America’s realtor racket is alive and kicking

For five years homeowners have been waging war. They have railed against the extortionate fees charged by estate agents, known as “realtors” in America, which are enforced by anticompetitive practices. They have filed lawsuits against brokers; fought cases against the National Association of Realtors (nar), an industry body; and sued the keepers of databases of homes for sale, known as “multiple-listing services”. Juries and judges across the country have found merit in their claims, deciding that homeowners have been ripped off, manipulated and duped into overpaying. In recent months they have awarded billions of dollars to plaintiffs and sent the two sides into negotiations over the rules that control realtors’ practices.

How wonderful it would be to believe that a settlement reached on March 15th, between the plaintiffs in several class-action lawsuits and the NAR, was about to usher in a fairer, cheaper era. That is how the agreement was described by the New York Times, which plastered the headline “Powerful realtor group agrees to slash commissions to settle lawsuits” across its scoop revealing that the agreement had been reached. CNN wrote that the settlement would “effectively destroy” the industry’s anticompetitive rules. The notion that victory is now assured has even been seized upon by the White House, which is desperate for any kernel of good news about housing affordability ahead of the presidential election in November. On March 19th President Joe Biden declared that the settlement was “an important step toward boosting competition in the housing market”, adding that it could reduce transaction costs by “as much as $10,000 on the median home sale.”

It is not at all clear, however, that this settlement will actually bring about a Utopia of greater competition and lower commissions. And the stakes are too high to accept such a settlement, which also protects brokers and agents from future lawsuits that might seek more reform. Under the existing system Americans pay 5-6% commission on almost every sale, triple the level in other rich countries. Since they trade homes collectively worth $2.8trn each year, if commissions fell to just 2% Americans would save $110bn in fees annually.

The problem boils down to a tactic called “steering”. In America it is both legal and expected that a home seller will make a blanket offer of compensation to any realtor who brings them a buyer. Often this is a proposal to split commission equally: if the total compensation is 6%, the seller’s agent and the agent of the buyer will each receive 3%. The problem is that although sellers can negotiate with their own agent and drive down that side of the bargain, if they attempt to offer a low commission to a buyer’s agent they will be told—correctly—that their home will get less interest and no decent offers.

It is not necessary to believe that realtors are morally bankrupt in order to see how this system perpetuates itself. The risk that even, say, 10% of agents might steer buyers away from a low-commission listing is enough to ensure that all the honorable ones benefit, since sellers offer 3% to ensure they do not lose out. This enforces a floor in total commissions.

Keep fighting

The settlement, which needs to be approved by a judge before being implemented in July, does little to tackle this underlying problem. One of its main provisions is that offers of buyer-agent compensation can no longer be published on a multiple-listing service, the databases used in the industry. But they can still be made, and can be published on websites or explained via text or a phone call. In Facebook groups and Reddit threads, realtors are already discussing such workarounds.

Another provision is that, before employing an agent’s services, buyers must sign an agreement outlining how the agent will be paid. At present buyers almost never discuss, and often do not even know, how much money their agent is making. They just know it is not their problem, since the fee is covered by the seller.

It is just about possible to see how this provision could erode the floor in buyer-agent compensation. If agents are required to tell buyers they intend to collect 3% of the sale price, and that—in the unlikely event a seller is not offering compensation—the buyer will be on the hook for it, cash-strapped buyers might seek a cheaper option instead. They might also reject the idea that their agent is worth 3%, and could argue for any compensation above a certain level, perhaps 1%, to be kicked back to them after the purchase.

Yet this probably assumes too much savvy on the behalf of buyers, and too little ingenuity from agents. Realtors might simply agree to add a clause to any contract reassuring buyers that they will not go after them for cash in the event a seller offers low commission, before steering them away from such properties, notes Rob Hahn, an industry analyst.

The Department of Justice (DoJ) could intervene. It did so in a case in Massachusetts, arguing that the agreement would not fix the problem of steering and was therefore insufficient. Officials appointed by the Biden administration have been constrained by a letter sent by those in the Trump one, which agreed to close a probe into the industry. When the current DoJ attempted to reopen it, the department was sued by the NAR, which argued it should not renege on the earlier promise. But an appeals court in the District of Columbia hearing this case sounded skeptical of the NAR’s arguments. That could pave the way for the DoJ to make a move.

Whether by killing the current settlement or opening its own probe, the doj would be wise to act. Homebuyers and sellers in America do not stand a chance of paying a fair price for commissions under the current approach. And the settlement as agreed offers no guarantee that they will have such a chance in the future.

Source: The Economist

Alone in an Empty House, Female Real Estate Agents Face Danger

Most sexual harassment comes from potential clients, and agents say they are vulnerable to abuse in an industry that offers few protections.

Sara Ghodsi sold auto parts before moving to San Diego and becoming a real estate agent. She didn’t have to sit in an office all day, made a good income and had the freedom to work on her own schedule, all of which she enjoyed.

But Ms. Ghodsi also understood it was a very competitive field as the number of agents across the country swelled to a record high. So when a homeowner in the coastal town of Oceanside, Calif., called and said he would consider selling, Ms. Ghodsi, eager to find a property for her client during the pandemic, agreed to meet him at his condominium — alone.

As they talked that afternoon in August 2021, the man began inching his chair closer to hers. Then he reached out, groped her thigh and forcefully kissed her.

“I kind of blacked out a little,” said Ms. Ghodsi, 37. “I was trying to be calm and collected because I was by myself in a stranger’s house. The door was maybe five feet away, but I had no idea what this guy was capable of doing.”

Across the nation, the overwhelming majority of real estate agents are women — and they are vulnerable to abuse in an industry that offers few protections, demands that they meet clients alone in empty homes and encourages them to use their appearance to help bring in buyers. Reports of harassment and occasionally physical violence, including rape and even murder, highlight the risks they face.

The National Association of Realtors reports that 66 percent of their members are women. Many were attracted to the field for the same reasons as Ms. Ghodsi: flexible schedules, a workplace that’s almost entirely remote and a licensing process that can be completed in as little as a few weeks.

But the industry is also structured so that 90 percent of agents are not actually employees of the agencies they work with. They are independent contractors, which means they are not protected under Title VII — the federal law that prohibits discrimination and sexual harassment in the workplace.

It also means that many real estate agencies that rely on these agents for the vast majority of their income do not feel obligated — or even inclined — to offer them any kind of institutional protection or training. For most of the women out there, it is up to them to come up with safety strategies like sharing their location with a family member or friend, insisting on references before meeting a client — or even carrying a firearm for protection.

And so, nearly six years after the #MeToo movement ignited a global reckoning about sexual harassment and assault, hundreds of thousands of women across the country are working in an industry that resists new measures to protect the women in its ranks.

“That world is pretty much the wild, wild west,” said Kimberly Perlin, a complex trauma therapist in Towson, Md., who has treated several real estate agents who were sexually assaulted at work. “Anybody can call up and say they have money and want a house, including sexual predators. And in a house, you have an unattended space, and an inherent power balance, because the salesperson wants the sale and the buyer knows it.” The National Association of Realtors, a trade organization representing 1.5 million members, has been resistant to require any sort of safety training of its members. Classes in its Realtor safety program, which includes webinars on best practices for safety, remain optional. On the group’s website, the program makes safety a matter of personal precautions, advising agents to avoid showing houses after dark and always ensure that properties have reliable cellphone service.

2020-member-safety-report-08-31-2020.pdf

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“It’s hard to force people to take certain things,” said Tracy Kasper, president-elect of the National Association of Realtors, of safety training. “Could that become part of what we make mandatory? It could. Have we done it yet? No we haven’t.”

Agents say the solution requires industrywide buy-in, and some recommended universal background checks for buyers and making mandatory safety trainings a contingency for all brokerages’ memberships in trade organizations. Others suggested that female agents have an option to ask for an escort when client meetings feel unsafe, with their brokerages covering the cost.

Ms. Ghodsi began carrying a Taser gun after her encounter. She filed a police report, but declined to press charges against her aggressor. “I just wanted it on file,” she said, “so it’s on record.”

It continues to affect both her mental health and her career.

“I feel like I haven’t been able to do my job to my full potential like I was before, because I’m scared,” she said. Younger agents, and those new to the profession, are not always aware of the dangers. Rachel DiSalvo has been selling homes in New York and New Jersey for 12 years. She has faced sexual harassment and violence on the job.Credit...Desiree Rios/The New York Times

“I never thought about it when I was starting out,” said Rachel DiSalvo, 41, who has been selling homes in New York and New Jersey for 12 years. “I would meet strangers at vacant homes at night.”

She has faced both sexual harassment while on the job — buyers making innuendos or attempting to grope her — as well as violence. One seller, angry she hadn’t secured him a higher price, took out an ax in front of her and proceeded to attack the lawn sign that bore her picture.

“I didn’t know what to do so I just tried to keep calm,” she said of the incident. “He was screaming and yelling. In the industry, we call it a ‘mantrum.’”

Surveys by industry groups have found that harassment in the industry is commonplace, with most real estate agents reporting that they had either personally experienced or witnessed sexual harassment in the workplace.

Working with house flippers, when homes sit vacant for prolonged periods, has also presented her with risks. In November, a squatter laid claim to a recently renovated home that she was trying to sell, and after she asked him to leave the property, he began calling her cellphone — the number was on the lawn’s “For Sale” sign — at all hours, threatening to have her killed.

She got the police involved, and eventually had him evicted from the property. Ms. DiSalvo now has an alarm button on her phone and keeps pepper spray in her car, which she takes into properties whenever she feels uneasy. She always shares her live location with friends or family when going to showings. But she is aware of the industry’s Catch-22: Every time she asks a new client to provide identification before meeting, or refuses to set a meeting after dark, she knows they might just opt to go with another agent.

“We don’t have an HR department,” she said. “If someone does harass you, and you complain about it, you basically lose the opportunity to make that commission.”

Ms. DiSalvo is an independent contractor currently working with a Keller Williams brokerage in New Jersey. She notifies the brokerage every time she faces an uncomfortable incident. That follows protocol.

“Keller Williams’s policies and guidelines encourage employees and agents who believe they have been harassed in the workplace to promptly report those facts to their franchisee’s management,” said Darryl Frost, a spokesman for Keller Williams, who added that management is also required to investigate. But while Ms. DiSalvo has always felt that she receives a sensitive ear, little action follows.

After the squatter threatened her, she was left on her own to coordinate with the police. And at a previous brokerage, it was suggested a male colleague step in to close a deal after she was verbally harassed by the client. But that meant Ms. DiSalvo paid the male agent a referral fee out of her own commission.

“There is no scenario in which the brokerage gets involved unless the police report comes to them directly,” she said. “In 12 years, I have always been the one problem-solving in these scenarios.”

Agents also know that their physical appearance is linked to their success.

One need only watch an episode of “Selling Sunset,” Netflix’s hit reality show following a group of high-earning female agents, to get the connection: the higher the hemlines and the stilettos, it seems the higher the commissions, as well. Real estate agents use headshots to bring in business, because they know their physical appearance is part of their brand.

“It’s really a double-edged sword because as a Realtor, you have to look good, be nice, and sometimes flirt with everybody to make them trust you. But that shouldn’t make me a target,” said Ms. Ghodsi.

Yet the very nature of their jobs — often meeting strangers to woo them into buying property — exposes real estate agents to danger. Those in the industry are well aware of high profile murders: One agent was killed showing a million-dollar home in 2008 in British Columbia; another was gunned down outside a property she was showing in Florida last year. In 2021 alone, 25 real estate professionals died from violence on the job, according to the U.S. Bureau of Labor Statistics.

Perhaps no crime sent more shock waves through the industry than the death of Beverly Carter.

Ms. Carter had just one more property to show on that September day before she could go home.

It was nearly 6 p.m., and the Arkansas real estate agent called her husband to tell him that she would be home for dinner before getting into her brown Cadillac and driving 30 minutes outside of Little Rock to show a home to a stranger.

She was never seen alive again.

Ms. Carter was 50 years old when she was murdered in 2014. Her killer, who lured her to the isolated property by pretending to be an interested buyer, kidnapped her, suffocated her and eventually buried her body in a shallow grave nearby. He later told reporters that he targeted Ms. Carter because — like most real estate agents — “she was a woman working alone.” He was sentenced to life in prison; his wife, who served as an accomplice, received a 30-year sentence.

Her son, Carl Carter, remembers being woken by the doorbell at 4 a.m. on the Tuesday detectives found her body. She had been missing for four days and a group of his mother’s colleagues, knowing that media was already camped out at the concrete plant where her body was discovered, came to his home to break the news to him personally. “The industry is operating without guardrails,” he said.

In 2017 he began the Beverly Carter Foundation, a nonprofit dedicated to creating more stringent safety measures for real estate agents. The same year, he and his family filed a lawsuit against Crye-Leike Realtors, the agency for which Ms. Carter had been working as an independent contractor, alleging the firm was aware of the dangers she faced but never offered any training or safeguards to prevent them. That suit was later dismissed because of the statute of limitations.

“No comment is needed,” said Harold Crye, president of Crye-Leike, in an email when contacted by a reporter about the case.

Too much onus is on individual agents to create their own safety measures, Mr. Carter said, when what is needed is industrywide reform. Rather than put protocols in place that would protect agents in the field, brokerages have been slow to respond to calls for broader reform — or resistant all together, Mr. Carter said.

“I’ve been told by big-name brokerages: ‘Sorry about your mom. But I’m not here to keep people safe, I’m here to make money,’” he said. “It’s just very much a for-profit industry.” The National Association of Realtors has made other trainings mandatory in the past: in May, after mounting pressure over discriminatory practices and appraisal bias, the organization announced that agents must now take regular continuing education classes in fair housing and diversity, equity and inclusion.

On the group’s webpage, they offer safety strategy tips like “share your schedule with a colleague, assistant or family member”; “check your cellphone battery and signal before heading to an appointment” and “never go into attics, crawl spaces or garages where you could be trapped.”

The organization also conducts an annual survey on safety. This year, when agents were asked if they’d been a victim of a crime while on the job, 98 percent of respondents said no. While the organization has touted those numbers as a success, Mr. Carter views them differently.

“A few percentage points out of 1.5 million suddenly becomes a really different conversation when you realize it means thousands of people have been victimized,” Mr. Carter said.

Some female agents, concerned about their own personal safety, are choosing to carry handguns on the job. Dawna Hetzler, 53, began carrying a gun on the job years ago after a friend encouraged her to get tactical training and a concealed weapon permit because she worked alone so often.

She was still arranging brochures at an open house in the Denver suburbs in August 2019 when she heard a knock at the door. The tall man with a shaved head who stood outside said he was interested in potentially buying the townhouse she was showing. She let him in, and when he asked to see the upstairs, she led him to the primary bedroom.

Then he suddenly pulled up his shirt, revealing a 12-inch knife tucked into his pants. He also reached for a canister of bear spray and doused her in the face. But that day, she had her Springfield 9-millimeter gun hidden in an ankle holster beneath her pants leg. She fired one shot, and he fled.

“He brought a knife to a gunfight,” she said.

Her attacker was arrested four days later, and later sentenced to 16 years in prison. Ms. Hetzler now offers trainings to other real estate agents, some of which involve tactical skills including headlocks as well as how to handle a gun during an attack. But carrying a weapon, she said, is a deeply personal decision.

“If you don’t believe in firearms, it doesn’t matter to me, there’s no judgment. Just find another way to defend yourself,” she said. “Nothing is worth your life, including a sale.”

Source: New York Times

The influence of real estate brokers’ personalities

The influence of real estate brokers’ personalities, psychological empowerment, social capital, and knowledge sharing on their innovation performance: The moderating effect of moral hazard

This study examined the influence of personality, social capital, psychological empowerment, and knowledge sharing on the innovative performance of real estate brokers. Our conceptual framework was supported by the goodness-of-fit test

results of the structural equation model. Theoretically, our findings supported all seven hypotheses: personality and psychological empowerment positively affect social capital and innovation performance; social capital positively affects knowledge sharing; knowledge sharing positively affects innovation performance; and moral hazard confounds the influence of social capital on knowledge sharing.

In practice, even though real estate is part of the service industry, its most distinctive feature is that the product is one not regularly purchased. Real estate is characterized

by high price and is affected by locational, environmental, transportation, and economic factors. While it is relatively easy to become a real estate broker, salary, service, and work hours affect the mobility of brokers, whose tasks cover connecting with people, objects, services, and professional knowledge.

Thus, personality (being open, hard-working, outgoing, agreeable, and emotionally sensitive) and psychological empowerment (work meaning, autonomy, competence,

and job influence) are factors that are important to real estate brokers. Social capital (interaction intimacy and trust) reinforce the relationship between personality and

psychological empowerment. With the rise of information technology, knowledge has become the greatest asset. Thus, establishing trust between the organization’s members, provoking their willingness to share knowledge, and achieving healthy competition is conducive to teamwork.

Additionally, innovativeness is an indispensable trait for enhancing an individual’s professionalism. The information recipient and sharer can enhance their own competence and competitiveness based on the diverse experiences of their colleagues or through in-service education programs.

Nevertheless, moral hazards are very likely to arise in industries that serve people. Real estate brokers often put their own interests first when they encounter competition from their colleagues or rival companies. This puts them at risk of a situation of moral hazard that terminates relationships and knowledge sharing.

Our findings are consistent with what is seen in practice practical situations. Therefore, personality, psychological empowerment, and social capital generate knowledge spillover through mutual trust and cooperation, and are conducive to enhancing innovation performance, and industry sustainability.

The influence of real estate brokers’ personalities, psychological empowerment, social cap.

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Source: Frontiers