member Since '03	Gregory Bain said: Lucia, do me a favor and look at this P2A web site and tell me if you think it is a licensed RE Agent? www.Morgan246.com Thanks Greg May 21, 2007 8:15 PM
Member Since '03	Lucia Brooks said: Greg, I think they have a tremendous "Sample Splash Page" that should really help consumers make informed decisions! http://www.morgan246.com/Sample_Splash_Page/page_1393474.html This is exactly what I am talking about. May 21, 2007 8:20 PM
Member Since '07	Brian Wurster said: I am with ya Lucia, I dont think it is right, and I cant dance a lick...remember I was playing devils advocate. Do you think an arguement could be made that it "is" plain to see, and you just have to do the math? I guess "plain to see" would have to be defined. I don't know. May be a gray area where they have just enough to cover themselves, and I think the only way to find out would be an expensive trip to court. I do believe that when a potential client brings it up, it is a golden opportunity to show them how they are being less than candid in the costs, and that may be enough for many. People do not like being deceived. May 21, 2007 8:22 PM
Member Since '03	Gregory Bain said: He is not licensed in the state of New Jersey. His inventory is from other RE Agents here at P2A. He is a builder who does not want to use RE agents to sell his homes. May 21, 2007 8:24 PM
Member Since '07	Bill Thompson, REALTOR® said: Lucia, I understand what you are saying. There is a broker here in the Dallas area that advertises he'll list your home for $495.00. I have looked at some of his listings in the MLS (sad to say, he has a ton of listings) and he offers the other broker 2% for bringing a buyer. I notice his listings stay on the market for a long time, but whether they ever sell or not he has his $495.00 and spends nothing to market the homes, no open houses, no newspaper ads, etc. His webiste and the hateful language he uses to describe REALTORS® is what makes me angry. He says he got into real estate because of quote: "Frustration with a corrupt real estate brokerage system designed and preserved to make buyers and sellers dependent on Realtors instead of Realtors providing value commensurate with fees charged to motivate buyers and sellers to choose their services willingly." (his exact words) He said most REALTORS® do little or nothing to market a home other than list it in the MLS and then wait for some other REALTOR® to bring a buyer. He said the listing broker does not deserve 3% and most buyer's brokers do not deserve 3% either. By the way he speaks as if the 6% is carved in stone. He is very anti-REALTORS®...so why is he allowed to belong to NAR? I don't understand. I know they are afraid of law suits right now, but when someone markets themselves by tearing down the entire profession, it does not seem they should be allowed membership. He could easily market his services in a positive way without saying anything negative about others. He could offer his dicounted service as an alternative to traditional brokerage but make it clear they are getting less than full service. Instead he says he offers just about what REALTORS® have always offered, he just offers it cheaper. I just checked his listings on the MLS. His license number brought up 1062 properties. 143 of these are active or pending, 555 sold, the rest, expired, cancelled, or withdrawn. He has his $495 times 1062 however, regardless of whether they sell or not and he has very low overhead or marketing expense. That is a half a million dollars. He was a one man office until recently. He now has one agent with him. May 21, 2007 8:24 PM
Member Since '06	Ava Lugg said: I believe the information we see on the website is just to get the agents in the door. Sort of like MLS Realty (buyowner.com), I am sure upon the listing appointment they going into all the details about how this actually works. I don't believe this is illegal and I can't say I see it as unethical, because the seller will know the whole story once they have a listing appointment. May 21, 2007 8:32 PM
Member Since '07	Brian Wurster said: I havent sold any with zero co-op. That would be a poor business decision to show them; but they do exist. May 21, 2007 8:36 PM
Member Since '03	Lucia Brooks said: Brian, My point is the whole law is designed so consumers do not have to "do the math", they assume that the real estate industry is regulated, so these advertisements must be on the up and up right? I have a very close family friend come to me just a week ago who listed with a company and she indicated she did not know everything she was getting into until it was to late. She paid $3,000 bucks up front to list her house and then she was calling me to see if I had any buyers because she couldn't get her money back. See, she didn't call me ahead of time because it looked to her like to good of an opportunity to pass up. We don't always get the chance to explain and with the tremendous growth of the Internet we will have less and less of a chance to explain in the future. That is why this is such a big issue to me. Greg, I would hate to live in one of his houses if he can't even figure out how to turn off a page of a website so as not to look mentally challenged! Brian, Well put, many people who provide limited and discount services have no problem endorsing their service by bashing in full service providers teeth with no abandon, but when they get a taste of their own medicine they cry foul! Give me a break! May 21, 2007 8:36 PM
Member Since '06	Ava Lugg said: By the way the sad part about this is that agents are on the ready and tv saying all they do is add the home to MLS and wait for it to sell. This type of activity hurts those of us who truly market our listings. May 21, 2007 8:38 PM
Member Since '07	George Damroth said: It sounds like the website is disclosing in good faith... good faith that some consumers do not realy think too hard, and could use the old advice "buyer/seller beware". Seriously though, it is a prime example of "what the big headline gives, the small print takes away". May 21, 2007 8:40 PM
Member Since '03	Lucia Brooks said: Ava, While I respect your opinion, I think the laws of Georgia and the Code of Ethics would have to disagree with what you think. Both state that advertisements have to be clearly understood up front or it is an unfair trade practice. It doesn't say it is okay to mislead someone until you get them in the office to explain what the offer really is. That is exactly what the law is intended to keep from happening. In this instance it doesn't matter what we think, the law is the law. I am afraid there may be people breaking it, and it seems to me there is no one doing anything about it. If that is all the law and the code is worth we might as well be wadding it up and using it for toilet paper. Brian, You are exactly right, and when there is no commission on the listing side left and there is no commission on the buying side left, then there will be no reason for any of us to be in business. We will all be hourly employees of the large real estate firms getting tiny pay checks and paying our taxes weekly to Uncle Sam like good little kids, which is exactly what the government has been trying to accomplish for years! When this happens, what kind of people do you think will be attracted to the real estate business, do you believe that the least common denominator agent will provide the best service for the consuming public? May 21, 2007 8:48 PM
Member Since '05	Jackie Hawley said: I don't see illegal or unethical either. Most agents (Realtors or not) do not go into detail all the costs of selling or every detail about listings. I know agents who advertise houses without including the price. Agents who advertise they are full time when they have another job- their answer to this is they do BOTH full time. I think the best way to fight "limited service" or "discount" brokers is to self police a little better. There are too many "traditional" agents who don't represent their clients very well. How many times have any of us heard when listing an expired that they never heard from their previous agent? We need to have higher standards- make a license more difficult to get, more con-ed, minimum service requirements..... Too many sellers and buyers have had negative experiences where their agent didn't really earn thousands of dollars or even a thousand dollars. That is the consumer who more than likely calls companies like the one in the original post. Or not :) May 21, 2007 8:49 PM
Member Since '03	Lucia Brooks said: Thanks for the discussion so far, I think the point I am trying to make is build any business model you want, just don't break the law when you are telling people about it, it is not fair at least and criminal at worst. Maybe I can pick this back up tomorrow. Goodnight and good luck! May 21, 2007 8:51 PM
Member Since '04	Ron Tarvin said: I think it's deceptive as hell to advertise like that. I looked in our market at Assist To Sell and they advertise that same "SAVINGS" without mentioning that is if they bring the buyer themselves... They didn't mention that in 70 listings they took last year, they were also the selling agent on just ONE of them. One out of 70 seems to be the exception not the rule! May 21, 2007 9:08 PM
Member Since '07	Jason & Wendy Smith said: I feel sorry for these people that choose do do this limited service... we have a buyer that was interested in a limited service listing. Called the listing broker and he told me to deliever the offer to the seller, and to tell the seller if he had any questions to call him. So i Did, about an hour later the seller called me, asking question, I told him, I cant disscuss this with him, he needed to call the listing broker, he stated, he did and that the broker want anouther outragoius fee to help him with the offer. So i adviseed him to call the title company (in Oklahoma we still have title companies, and Abstracts!) He didnt and accepted the offer, Which was little lower then asking price and stated to pay for Buyers closing fee of like $4000... he did ask if that included our commision and I told him NO, that he will have his own closing cost as well. Well once our perfer lender worked everything thru the RD/FHA, the seller was going to be bring money to the table to sell his house, and at this point there is nothing he can do since he is under contract now. I feel so bad for this Guy, but there is nothing we can do about it, since he did the limited listing and by ethics i couldnt even help him understand the offer! (oh BTW we didnt want to ask for closing cost, knowing this was a limited service and this guy probaly wounldnt understand what he was doing, we was trying to advice the buyers not to ask for it. but we have to put on paper what the people want not what we want!) I think they need to be TOTALLY banned!! Use a Full service realtor or stay out of the MLS!!!!!!!!!!!!!!!!! They are giving use full time Realtors a worst name because they are getting screwed and a Realtor is a Realtor to them! May 23, 2007 6:57 AM
Member Since '03	Emil Ratti said: Your original statement: "Is telling someone you will sell their home for $499 "unethical" or "illegal"?" I got two listings and a sale from one of these brokers this year. I even spoke to the broker and he told me that's great. Go after all of my listings. I just see it as another line of business. May 25, 2007 8:33 AM
Member Since '05	Jana Davis & Marcia Demerjian said: Lucia am I getting your question wrong? Whether it is a unethical or illegal practice is not the question - The unethical or illegal part is the advertising. Correct? You can't just put any old thing to get your phone ringing then explain later. If they do explain at all, perhaps there is "the tiny print" on the contracts. How many of your clients read the tiny print unless you point it out? There is also RE language (got to keep those attorney's paid!) That most of our clients don't understand either. I look at these advertisements as bait and switch and that makes another black mark on our field. Thank God they can't get paid up front here in CA or I am sure I would see these ads too. I had a broker visit one of our broker's opens and he told me that he only charges 1% on his side so he would much rather sell one of my listings at a higher percentage. He looks at his listings as a way to find buyers... Yes, he actually told me that. At least he was honest about it. We just ran into something that we think is a scam of some sort that I am going to put out here later tonight. Let me know what you think is going on. Have a great weekend everyone! Jana May 27, 2007 6:18 PM