We are living in an exciting time, with disruptive business models challenging established ways of thinking and often producing better ways, ones benefiting the consumer.
These new methods allow individuals to exert some control over processes which have become so ingrained in our day-to-day that most accept the prescription without questioning the doctor. Think banking and investing for two examples.
Most journalism on disruption talks about the advantages to the new ways and how they benefit consumers. When they do address the old guard, commentary is mostly limited to versions of “hop on or fall behind.”
The establishment does not cede ground easily but usually their methods are subtle, such as equating long-term business practices with consumer trust, PR spin, or even tweaks to their business models.
Sometimes the establishment fights back.
I first met TRELORA Real Estate founder Joshua Hunt last July at a real estate conference in San Francisco. TRELORA is a Denver, Colorado-based firm selling houses at flat rates instead of commissions. Their volume business is profitable for them and regularly saves customers more than $10,000 compared to fees charged by commission agents.
Mr. Hunt and I spoke in the hotel lobby, symbolic in that it was away from the more traditional companies and services gathered at a trade show one floor above.
Seven months ago Mr. Hunt discussed how TRELORA had been involved on both sides of ethics complaints. They have never been found in violation of industry codes, but have won several complaints against agents refusing to show TRELORA listings to their clients because of their business model.
Since our initial conversation TRELORA partnered with Home Junction, a home search site which provided the raw data for search.trelora.com, TRELORA’s feed which displayed broker commissions for every property for sale in the greater Denver area, a development TRELORA referred to as “rewarding their buyers with a new paradigm in transparency and control.”
Don’t go looking for it, it’s no longer there.
Shortly after Home Junction went live it prompted a cease and desist letter from REcolorado, the state’s largest MLS service. On Feb. 9, REcolorado Director of Customer Care and Compliance Leesa Baker cited TRELORA for violating IDX (a broker reciprocity program) and MLS regulations.
At issue was TRELORA’s publication of agent commissions, information only available to registered site members (i.e. agents), but not the general public.
Ms. Baker cited TRELORA for manipulating “listing content in any way that produces a deceptive of misleading result.” Because Co-op compensation “is not a part of the IDX content, and is confidential and proprietary to REcolorado,” it had to be removed, Ms. Baker told TRELORA in a letter provided to Bankless Times.
To make her point clear, Baker cited four additional MLS rules and regulations, all variations of “you can only publish what we tell you to publish.”:
♦ “Co-op compensation percentages…are part of the MLS database and not available for IDX display. The compensation amount(s) is being developed by others…”
♦ “The listing content provided in your IDX display does not include compensation percentages nor does it compute the amount of compensation.”
♦ “The IDX database does not include any compensation amounts. This is altering the IDX content…”
♦ “IDX listings displayed may not contain any additional fields that are not designated as required, recommended or optional in the content license agreement. Confidential fields and information (e.g. Broker Remarks, Listing and Expiration dates, Co-op Compensation (emphasis added), Showing instructions, Property security information, etc.) may not be displayed on IDX websites. (MLS regulation)”
TRELORA was also dinged for not placing the IDX logo on its site and on each page using IDX-related content.
REcolorado conveniently cites their own self-benefiting regulations, for sellers have to disclose how much they will pay buyer agents before they list a home. Publishing the data does not violate any state rules, a Colorado Division of Real Estate director confirmed to the Denver Post’s Aldo Svaldi.
“Commissions across the board are negotiable,” Marcia Waters told Mr. Svaldi.
“This is an incredibly hot issue that will explode on a national level within the next 12-24 months, if not sooner,” TRELORA’s Rett Kearbey
Ms. Baker’s letter drew a response from TRELORA through their lawyer Robert Bruce. In it TRELORA describes visiting several home search websites “for comparison.” TRELORA found dozens of instances of improper IDX logo placement (or complete omission), missing disclaimers, absent MLS-mandated information, and listings showing days on the market, all actions TRELORA was cited for.
TRELORA offered a spreadsheet of more than 60 violations from 30 different sites as proof REcolrado was engaging in selective sanctioning.
“As buyers are responsible for all fees associated with the price of a home they are purchasing, we believe it is in their best interest to have access to the commissions being offered to pay their agent,” Mr. Bruce wrote. “We are unsure as to why REcolorado would want to prevent public access to critical information that affects a buyer’s purchase price and is, in all reality, 100% necessary for buyers to make informed purchase decisions in today’s real estate market.”
Mr. Bruce requested a meeting between REcolorado and TRELORA but agreed to revise the website in the interim.
Consider this a pause bit not the end.
“This is an incredibly hot issue that will explode on a national level within the next 12-24 months, if not sooner,” TRELORA’s Rett Kearbey said. “Homeowners’ control and rights around their own financial best interests are being pitted against a legacy business model in which one agent pays the opposing party’s representation to elicit a desired result. This activity in any other industry would be considered a bribe or inducement.”
Late last week TRELORA released a public statement:
“REColorado, acting as a monopoly of home listings in the Denver Metro area, has chosen to block home buyers from viewing critical information necessary for making wise financial decisions in a hot real estate market. Commissions for buyer’s agents are chosen by sellers and the sellers’ agents and imposed upon buyers. TRELORA simply wants to allow buyers to see how much commission has been committed to their agent on each home for sale, keeping them in full control of their home buying process.”
Joshua Hunt explained the rationale behind Home Junction.
“Buyers are finally realizing that the money they bring to the closing table, whether a loan or cash, pays for everything in that transaction. If you’re spending hundreds of thousands of dollars, don’t you deserve to know how much of your money is paying for real estate and how much is being extracted for fees and fluff?”